Millions of homeowners have been put out of their homes already in the nationwide foreclosure crisis. The mortgage loans that have gotten the most attention are the subprime loans, where borrowers were encouraged to take out mortgage loans that they could not really afford. As the economy worsened, the ability of the average subprime borrower to keep up with his or her mortgage payments worsened with it. Now many of these low-income borrowers are out on the street.

Because the situation for these low-income borrowers is both common and desperate, it has captured the most attention. However, there is another side of the foreclosure mess, and that is the number of foreclosures on high-income homeowners (formerly) living in luxury homes. It turns out that this situation is also pretty common, if not as desperate as for lower-income homeowners. 

California foreclosure attorneys have noticed that in many areas with high-priced homes, the foreclosure rate has risen dramatically. There are two basic scenarios that lead to foreclosures on high-income homeowners. One is the loss of income, which is essentially the same cause as for lower-income homeowners. Combined with a drop in home values, many owners of luxury homes are finding that they cannot keep up with the payments.

The second reason is that many high-income homeowners are opting for strategic defaults. Many financially shrewd homeowners are looking at the options of paying hundreds of thousands, maybe even millions, of dollars for pieces of property that may only be worth half of what they are set to pay. Faced with that choice, many wealthy homeowners are choosing to walk away from their mortgages, take the credit-rating hit, but save their money.

Source: Forbes "Rich Neighborhoods Riddled With Foreclosures" Nov. 14, 2011