As an update to the articles that I wrote about a year ago regarding strategic defaults, it is time to revisit the continued problems with the housing market. It turns out that one in seven homeowners with loans over $1 million are seriously delinquent compared to one in 12 with mortgages below $1 million. In addition to leaving the banks with a larger loss, the homeowners who stop making their payments get to stay in their houses longer because the banks are less interested in foreclosing on million dollar properties. The banks are disinterested to take back the properties because they are harder to move on the market and would require that the banks to pay hefty maintenance fees on the properties for upkeep.
From CBS News:
For Darren Thomas that ocean view was quickly losing its value. He says, “I bought it for [$1.385 million]. It is worth less than [$800,000], maybe less.”
Thomas bought his townhome in 2006 but after seeing its value drop steadily he stopped paying.
“I haven’t made a payment in two years,” he says. “It was business decision. It was an easy decision. I have a property worth six or 700,000 less than when I bought it. I was making payments of 10,000 a month.”
“People like myself, business people, are going it is silly to throw good money after bad,” says Thomas “The loss is not mine. The loss is the banks.”
Actually Darren Thomas, since the government bailed out and continues to finance the banks at zero interest, the loss is ultimately born by the taxpayers. You can say thank you to your fellow citizens any day now.