When the owners of high-end homes fall way behind on their mortgage payments, foreclosure is not a foregone conclusion.
Lenders can be more willing to craft a new payment plan to make high-dollar homes more affordable. Paperwork and procedures are also often delayed, keeping homeowners in some states in their homes for two or more years after they've stopped making mortgage payments. In some cases, lenders are offering homeowners tens of thousands of dollars in cash in exchange for their agreeing to a short sale, in which a home is sold for less than the borrower owes on the mortgage.
Repossession rates show the difference. In 2012, roughly 85% of homes worth as much as $1 million that received default notices were eventually repossessed, according to RealtyTrac, which tracks real-estate data. About 28% of homes worth more than $1 million were repossessed. (Bing:Learn more about repossession rates)
For lenders, it's worth the extra effort to avert foreclosure on luxury properties. They incur substantial expenses when they hold these homes, including paying property taxes, maintenance costs and, often, homeowners'-association fees. The homes are also more difficult to sell because fewer buyers can afford them. When lenders eventually unload them, it's often at a loss.
"Lenders have more of an incentive to work out payment plans for these borrowers than with the ones [whose homes] may move quickly," says Jon Maddux, co-founder ofYouWalkAway.com, which helps borrowers, including luxury homeowners, in default or foreclosure.
Alternative payment options will vary by lender but can include getting a lower interest rate or extending the mortgage-repayment period to lower the monthly payments.