NYT on 'Rich' Mortgage Defaulters

http://www.futureofcapitalism.com/2010/07/nyt-on-rich-mortgage-defaulters

The New York Times has a front page news article that appears under the headline "Biggest Defaulters on Mortgages Are the Rich." From the story:

The housing bust that began among the working class in remote subdivisions and quickly progressed to the suburban middle class is striking the upper class in privileged enclaves like this one in Silicon Valley.

Whether it is their residence, a second home or a house bought as an investment, the rich have stopped paying the mortgage at a rate that greatly exceeds the rest of the population....data suggest that many of the well-to-do are purposely dumping their financially draining properties...data suggest that the rich do not seem to have concerns about the civic good uppermost in their mind

You'd think that the definition of "rich" might be something having to do with assets or income. But instead, the measure that the Times uses to define its claim is:

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.

This is one of the strangest definitions of "rich," "upper class," or "well-to-do" that I've ever seen, a definition not based on assets or income but on liabilities. By the Times's definition, if you have a loan of more than $1 million on your house, you are rich. That's nonsense. Sure, there may be some genuinely rich people out there carrying big mortgages so they can deduct the interest on their taxes. But a lot of the people with $1 million loans took them out precisely because without them they were not rich enough to afford to live in a house big enough for their family within reasonable commuting distance of their jobs.

One of the examples in the Times article demonstrates the point: "At one house, where the lender was owed $1.3 million, there was a couch out front wrapped in plastic. A woman said she and her husband had lost their jobs and were moving in with relatives." Is she "rich" or "well-to-do"? Maybe she used to be. Maybe "Biggest Defaulters on Mortgages Are the Formerly Upper-Middle-Class" wouldn't fit in the headline space, or wouldn't have merited front-page placement.

by Ira Stoll  |  Jul 9, 2010 at 9:40 am Related Topics:  Definition of 'Rich', Housing, Press receive the latest by email: subscribe to the free futureofcapitalism.com mailing list