Jumbo Mortgages Seeing Largest Default Rates

In a shocking report I read recently, apparently the rich who have those “jumbo mortgages” that are hundreds of thousands of dollars, and often exceed a million dollars for a home, are now the biggest population of defaulting mortgages here in the US. Areas where the rich notoriously buy second homes or esteemed first homes, like a lot of areas in California, where you pretty much have to be rich to afford any kind of nicer home, are seeing skyrocketing amounts of foreclosures and defaults on these huge mortgages.

While the huge housing bust and subsequent increasing amounts of foreclosures really started at the ground level with folks like you and me, more blue collar types of incomes and also correspondingly modest home loans, it now appears to be much more rampant in this upper echelon of mortgage lending. One thing puzzles me though. Even though these are the rich who are dumping their homes, aren’t they at all worried that this will give them bad credit?

That is what would be first and foremost on my mind. But speculation is that the rich will be much more decisive and quick to drop a property that clearly has become a “bad investment”, especially if it is a second property or vacation home. And really especially if it is a home they bought for speculation – in other words, for reselling for a profit.

I gotta say that this mentality bugs me. Especially when it’s done by people who can afford the mortgage, they just no longer want the burden of paying a mortgage that they don’t think will do them any good in the near future on a property that’s diving in value. I mean, there are millions of us who have homes that have taken a nose dive in value, but you don’t see everyone marching off into the sunset and leaving their homes for foreclosure?

Let me emphasize that I get there are many times extenuating circumstances, and I understand that. But a lot of these are pure impatience and lack of responsibility, which is what has gotten us in this mess in the first place, that and irresponsible lending by banks. Well, now a lot of people will suffer because banks are much tighter on their lending restrictions than they used to be.

This is going to have a widespread devastating effect on the already faltering economy. It’s a trickle down effect. Not only are people like this hurting themselves by seriously dinging their credit for future purchases, but they are also hurting the greater economy, the job market and everything else that makes this once great economy of ours tick.

It’s time for people to take responsibility for their actions, and wait it out. These homes will go back up in value, it’s not as if they never will, it just may be a longer wait than we’d like at this point.