About Those Ruthless Rich Walkaways….
So that NYT story regarding “rich walkaways” seems to be attracting some attention from the blogosphere, including Alexandria and The Other Blog. I first heard about the story on Calculated Risk, who asked a key question that I’ve not seen addressed either in that story or in any of the (admittedly-limited) sample of econoblogospheric commentary I’ve read regarding it:
Were these borrowers really “rich”? Or did they just buy more home than they could really afford?
Along related lines…AFAICT that story didn’t provide us w/ any details of the loans in question besides the size of their initial balances. No stats re. the income or non-housing assets of the borrowers in question (both in general, and among defaulters), nor a comparison between the rate of >$1 mil mortgage defaults and local housing prices. No effort determine whether high income or assets has any remaining effect once key factors like negative equity or job loss are taken into account. No effort expended to figure out how many of these defaults really were “strategic”, in the sense that the loan really was affordable to a borrower who nevertheless “walked away”.
Moreover, we’re left to assume that anyone w/ such a mortgage is “rich”, and maybe if “liar loans”, NINJAs, etc., had never existed, such an assumption would be warranted. But in fact, such “innovations” did exist – which would seem to cast doubt upon whether the aforementioned assumption still holds. Yet the only “evidence” provided to support this notion that “>$1 mil mortgage = rich” is anecdotal: the rapper Chamillionaire and a so-called “technology entrepreneur” (whose income & assets are oddly left out of the story).
Maybe the rich really are more “ruthless” than everyone else; it’s not entirely implausible. But before we declare the case closed, it’d be nice to see a little more evidence from the prosecution. For starters, NYT et al might want figure out how many of those defaulters really were “rich”, and how many really were “ruthless”.