Why are the rich defaulting at a higher rate?
The general perception is that the people who are not paying their mortgages are either unemployed or are the common man who is going through a rough time. This headline, however, paints a bit of a different picture: it is the borrower of loans that are over a Million Dollar who are defaulting at a higher rate than the borrowers below a Million Dollars. One in Seven for the Million Dollar borrower versus one in twelve for the other borrower.
The talk of the moment right now is that of strategic default. And the interesting thing is that this article raises the question as to whether the rich are making strategic financial decisions to stop paying their mortgage as bad investments. That certainly would explain why the segment with the higher net worth and other resources are defaulting at a higher rate that the less fortunate segment of society.
It would be interesting to see how this pans out.
