Luxury Foreclosures Double, Still "Average Joe" Problem - NBC 5 Dallas-Fort Worth

Luxury Foreclosures Double, Still "Average Joe" Problem

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    Luxury Foreclosures Double, Still "Average Joe" Problem
    Luxury home foreclosures across North Texas have doubled, but the crisis is stil an "average Joe problem."

    Luxury home foreclosures across North Texas have doubled according to numbers released by Addison-based Foreclosure Listing Service.

    Figures published in the Star-Telegram showed homes worth more than $1 million jumped 175% in foreclosure rates for the first quarter, but the majority -- 81% of all foreclosures were for houses worth under $200,000.

    The foreclosure crisis then, in the words of George Roddy, Foreclosure Listing Service's president, is "an average Joe problem."

    These figures echo statements in investor Warren Buffett's annual letter to Berkshire Hathaway's stockholders, specifically in one excerpt stating:

    "Commentary about the current housing crisis often ignores the crucial fact that most foreclosures do not occur because a house is worth less than its mortgage (so-called "upside-down" loans). Rather, foreclosures take place because borrowers can't pay the monthly payment. Homeowners who have made a meaningful down payment—derived from savings and not from other borrowing—seldom walk away from a primary residence simply because its value today is less than the mortgage. Instead, they walk when they can't make the monthly payments."

    Many homeowners were moved into houses for 0% down, but with payments they couldn't continue to afford, adding to the foreclosure rate if one income was lost or even sooner as mortgage costs became larger slices of the "bill-pay pie" each month.

    Buffett encourages regulation that requires higher down payments and closer verification of income for the home buyer. That still doesn't stop homes from foreclosing.

    The latest Government spending spree includes a proposed $75 billion bill that would temper foreclosure rates in what's being called the "Making Homes Affordable" plan. The plan could allow up to 9 million borrowers adjust their mortgage payments and loan rates with lenders -- a move to keep homeowners from "walking away" from many homes across the U.S.

    Critics of the bill, including lending groups, are skeptical the program could work and are worried about the funds going to at risk mortgages, rather than responsible borrowers. Supporters, including the Obama administration that proposed the bill, say there are standards in place to combat both issues.