STRATEGIC DEFAULT IS NO MORAL DILEMMA FOR THE RICH

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“The stigma around default has really changed and people are starting to see it for what it is – a business transaction with the bank.”

PEOPLE WITH MONEY WANT TO KEEP IT;

WALKING AWAY FROM BAD INVESTMENT

FROM YAHOO REAL ESTATE PROVIDED BY FORBES

Victoria Gotti, the reality TV star and daughter of infamous mob don John Gotti, made headlines in 2009 as the latest high-profile homeowner facing foreclosure. According to the New York Post, Zillow.com and others, she had stopped making mortgage payments to lender JP Morgan on her Long Island, N.Y., estate, which she had put up for sale the prior year, finding no takers at an asking price of $3.9 million. The home, in the tony neighborhood of Old Westbury, originally cost close to $4.1 million. Two years later, she’s still in the house–now listed for $2.9 million.

She’s hardly alone, of course. Millions of American homeowners have faced foreclosure over the past several years and roughly 11 million more remain significantly underwater on their mortgages. About 7.7% of all mortgages nationwide are in trouble, either seriously delinquent or already in foreclosure. But somewhat surprisingly, ritzy ZIP codes like Gotti’s Old Westbury 11586 aren’t immune. Far from it. According to LPS Applied Analytics, 6.5%, or 33 out of the 516 active loans in her area are in some stage of delinquency. In nearby Great Neck, the default rate is even higher. Of the active home loans in the peninsula enclave, 7.2% are in some stage of foreclosure or pre-foreclosure.

See full list: Rich Neighborhoods Riddled with Foreclosures

See full list: America’s Dirtiest Cities

We asked LPS Applied Analytics, a unit of Lender Processing Services that publishes the monthly Mortgage Monitor report, to pull the foreclosure statistics for the priciest neighborhoods in America. Using Forbes’ 2011 list of the Most Expensive ZIP Codes, the folks at LPS Applied Analytics calculated the number of defaulted loans against the total number of active loans – which include everything from subprime loans to conventional loans to jumbo prime loans (and even complicated nontraditional financing, which undergoes the foreclosure process the same way as a traditional mortgage) – in America’s 100 most expensive ZIP codes.

Where It’s Worst

The result? Perhaps not surprisingly, hard-hit Florida led our list. It has two higher end hoods in top spots: Fisher Island (No. 1) and Rosemary Beach (No. 3). Fisher Island, the Miami Beach multimillionaire enclave and the 43rd most expensive ZIP code in the country, has a whopping 20.5% foreclosure rate, with 38 out of 184 active loans in default. Rosemary Beach, a posh planned community in the panhandle and the 69th most expensive ZIP code, clocks in at 9.9%, with 10 out of 104 homes in default.

Record numbers of foreclosures have translated into price depreciations of 50% or more in many parts of the state, pushing yet more underwater homeowners into foreclosure. “The rates in Florida have been among the highest for a very long time now so I think it’s emblematic of that,” says Herb Blecher, vice president of LPS Applied Analytics. A number of high-profile Florida owners have been among the state’s default ranks, including comedian Chris Tucker, who owes more than $4.4 million on a $6 million mansion currently assessed at $1.6 million, according to the Orlando Sentinel.

Walking Away

So why do the rich face foreclosures? Loss of income, of course, is the biggest reason. But analysts say they’re seeing a rise in the number of well-off property owners who stop paying their mortgages for calculated financial reasons. “Strategic defaults can be an even bigger issue with higher-end homes, where if you’re 25% underwater that could mean hundreds of thousands of dollars or more, because the borrowers may be more financially shrewd and consider it a financial decision to walk away from the home,” explains Daren Blomquist of RealtyTrac.

