‘Rich’ People Defaulting On Homes At a Higher Rate Than Average

The RealtyTrac organization predicted earlier this month that home foreclosures in 2011 will likely exceed the record 3.8 million reported in 2010.

CBS News correspondent John Blackstone reports one group of mortgage defaulters seems to be bucking the trend. In wealthy communities like La Jolla, Calif., living near the ocean is a privilege that many homeowners are willing to pay millions for.

For Darren Thomas that ocean view was quickly losing its value. He says, “I bought it for [$1.385 million]. It is worth less than [$800,000], maybe less.”

Thomas bought his townhome in 2006 but after seeing its value drop steadily he stopped paying.

“I haven’t made a payment in two years,” he says. “It was business decision. It was an easy decision. I have a property worth six or 700,000 less than when I bought it. I was making payments of 10,000 a month.”

Thomas has gone into strategic default. He could make payments but is refusing to put more money into a home that is worth less than his mortgage. Among luxury homeowners he is not alone.

One in seven homeowners with loans over $1 million are seriously delinquent compared to one in 12 with mortgages below $1 million.

The more you owe, it seems, the better off you may be. Darren Thomas continues to live in his home because banks are often slower to foreclose on million-dollar homes.

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