Although many individuals in Florida are losing their homes to foreclosure because they can no longer afford to make their monthly mortgage payments, others are choosing to default for a completely different reason. The CBS News reported at the end of January that more millionaires are making the decision to not make payments on their mortgages because their luxury homes have become just another bad investment in today’s economy.
Foreclosures in Florida significantly increased last year, and the U.S. reported a record of 3.8 million foreclosures for 2010. RealtyTrac believes that those numbers will continue to rise throughout 2011 as home values plummet even more. Analysts also predict that more millionaires will default on mortgages in 2011 because their homes have lost hundreds of thousands of dollars in value.
One luxury homeowner interviewed by CBS said that he originally purchased his house for $1.385 million in 2006. His monthly mortgage payment is $10,000, but now the house is worth less than $800,000. The man said he has not paid his mortgage for over two years now because it is a strategic move for him not to invest in the home anymore. He has already lost over $600,000 in value on the home. According to CBS, one in seven homeowners who have a mortgage over $1 million on a home is delinquent on their payment.
These million-dollar default mortgages are less likely to go into foreclosure as quickly as other homes do. Banks don’t want to be responsible for the maintenance costs and they are more difficult to sell. The man interviewed by CBS has not made a single payment on his luxury home for over two years, but the bank has yet to begin the foreclosure process.
For the majority of Florida residents, losing a home to foreclosure is not just a bad investment gone awry. Many residents want to be able to make their mortgage payments so that they can continue to provide their family with a home. Unfortunately, more and more individuals are finding it difficult to manage their expenses because they have lost income that they counted on. Bankruptcy attorneys in Florida want residents to understand that there are solutions to keep one’s home while also consolidating debt. Foreclosure doesn’t have to be the result.
CBS News: “Even More Millionaires Defaulting on Mortgages” John Blackstone, 30 Jan. 2011