I got this report from an attorney who is doing work in one of the top five foreclosure states. I’m relying this account in a somewhat sanitized form; he provided far more in the way of specifics.

One of his colleagues has a monthly mortgage payment considerably above $20,000 a month. He has not made a single payment in over 18 months. He has also not received a foreclosure notice or even as much as a call from his servicer.

Do you see evidence of bank reluctance to foreclose in neighborhoods with very high end homes?

He knows of 20 people personally in his community who have mortgages of over $20,000 a month who have not made a payment in over a year. Some are nevertheless freaked out, concerned that the sheriff will show up any day, and have moved out.

The only theory my contact could come up with is that the high end appliances in these homes would make them particularly attractive targets for stripping, and the banks figure it’s cheaper to keep the nominal homeowner in place rather than pay for security. Another possibility is that the market for $5 million and over homes in this area is so thin (as in non-existant) that they are afraid to take over and put any homes on the market out of concern for revealing where prices are now.

Needless to say, this anecdote illustrates the two tier system we have in the US, of one set of practices for the very well off and another for the great unwashed.

I’ve noticed that banks are slow to foreclose on people who have the resources to challenge them in court. The procedure the process requires is out of reach for the average person whose house is being forclosed.

Yves, please wiki the FHFA, the Federal House Finance Agency. It is an agency, independent of the federal government, that controls fannie and freddy policy. Created in 2008, it smells like the FED . It seems that all houses being foreclosed on counterfiet chain of title are then assigned over to Fannie and Freddy. The taxpayer gets the loss, the properties are controlled by this independent agency. This is designed to hand title ownership to FED cronies. Check it out. The FHFA is the reason Fannie and Freddy can’t write down principal to make modifications work.

No it is not an aberration. As a contractor (in MA) I’ve done many jobs on “Mortgage Hill” where it’s not unusual to see two beemers in the driveway and rented furniture in the house; these people don’t get foreclosed. I know one guy who hasn’t made a payment in two years.

As with his case, there has not been a peep from the bank about the failure to pay

What do I think is driving it? The belief amongst bankers that people who were successful are intrinsically more moral than others, and that they offer the best future opportunity for profit.

It’s either they don’t want to foreclose on the holidays, or the banks can’t simply produce the note on the property. Higher income buyers are, by in large, more savvy about financial matters and generally have access to better legal advice, so it makes since that if the banks know they have a weak hand, it’s better to play “see no evil, speak no evil” for the time being.

A second alternate theory could be a fear of mark to market accounting. Since a foreclosure is, in essence, a forced sale at current market conditions to expedite the sale, perhaps the banks simply don’t want to know (or don’t want the public to know) how deep their proverbial rabbit hole actually goes.