Friday, July 9, 2010

"Ring of Death" Burning Brighter Than We Thought

Drawing on numbers in NYT today from NHC Member Partner, CoreLogic, Felix Salmon laments on the wave of “strategic” mortgage defaults among more well-off homeowners, and Fannie and Freddie’s attempts to put a stop these moves among folks with smaller assets: “Sure, it’s not good social policy to strategically default. Fine. That doesn’t stop the rich, and it shouldn’t stop the rest of us either.” Krugman says CoreLogic’s findings show it was mortgage loans to “affluent deadbeats,” as much as the government pushing homeownership for lower income families, that led to the crash.

We’ve talked a lot in the last few weeks about how the foreclosure crisis has disproportionally hit the traditionally “wealthy” suburban outreaches in many of America’s largest metro areas – a phenomenon William H. Lucy calls the “Ring of Death.” On top of higher foreclosure rates, CoreLogic’s findings add to this mix the higher rate of intentional defaults on expensive homes (mostly in the suburbs). So the Ring of Death is burning brighter than we might have thought. Whether it’s forced foreclosure or intentionally withholding mortgage payments, for thousands of families, it appears the old, exurban American Dream is beginning to bubble over.

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