He also notes that foreclosures among high-end homeowners have been rising for some time: a study conducted by Realtytrac last year from January to October revealed that defaults on million dollar and higher loans has risen 335% from 2007 through 2010, compared with a 128% rise for all categories of loans at all price points. And LPS Applied Analytics data shows that trend holding steady through this year, with jumbo mortgage delinquencies remaining nearly 300% higher than 2008 rates.

Why are foreclosures ratcheting up in these expensive enclaves? When the reason is strategic default, it’s usually because wealthier people can’t necessarily qualify for a short sale or a loan modification thanks to too much income on the books, explains Chad Ruyle, co-founder of Youwalkaway.com, a Carlsbad, Calif.-based site specializing in strategic defaults. He says the company has helped a number of well-to-do clients since its inception in 2008. “Today we have had a couple celebrities that have randomly contacted us who want to foreclose,” says Ruyle, declining to disclose identities. “The stigma around default has really changed and people are starting to see it for what it is – a business transaction with the bank.”

20 Responses

  1. In the chapter called “Overture” in Daniel Estulin’s book, The True Story of The Bilderberg Group, there is an account of how when anti-Quebec nationalist Jean Chretien became Prime Minister of Canada, the province nearly seceded to become an independant state, as a result of the Quebec Referendum of October, 1995.

    A small group of 38,000 Canadian patriots from across Canada descended on Quebec and begged them not to secede. The political powers in Canada could not anticipate or even suspect that this small group could have such a profound effect, and thereby prevent Canada from being broken up and destroyed. Separatists had stage-managed the rest of Canada, trying to orchestrate Quebec’s exit, as stoics in Quebec were dead set against the secret deal between the political class and the U.S. to create the North American Union and sell out the provinces. Quebec stood firmly in the way of completion of the plan, to her credit. The point made was that a rediculously small group of people, 38,000 out of a population of 32,000,000 can make a huge difference against the powers of darkness and destroyers of liberty and sovereignty. When we unite and ACT, we move the earth.

  2. Enraged,

    Heard that too. AIG all about derivatives. Foreclosures all about derivatives.

    Ann

    Nothing surprises me anymore. Cover-up continues. Nothing like letting the fox investigate for the hen house he guards.

  3. @Nora,

    Could you elaborate on your French-speaking Canadian quip? I missed that.

  4. Prof. Wilmarth got it right;
    “The Act’s proponents claim that the new financial supermarkets will produce favorable economies of scale and scope, offer convenient one-stop shopping to customers, and achieve a safer diversification of risks.” The proponents meant safer for themselves, not the slave caste inhabitants of the globe. The one stop shopping was only available to the elite–the bankers–who engineered consent through their media outlets, and enabled them to build unimaginable wealth.

    But we know that now. The tempest is brewing, the zionists are losing their grip, and the slaves are arming themselves. The EU is falling apart, Canada successfully blocked the NAU and refused to be taken apart, and thanks to the likes of Neil and this site, we are finally on track to snatch our sovereignty back from the greediest, maddest men on the planet. (Thank you french-speaking Quebec for not seceding from the Canadian provinces!) Truth spreads even quicker than lies.

  5. […] What is a Super Jumbo MortgageCiti Mortgage Loan Modification Class Action LawsuitJumbo Mortgages Could be Next in Line to DefaultJumbo Mortgage Loans Harder to GetJumbo Mortgage Rates – what goes up must come down, and back upAre Mortgage Modification Applications exempt from banking complianceCan second mortgages foreclosureSTRATEGIC DEFAULT IS NO MORAL DILEMMA FOR THE RICH […]

  6. The Professor that Predicted The Outcome of the Gramm-Leach-Bliley Act of 1999 and the big bank managers just wanted to build personal wealth and create companies that are Too Big To Fail!!

