The Anna Maria Island Sun Newspaper

Vol. 12 No. 24 - March 28, 2012


Giant mortgages, giant foreclosures

No one ever said life was fair, and when it comes to home ownership, in spite of decades trying to even the playing field, there are still plenty of players left on the benches. When it comes to bank foreclosures, if you own a property with a $1 million mortgage about to go into foreclosure, chances are you'll have more time before the bank pushes you out.

According to the Mortgage Bankers Association, for people with foreclosed loans under $250,000, banks took an average of 611 days before taking back the property. Borrowers with loans of at least one million dollars were able to stay in their homes for an average of 792 days. The question is why?

Apparently, banks tend to keep larger mortgages on their books longer than smaller mortgages. Smaller mortgages are more likely to be bundled and resold to investors as securities, while larger mortgages are held by individual banks to enhance their standing and also with the hope of gaining other business from wealthier clients.

In addition, banks view wealthy homeowners as having more options when trying to get themselves out of financial danger. Their chances of future employment or additional income and bonuses is generally better than the average middle class borrower, therefore, the banks are more likely to extend them time.

Also, banks try very hard not to foreclose on homes in any price range, since they simply do not want to maintain the property. That fact is magnified on luxurious properties that require a lot more expensive maintenance than your average three-bedroom, two-bath, 2,000 square-foot family home.

But that's not the whole story. A good part of the reason banks are slower in foreclosing on larger homes is because wealthier homeowners tend to be more sophisticated at stalling the foreclosure process. They are in a better position to hire attorneys to find a way to keep them in their home and using the court system to their advantage in delaying the inevitable. For some of these homeowners with large mortgages, it is less expensive to hire an attorney than pay the mortgage on a home that is upside down in value.

That being said there are only 0.7 percent of mortgages in foreclosure that are above $1 million compared to 71 percent less than $250,000 and 94 percent below $500,000. The perception may be that the wealthy are getting a big break, but the reality is that the majority of foreclosures are not in those price ranges.

On another note, a few weeks ago I wrote about surplus lines of insurance being proposed by the Florida legislature as a way of off loading policies from Citizens to private insurers. After the original bill was amended by consumer focused groups, that changed the bill to require a signature before a surplus lines insurer could take over the policy from Citizens, it was put on hold in the Florida House and not passed on to the governor for approval.

The sponsors of the bill felt the changes in the bill would discourage surplus companies from writing policies in Florida. The bottom line is this latest effort to downsize Citizens didn't work, so it's unlikely we'll see any changes this year.

I guess if you're looking for fairness, you won't find much of it in either banking or insurance. Come to think of it, I'm not sure where to even look.

Real Estate Transactions
Real Estate Transfers from Feb. 1 to 15, 2011
Sponsored by Alan Galletto Island Real Estate

Sold Date | List Price | Sold Price | Address | Provision | Property Style

Anna Maria

02/03/2012 455,000 455,000 223 Willow Ave. 1553 100x148 3 Br/1 Ba SFR


02/03/2012 319,000 315,000 4126 Osprey Harbour 1912 2 Br/2 Ba condo

Holmes Beach

02/01/2012 229,900 205,000 600 Manatee Ave. # 130 1179 2 Br/2 Ba condo
02/02/2012 450,000 410,000 7000 Gulf Dr. # 205 1259 2 Br/2 Ba condo
02/03/2012 375,000 376,000 2312 Gulf Dr. # 207 1180 2 Br/2 Ba condo
02/07/2012 585,000 505,000 5300 Gulf Dr. # 310 1057 2 Br/2 Ba condo
02/14/2012 299,900 291,500 5200 Gulf Dr. # 102 832 1 Br/1 Ba condo
02/10/2012 30,000 23,000 No assigned address Dock- Rackominium
02/06/2012 425,000 395,000 7805 Gulf Dr. # 7508 B 875 2 Br/2 Ba SFR
02/09/2012 549,000 520,000 307 63rd St. # B 1650 3 Br/3 Ba SFR
02/10/2012 539,000 542,000 315 62nd St. 1600 3 Br/3 Ba SFR
02/10/2012 614,900 562,000 604 Hampshire Lane 1652 95x105 3 Br/2 Ba SFR
02/15/2012 1,149,000 900,000 661 Key Royale Dr. 2487 100x150 3 Br/3 Ba SFR
02/02/2012 260,000 255,000 6250 Holmes Blvd # 63 1224 2 Br/2.5 Ba town home
02/02/2012 449,000 450,000 120 50th St. 1204 62.5x100 2 Br/2 Ba vacant

Source: Manatee County Property Appraiser’s Office

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