Though imperfect in many ways, the government does have a number of options for the average homeowner in need of assistance to avoid foreclosure. But the U.S. median home price in October stood at only $173,000, down a whopping 25% from a high back in 2006 of about $230,200. What happens if you need help with your mortgage and your home is in the million dollar or above range? It's not uncommon in many more affluent coastal regions of the north- and south east, as well as large swatches of California.
Increasingly, the best option for you folks, according to figures cited by Bloomberg News, appears to be the common short sale. (That's when a lender agrees to take less than what the mortgage is worth just to get the property off its books.)
In fact, according to Bloomberg, "homeowners with mortgages of more than $1 million dollars are defaulting at almost twice the U.S. rate" with increasing numbers of these previously well-to-do homeowners opting for a short sale as their salvation.
"There's a lot of distress," one real estate agent tells Bloomberg, citing as an example, the plight of hedge fund experts who are still out of work after months of unemployment and who have exhausted much of their savings.
Another broker is quoted as saying we are just now seeing the "tip of the iceberg" when it comes to so-called luxury short sales.
Of course, just because you want a short sale doesn't mean your lender will go along with this. But most of these properties tend to be in above average shape and in desirable neighborhoods, making it more likely that a lending institution will eventually see it your way and agree to the short sale knowing that, even in this tough market, the property can probably be re-sold in a relatively short period of time. Good for all concerned.
There is a bit of irony at play here. Recently, Congress refused to go along with a proposal that would have allowed bankruptcy judges the flexibility to change the terms of a primary mortgage -- usually by reducing the principal along with the interest -- in an effort to stave off foreclosure. Some people felt it unfair that some homeowners should be allowed "off the hook" while others had to pay their full loan amounts.
While I have not seen any hard figures on this, I would be willing to bet that many of these wealthier homeowners who are dumping their properties on the banks by selling short, are some of the very same folks who got all up in arms about those less fortunate than themselves who were willing to actually keep their homes but only needed a little extra help from the banks to do so.
Charles Feldman is a journalist, media consultant and co-author of the book, "No Time To Think- The Menace of Media Speed and the 24-hour News Cycle."
Short sales proving popular for many wealthier home owners