    The Transformation of the U.S. Financial Services Industry, 1975-2000: Competition, Consolidation and Increased Risks

    Arthur E. Wilmarth Jr.
    George Washington University Law School

    University of Illinois Law Review, Vol. 2002, No. 2, 2002

    Abstract:
    The structure of the U.S. financial services industry has fundamentally changed during the past quarter century. Rapid improvements in information technology and the creation of innovative financial instruments have produced a dramatic increase in competition and spurred deregulation, thereby eroding traditional barriers that separated banks from securities firms and life insurance companies. In response to these trends, major banks, securities broker-dealers and life insurers have aggressively expanded by merging with their direct competitors and by acquiring firms in other financial sectors. The Gramm-Leach-Bliley Act of 1999 has encouraged this consolidation trend by authorizing the creation of financial holding companies that engage in a full range of banking, securities and insurance activities. The Act’s proponents claim that the new financial supermarkets will produce favorable economies of scale and scope, offer convenient one-stop shopping to customers, and achieve a safer diversification of risks.

    This article contends that the motivations for and probable outcomes of financial conglomeration are very different. Managers of large, diversified financial firms have sought growth in order to build personal empires, to increase market power and to secure membership in the exclusive club of too big to fail (TBTF) institutions. By virtue of their TBTF status, major financial holding companies are largely insulated from market discipline and regulatory oversight, and they have perverse incentives to take excessive risks at the expense of the federal safety net for financial institutions. Based on past experience, the new financial megafirms are likely to encounter diseconomies of scale and scope, shrinking profit margins, increased customer dissatisfaction, and greater vulnerability to sudden disruptions in the financial markets. In addition, current policies create a near-certainty that federal regulators will prop up these gigantic financial firms during economic crises.

    In light of the challenges posed by financial holding companies, federal regulators have tried to strengthen capital regulation and increase market discipline. However, these incremental regulatory initiatives cannot control the potential risks of financial conglomerates, because they do not solve the problems of supervisory forbearance and moral hazard created by the TBTF doctrine. This article calls for more far-reaching reforms to our financial regulatory system in order to compel financial conglomerates to internalize the costs of their risk-taking.

    Number of Pages in PDF File: 262

    Accepted Paper Series
    Date posted: January 20, 2005

  7. @Ann

    You want outrageous? Hank Greenberg, former CEO of the now infaous AIG is suing… the Feds for “improper take over”. He wants a “just” compensation from… hmm… that would be… us?

    He robbed us blind and now, he wants to be “justly” compensated. “Chutzpah” doesn’t even start to describe it.

    http://www.nytimes.com/2011/11/22/business/greenberg-sues-us-over-aig-takeover.html?_r=2&ref=business

    Un-be-lie-va-ble!!!!!!!!!!!!!!!!!!!! So, now, you and I must foot the defense costs bill and, of course, Greenberg has retained the biggest hired gun there is.

  8. OUTRAGEOUS !!!! You all are not going to believe this one….

    Just when you thought they couldn’t be more outrageous, we have this…~

    Foreclosure Review Services (FRS), Industry Veterans to Lead Review of 4.5 Million Foreclosure Cases

    Foreclosure industry veterans to provide foreclosure review services in response to the Office of the Comptroller of the Currency’s “Independent Foreclosure Review” program.

    Miami, FL (PRWEB) November 21, 2011

    Foreclosure Review Services (FRS) provides contract attorneys who diligently review cases to determine whether a homeowner may have suffered financial injury as a result of errors, misrepresentations, or other deficiencies in the foreclosure process.

    FRS’s Director of Operations and Training, Miriam Mendieta, Esq.,is a nationally recognized industry expert with over 15 years of hands-on experience. Miriam served as the managing attorney for one of the largest creditor’s rights firms DAVID STERN in the country where she was responsible for the oversight of all the aspects of foreclosure and bankruptcy related services.

    FRS’s team of contract attorneys are extensively trained to properly review and analyze each case. FRS will review each foreclosure case to determine if the homeowner suffered financial injury as a result of errors made during the foreclosure process.

    The reviews are part of a series of compliance actions initiated by the Office of the Comptroller of the Currency.

    FRS has facilities in Dallas and South Florida and also provides consultants onsite.

