Jumbo-Priced Foreclosed Homes Soared 127 Percent

Distressed lower-income homeowners have the Obama administration’s Making Affordable Home Program to help them save their houses from becoming foreclosed homes. For distressed owners of high-end homes, they have to solve their foreclosure problem by themselves.

According to California-based RealtyTrac, the number of high-end houses nationwide valued at over $729,750 and hit with foreclosure filings in this year’s first 10-week period increased by 127 percent, compared to the same period in 2008. The amount of $729,750 is the lower limit of what are called jumbo loans in many affluent areas.

For homes appraised at $417,000 or lower, the increase in foreclosure filings was 72 percent. For all types of homes, the increase in foreclosures was 78 percent.

In addition, the share of houses valued at over $729,750 which are in foreclosure in this year’s first 10 weeks climbed to 2.83 percent, an increase from the 2.21-percent share in last year’s first ten weeks. The share of houses in foreclosure appraised at $417,000 or lower declined to 87 percent, compared to 89.7 percent level in last year’s first 10-week period.

David Adamo, CEO of Connecticut-based Luxury Mortgage Corp., said that owners of high-end homes, just like owners of smaller homes, planned to refinance to sustain payments and then sell later at a profit. Their plans however collapsed when the flood of foreclosed homes began and the market for high-end houses slumped.

Jumbo mortgage loans were not guaranteed by Freddie Mac and Fannie Mae because company policies limited them to only houses appraised $417,000 and below. The number of jumbo loans declined to 4 percent of all mortgage loans in last year’s fourth quarter.

According to a report from Bloomberg, defaults on subprime loans and the number of lower-priced foreclosed homes started to rise in 2007, reaching to high levels that caused nearly $1.4 trillion in write-downs and losses by mortgage securities packagers and lenders.

Tennessee-based FTN Financial said nearly $500 billion jumbo mortgages have been packaged as bonds. Losses on these jumbo mortgages have increased to 10 percent due to increasing defaults and jumbo-priced foreclosed homes, according to JPMorgan analysts.

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