Over the weekend, I discussed how the wealthy are far more likely to walk away from an underwater mortgage (when the mortgage payments will cost more than the value of the property) than the non-wealthy. Yves Smith makes a good observation (italics mine):
Another message here is that high income borrowers aren’t taking the Freddie/Fannie/bank bluster about strategic defaults seriously. Recall that the latest threat was that they would pursue deficiency judgments, as in sue borrowers who defaulted where the proceeds from the sale of the home, net of expenses, did not cover the mortgage debt….it is expensive to pursue defaulting borrowers, and if the borrower really is broke (say he had medical emergency, a business failure, or a costly divorce) litigation is just a costly wild goose chase. The most obvious group to pursue, nevertheless, would be defaulted owners of big ticket homes in affluent areas. They clearly regard the odds of legal action as low.
Like I said, a sucker’s play.
Related post: ScienceBlogling Sharon Astyk comments on the topic too.