    FRS: Foreclosure Review Services
    1395 Brickell Ave., Ste. 800
    Miami, FL 33131
    888-603-5559
    info(at)frserv(dot)com
    EXPERTS IN DEFAULT SERVICES * EXPERTS IN DOCUMENT REVIEW ###

    Now, brace yourselves for what comes up next on Ms. Miriam Mendieta, Esq.

    FroM the Deposition of TAMMIE LOU KAPUSTA

    12:11 p.m. – 1:58 p.m.
    September 22, 2010
    Office of the Attorney General
    110 Southeast 6th Street, 10th Floor
    Fort Lauderdale, Florida 33301

    Read more at http://4closurefraud.org/2011/11/21/outrageous-miriam-mendieta-esq-former-managing-partner-of-david-j-sterns-fraud-factory-to-lead-review-of-4-5-million-foreclosure-cases/

  9. Republicians & Democrats————-divide and rule, money interests, banks create money from book keeping entry, google search it, read for yourself,,,,,,,,,,,,,,

    You better believe————-don’t believe, we can be a group.

    pitted against each other since long ago……………….

    http://en.wikipedia.org/wiki/Divide_and_rule

  10. You get this Karl Deninger at market ticker dot org.

    Speculation is only a word covering the making of money out of the manipulation of prices, instead of supplying goods and services.

    ——————

    While it is legal, what is it, really? While it is Wall Street and while it is legal. why what is it really? It is Speculation and it is gambling…………so fuk you you Neil thinking it is something cool. It is not.

    Get real. It has only to do about making money but not exchanging a product or service.

    It is only about making money off of money, the 1%, while the 99% work to make money for the 1%. Big difference.

  11. Welcome to the New America or Global Economy thanks to Wall Street and the Federal Reserve System of banks………….SYSTEM being the key word…………and what is the Wall St system?

    Place your bets per CNBC, Karl Denninger—————spoken everyday, Karl read the below.

    Speculation is only a word covering the making of money out of the manipulation of prices, instead of supplying goods and services.
    Henry Ford

    Read more: http://www.brainyquote.com/quotes/authors/h/henry_ford_2.html#ixzz1eOsyURgO

  12. Harm:

    http://www.merriam-webster.com/dictionary/harm

    Who has been harmed?

    Profits or no profits – that would be interest. Consider in that how money is actually created – via bank loans – via federal reserve system of banks. Compound interest, off of created money via IOU’s, or promise to pay, or book keeping entry, or not money actual lent but leveraged money lent, deposits are not lent at a bank.

    so who is harmed?

    So since money is leveraged, and the 1% get to leverage the money, which is your debt, your promise to pay and sliced and diced and securitized into Wall St, why who is harmed? It is leveraged.

    Pay off your debt, or default on it, or whatever, who gets harmed? The laws want you to be harmed if you default? But they get a write off. You do not. And it is all leveraged money anyway? So who is harmed? From the bank viewpoint. They are not. Just loss of profit, or interest, not actual 1 for 1 money lent, since fractional reserve of system of money.

    That is all.

    But if you understand.

    why you can work out a best deal.

    If you think you can do a thing or think you can’t do a thing, you’re right.
    Henry Ford

    Read more: http://www.brainyquote.com/quotes/authors/h/henry_ford_2.html#ixzz1eOsLpwKm

  13. Lady Justice — truly blind.

  14. esther9,

    Right on. Servicers are servicers for someone — but they just do not tell you who. And, they do not tell you how much the “current” creditor purchased the collection rights for. Could be as low as 30 cents on the dollar (or lower). And, since the creditor is never identified, you never have the opportunity to negotiate with your “current” creditor — as required by HAMP and the TILA Amendment. As it stands, you are stuck paying an inflated loan based on an inflated appraisal based on a fraudulent mortgage – which now amounts to a fraudulent foreclosure.

    Nice — Huh??

