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Friday, July 9, 2010

Rich More Likely to Walk Away from Mortgages

Ah, the rich. Paragons of capitalist virtue. Models of personal responsibility.

And mortgage deadbeats:

[The New York] Times analyzed data from CoreLogic. That's a firm that analyzes real estate trends. The data shows that more than one in seven homeowners with loans over a million dollars has missed at least three payments in a row. They're seriously delinquent. Only about one in 12 homeowners who owe less than a million dollars is seriously delinquent. That's basically the rest of us [Stacy Vanek-Smith, "Rich More Likely to Walk Away from Homes," Marketplace Morning Report, 2010.07.09].

See the NYT article Vanek-Smith cites for these valuable quotes:

“The rich are different: they are more ruthless,” said Sam Khater, CoreLogic’s senior economist.

...the rich do not seem to have concerns about the civic good uppermost in their mind, especially when it comes to investment and second homes [David Streitfeld, "Biggest Defaulters on Mortgages Are the Rich," New York Times, 2010.07.08].

And I'm supposed to trust the rich with more tax breaks? I don't think so....


  1. Cory,

    As much as I know you'd like to jump to a conclusion as it appears your sources did, I know of instances of some of these large defaults. They are small or medium business owners whose businesses are in dire straights.

    They are forced with a nre reality:

    Their business lender is squeezing them, limiting their draws, and forcing them to reinject all their external assets into the business.

    Essentially, they have two choices:

    1) Default on their business loan, close their business and have their employees lose their jobs. Or,

    2) Fight to keep their home.

    While I don't endorse defaulting on debt, I'm not quite so quick to attribute to them such nefarious motives. In the end, they will either cover the bank's losses on their home or be forced into personal bankruptcy where they ultimately lose their business.

    My point is the final page on these defaults have yet to be written. And your attempt to somehow use this as rationale for job destruction public tax policy is neither intellectually sound nor fair to the people who continue to be out of work because Obama continues to pursue anti-growth policies.

  2. This article is retarded. Owing more than $1 million on a house is more a function of location than anything else. Check out California for instance. Property prices there are insane and the foreclosure rate reflects it. These people aren't paying because they are SUPER broke, not rich.

    They are normal people with normal jobs that got roped into paying huge amounts of money for homes because of the bubble.

    Now, if the article said they had million dollar mortgages and very lucrative jobs (say, 250-300k/year), then your and the article's conclusion would be warranted.

  3. Troy and Tony:

    Thanks for the clarifications. I must admit that the article Cory cites disturbed me when I first read it. Now I understand the matter little better (I hope).

    I remain skeptical of the blanket notions that "rich people" are ruthless and that they lack concern about civic matters.

    However, I have little respect for anyone who walks away from a debt obligation. In effect, they stick the entire population with the cost of cleaning up the chaos they leave behind.

    I think that the Bush tax cuts for "rich people" were a mistake to begin with. Now, if we let those cuts expire, it will "taste" like a tax hike. But I say go ahead and let them expire -- and pass a bill mandating that the extra revenue go only toward paying down the debt, and not toward any new spending.

  4. Yeah! Down with the greedy bourgeois pigs! If they can't keep concerns about the "civic good" uppermost in their mind well then let's off with their uppermosts!

    ...or forcibly confiscate their property in the name of the "civic good" like civilized people.


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