High-End Houses Are Not Immune From Foreclosure

Posted on October 25th, 2007 by saman

People who own low to mid-priced homes have been foreclosed in record numbers, but they aren’t the only homeowners facing the auctioneer’s gavel. Expensive homes, some worth seven figures, are also falling into default due to their owner’s becoming seriously delinquent on mortgage payments and tax bills. And some of these homeowners are bankers, real estate brokers and developers who made big profits in the housing boom before 2006.

The increasing foreclosure of high-end properties is a clear indication that even some wealthier people can be subject to job loss and other financial difficulties. Those facing job losses have ended up in that unfortunate position as a result of the same subprime mortgage crisis that caused the recent meltdown. Many were relatively high salaried employees of some of the biggest sub prime lenders who either went out of business or had to close many of their offices. Others made big bucks on commissions from closing subprime mortgage deals. Some experts in finance say that it stands to reason that many of the people who profited the most from improper subprime lending activities would end up in an equally bad financial state as a result of the foreclosure crisis. There are also a sizeable number of investors who bought properties with subprime loans in order to fix them up and resell them at a profit, only to find themselves unable to move the properties. The sad truth is that if you can’t rent out an investment property or sell it, you’re in deep trouble.

Some uninformed homeowners thought that their mortgages had a fixed rate because they took the lender’s word for it and didn’t really understand all the fine print terms and conditions. When the payments suddenly escalated, it didn’t take very long for the homeowners to become delinquent and to receive a Notice of Default from their lender. When asked to refinance or restructure the mortgage, the lenders plainly refused to settle for anything short of a check for the full delinquent balance. Nor would the lender return phone calls.

Many federal and state legislators have been talking about enacting new laws that will give homeowners facing imminent foreclosure some options to save their home or at least escape without necessitating bankruptcy. Community groups in many states have been working with officials to the same end. Nevertheless, despite all the ‘ifs’, nothing yet has taken place to help the unfortunate. Meanwhile, many neighborhoods have become unusually quiet because so many homes are empty with “bank owned” signs gracing the front yard.

If any help is to come, it’s unlikely to happen until sometime in mid or late 2008, and that’s too late for many now in the foreclosure process. In the interim, more and more homeowners face the inevitable with nowhere to turn for an answer. Moreover, the mortgage crisis is now affecting developers of new homes and local merchants who are feeling the effects of reduced spending from a smaller customer base, as neighborhoods grow smaller in population.