  15. As i commented to one servicer, I owe somebody money but i don’t think its YOU!

  16. in 2007 and 2008, we all paid those forward too, along with ours and the Joneses’. If people don’t look twice before walking away from a $3.9M debt, who are we to fewel guilty over our puny little $209,000?

  17. linda

    Much higher as to homeowners “under-water”, which means far more foreclosures may be in the pipeline, and it dramatically affects the economy. Despite how some may present it, the US economy is not is good shape. US economy largely relies on consumption, and there is no current lending to fuel that consumption. And, that then means unemployment will not recover anytime soon (note 9% unemployment does not include those that have given up looking or those that settle for part-time work – rate is actual much higher). Further, global issues create a huge threat to national economies. And, finally, any recent stock market “wealth” has been by government actions that has artificially concealed the true state of the US economy.

    Those with wealth will not substantially suffer by walking away from a property investment. You and I would (unless you are among the wealthy.)

  18. I fail to understand why you’d believe, much less care what LPS has to say, or whatever phoney baloney numbers/data they post as a supposed representation of the foreclosure machine. They work for the bad guys, remember?
    There’s a general agenda of stating conflicting information, confusing the readers and if at all possible keeping the different factions in an argument if possible. Divide and conquer. Keep the sheeple from organizing and becoming effective in a counter assault, A Tavistock methodology of keeping us disoriented and confused. Brainwashing is a favorite tactic used by the really bad people behind the NWO. All we really need to remember is the names of the bad guys. LPS Field Services employees are the jack-booted thugs and thieves who loot the homes of people in the process of walking away from these giant anchors of aggravation we call “home loans”. On those grounds I say phooey to anything coming from that camp. They not only stole the silver platter the Thanksgiving turkey usually sits on, but the only silver I had managed to hang onto as a means to buy a loaf of bread if the financial crisis predicted for 2012 becomes a reality. That’s the only real loss, ’cause there isn’t any turkey this year, anyway. We’ll be enjoying the stale bread, “au natural” rather than as “stuffing.” Screw ’em…be deaf and blind to their disinformation.

  19. whats beats me up about this shin dig is that in 1991 when i bought my 1st house i pain stakenly worked every minuye to save for my down payment then i went live in it for 13 yeats home prices rose slowly i could aford my house when my husband was unemployed and i broke my ankle i called the bank the car company deffered the mortgage payment and car payment this was in 2000 approving homes to people that couldnt actually afford then is wrong blaming this mess on homeowners and foreclosing is wrong beleive me if i coulds sell my house to get out of this pile of crap i would . Unfortunatly i have learned to much over the past 2 years just because jack and jill ask for an expensive ipod doesnt mean mommy and daddy can buy it. lieing on someones mortgage application just to make some money? A stated income loan where did that come from? i had a 789 credit score before all this its not the adults they r hurting but the kids. Rents r cheap where i live in fl but my kids belong in their homes

  20. Might sound corny, but I have say that I am disappointed. I thought the nationwide foreclosure rates were higher. These statistics only tell me that more than 90% of the nation still does not know what is going on or the foreclosure rates would be higher.

    I would also venture to guess that most people continue to pay on these ghost mortgages because they really believe they owe the money to the bank, or for fear of default or fear of being thrown out. They are afraid of what could happen to them because they don’t understand what’s going on. They would rather pay than to face the fear of the unknown.

    Even if half the mortgages are underwater, people are continuing to pay on them! It strikes me that banks would also consider these percentages somewhat puny compared to the average foreclosure rate of 4% on homes in a good market (is what I heard).

    No wonder banks don’t care. They just want to get as many foreclosures done as possible with the notion that the bottom of the market is in sight. I hope they are rudely awakened.

    I’ll bet you anything Banks are disappointed there aren’t MORE foreclosures. I’ll just bet you.

    In this scenario, banks will need to roll out more incentives for homeowners to want to foreclose. !

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