April 9, 2010
The rich and famous now have something in common with hundreds of thousands of middle and lower-class Americans: The bank is about to take their homes.
Houses with loans of $5 million or more will likely see a sharp rise in foreclosures this year, according to a RealtyTrac study for The Wall Street Journal.
Just this week, a Tudor mansion in Bel-Air belonging to film star Nicolas Cage was in foreclosure auction and reverted to the lender. On Wednesday, Richard Fuscone, a former top Wall Street executive, declared personal bankruptcy, forestalling a foreclosure auction that had been scheduled this week on his 14-acre Westchester mansion. Last month a Manhattan condominium owned by Italian film producer Vittorio Cecchi Gori was sold in a foreclosure auction for $33.2 million.
In February alone, 352 homes nationwide in this category were scheduled for foreclosure auction, the final step before a bank acquisition. That is the largest monthly number of these so-called notices of sale since the financial crisis began. By comparison, in all of 2009, there were 1,312 such notices.
Banks had scheduled a foreclosure auction of Richard Fuscone's Westchester County, N.Y., mansion this week. But the former top Wall Street executive declared personal bankruptcy, delaying the auction.
Economists say the super-wealthy are among the last to lose their homes in a mortgage crisis because they usually have high savings, better access to credit and other means for staving off foreclosure. But many of them work in financial services and other industries hit especially hard by the crisis, and have seen their wealth shrink in the market crash.
While the numbers are modest compared with foreclosures at other income levels, they suggest the possibility of a sudden spike in bank takeovers of the wealthiest Americans' property. Typically half the notices of sale result in homes being turned over to creditors, though the figure could be slightly lower for the richest Americans who have more financial options, according to Daren Blomquist at RealtyTrac.
Big borrowers are more likely to default than ordinary peopleAt the end of 2009, nearly eight million households, or 15% of those with mortgages, were behind on mortgage payments or in the foreclosure process.
Wealthy people have the means to stretch out the distress process, sometimes for years.
"It's very, very difficult for these people to believe they've had such a severe reversal of fortune," says Maggie Navarro, a real-estate agent in Pasadena, Calif.
Marc Carpenter, a San Diego-based foreclosure specialist, adds that while it's much harder for potential buyers to get loans, there are also fewer buyers who can pay for top-dollar properties. "The upper end is definitely a lagging indicator," he says.
In his bankruptcy filing, Mr. Fuscone provided a list of his debts, including ones to the Greenwich Country Day School, American Express, Mercedes-Benz, a local hardware store, a pet store, and Richards of Greenwich, a fine-clothing store.
"My background is in the financial-services industry and I have been personally devastated by the financial crisis which came to a head in March 2008," Mr. Fuscone said in his bankruptcy declaration. "I have been sued by Patriot National Bank" as part of a foreclosure action. "I currently have no income for the 30-day period" following his bankruptcy petition.
C.W. Kelsey, owner of Greenwich Hardware, was among the local merchants owed money by Mr. Fuscone, though he wouldn't say how much.
"Traditionally, the majority of our credit problems were contractors," he said. "Now there are people you'd never expect two or three years ago to have problems, who live in multimillion dollar homes."
The rich and famous now have something in common with hundreds of thousands of middle and lower-class Americans: The bank is about to take their homes.
Houses with loans of $5 million or more will likely see a sharp rise in foreclosures this year, according to a RealtyTrac study for The Wall Street Journal.
Just this week, a Tudor mansion in Bel-Air belonging to film star Nicolas Cage was in foreclosure auction and reverted to the lender. On Wednesday, Richard Fuscone, a former top Wall Street executive, declared personal bankruptcy, forestalling a foreclosure auction that had been scheduled this week on his 14-acre Westchester mansion. Last month a Manhattan condominium owned by Italian film producer Vittorio Cecchi Gori was sold in a foreclosure auction for $33.2 million.
In February alone, 352 homes nationwide in this category were scheduled for foreclosure auction, the final step before a bank acquisition. That is the largest monthly number of these so-called notices of sale since the financial crisis began. By comparison, in all of 2009, there were 1,312 such notices.
Banks had scheduled a foreclosure auction of Richard Fuscone's Westchester County, N.Y., mansion this week. But the former top Wall Street executive declared personal bankruptcy, delaying the auction.
Economists say the super-wealthy are among the last to lose their homes in a mortgage crisis because they usually have high savings, better access to credit and other means for staving off foreclosure. But many of them work in financial services and other industries hit especially hard by the crisis, and have seen their wealth shrink in the market crash.
While the numbers are modest compared with foreclosures at other income levels, they suggest the possibility of a sudden spike in bank takeovers of the wealthiest Americans' property. Typically half the notices of sale result in homes being turned over to creditors, though the figure could be slightly lower for the richest Americans who have more financial options, according to Daren Blomquist at RealtyTrac.
Big borrowers are more likely to default than ordinary peopleAt the end of 2009, nearly eight million households, or 15% of those with mortgages, were behind on mortgage payments or in the foreclosure process.
Wealthy people have the means to stretch out the distress process, sometimes for years.
"It's very, very difficult for these people to believe they've had such a severe reversal of fortune," says Maggie Navarro, a real-estate agent in Pasadena, Calif.
Marc Carpenter, a San Diego-based foreclosure specialist, adds that while it's much harder for potential buyers to get loans, there are also fewer buyers who can pay for top-dollar properties. "The upper end is definitely a lagging indicator," he says.
In his bankruptcy filing, Mr. Fuscone provided a list of his debts, including ones to the Greenwich Country Day School, American Express, Mercedes-Benz, a local hardware store, a pet store, and Richards of Greenwich, a fine-clothing store.
"My background is in the financial-services industry and I have been personally devastated by the financial crisis which came to a head in March 2008," Mr. Fuscone said in his bankruptcy declaration. "I have been sued by Patriot National Bank" as part of a foreclosure action. "I currently have no income for the 30-day period" following his bankruptcy petition.
C.W. Kelsey, owner of Greenwich Hardware, was among the local merchants owed money by Mr. Fuscone, though he wouldn't say how much.
"Traditionally, the majority of our credit problems were contractors," he said. "Now there are people you'd never expect two or three years ago to have problems, who live in multimillion dollar homes."
Closed November 2010
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