Owners of luxury homes feel the pinch

2/21/2009

Luxury homeowners are falling behind on mortgage payments at the fastest pace in more than 15 years, a sign the U.S. financial crisis has reached the wealthiest Americans.

About 2.57 percent of prime borrowers who took out jumbo loans last year were at least 60 days delinquent, a percentage reached within 10 months and the fastest since at least 1992, according to LPS Applied Analytics, a mortgage data service in Jacksonville, Fla. That's almost twice as quickly as 2007 borrowers fell behind and a level 2006 owners haven't attained after almost three years.

The jump in late payments on jumbo loans, while still lower than the 20 percent delinquencies in subprime mortgages, signals that the borrowers with the most money and the best credit are hurting as the U.S. recession deepens in its second year.

"The biggest influence in rising delinquencies is related squarely to the economy rather than poor underwriting," said Keith Gumbinger, vice president of HSH Associates, a Pompton Plains, N.J., mortgage research firm. "We are apparently all suffering to some degree."

Raymond Young bought his lakeside home in Miami four years ago for $2 million cash and in 2006 took out a $1.4 million jumbo mortgage to pay for a real estate venture in Texas. Now, with home prices in his area down 40 percent from their 2006 peak, according to the S&P/Case-Shiller Home Price Index, Mr. Young needs to refinance because the Texas investment isn't paying off, his income has dried up, and he can't find a bank to help.

"They're telling me the house is only worth $1.3 million," said Mr. Young, 46. "I'm upside down. I'm stuck.

"I'm in bailout mode, but they're bailing out banks and they're not bailing out homeowners."