High-End Homeowners May Fare Better In Foreclosure Process

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After a foreclosure, this California home stood vacant.

The national foreclosure system appears to favor borrowers whose home loans total $1 million or more.  That’s according to a new analysis for The Wall Street Journal.

“Nationally, borrowers with loans of at least $1 million were in default for an average 792 days last year before banks repossessed their homes, according to an analysis by data provider Lender Processing Services. For loans under $250,000, the wait stood at an average 611 days—a difference of about six months.” — The Wall Street Journal

The article says the trend holds true in 45 states, including Idaho.  The Journal reports there are a number of explanations for the disparity.  Among them is the fact that, “banks tend to keep larger mortgages on their books, while smaller mortgages are more likely to be bundled into securities and later resold to investors with backing from Fannie Mae and Freddie Mac.”

According to StateImpact Idaho’s reporting late last year, high-end homeowners who are in default may have a harder time than more modest homeowners in at least one respect.  Lenders may be more likely to pursue wealthy homeowners for post-foreclosure debt.  Kelly McConnell, an attorney with Idaho commercial law firm Givens Pursley LLP, made that observation in an interview last fall.

“I am seeing an increase of deficiency actions on vacation homes and secondary residences,” McConnell said, “where the homeowner in that situation was more affluent or went to purchase a second home and stretched themselves too thin.  In that type of situation I would see more deficiency actions, for sure.”