What the Rich Say About Strategic Default
The New York Times and CoreLogic examined the data, and found that the rich are more likely to purposefully default on their mortgages -- to strategically
Jul 31, 2020127.9K Shares3.7M Views
The New York Times and CoreLogic examinedthe data, and found that the rich are more likely to purposefully default on their mortgages — to “strategically default” — than lower-income homeowners:
“„More than one in seven homeowners with loans in excess of a million dollars are seriously delinquent, according to data compiled for The New York Times by the real estate analytics firm CoreLogic. By contrast, homeowners with less lavish housing are much more likely to keep writing checks to their lender. About one in 12 mortgages below the million-dollar mark is delinquent.
“„Though it is hard to prove, the CoreLogic data suggest that many of the well-to-do are purposely dumping their financially draining properties, just as they would any sour investment. “The rich are different: they are more ruthless,” said Sam Khater, CoreLogic’s senior economist.
That the rich would default strategically more often makes plenty of sense. First of all, if you are lower-income, you might be less willing to default because your home is your biggest asset. (That is, if you get rid of your house without making anything off of the sale, you might end up broke on paper, unlike a wealthier person with a 401k and investments.) If you are lower-income, your mortgage is probably a higher percentage of your monthly take-home pay — meaning your default is more likely to be out of financial necessity than financial ruthlessness. Finally, the wealthy are likely more financially savvy.
That said, this article epitomizes my broader frustrations with the debate over strategic default. It fails to definestrategic default — setting out what distinguishes a canny defaulter from one tapped-out and a few months away from insolvency. It says one in seven homes with a million-dollar loan is on the verge of foreclosure — but provides no data as to why that means that their defaulters are strategic. What demonstrates that those homeowners are choosing to give up their mortgages, rather simply realizing they cannot afford them anymore, other than anecdotes?
Dexter Cooke
Reviewer
Dexter Cooke is an economist, marketing strategist, and orthopedic surgeon with over 20 years of experience crafting compelling narratives that resonate worldwide.
He holds a Journalism degree from Columbia University, an Economics background from Yale University, and a medical degree with a postdoctoral fellowship in orthopedic medicine from the Medical University of South Carolina.
Dexter’s insights into media, economics, and marketing shine through his prolific contributions to respected publications and advisory roles for influential organizations.
As an orthopedic surgeon specializing in minimally invasive knee replacement surgery and laparoscopic procedures, Dexter prioritizes patient care above all.
Outside his professional pursuits, Dexter enjoys collecting vintage watches, studying ancient civilizations, learning about astronomy, and participating in charity runs.
Latest Articles
Popular Articles