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Wednesday, July 02, 2008

US foreclosures and the hard times towards the top of the pyramid

Last month it was reported that more than one million American homes were in in foreclosure - the process that more often than not ends up in people losing their homes. It was the highest rate ever recorded, according to a trade group which warned that the number will continue to climb.

The Mortgage Bankers Association's first quarter report showed that a record 2.5% of all loans being serviced by its members are now in foreclosure, which works out to about 1.1 million homes. That's up from the 2% of loans, or about 938,000 homes, that were in foreclosure at the end of 2007.

The New York Times has provided many reports on the plight of the losers including one on the auctions of the personal effects of people who have lost their homes and are then unable to pay rentals for storage.

In June, the NYT had an article on the plight of the still well-off but who are not as rich as they were.

The article said that interviews with the people who actually see the bank statements, like divorce lawyers and lenders, say their clients are definitely living on less than they did a year ago, regardless of how expansive the definition of “less” may be. Hairstylists and private jet rental companies say the wealthy are cutting back on luxuries like $350 highlights and $10,000-an-hour jet rentals. Even nutritionists and personal trainers notice a problem. The wealthy are eating more and gaining weight because of the stress.

The New York Times said that these financial problems — if they can be called that — will hardly elicit tears from the rest of us. But in those gilded living rooms, there is a quiet nervousness about keeping up appearances.

“Even if they’re not in danger of not paying their mortgage, there’s still a psychological change,” said Chris Del Gatto, chief executive of Circa, which has watched its business jump by 50 percent in the last year as wealthy clients sell their spare diamonds and Rolexes. “The economy is an issue even for people who don’t need the money.”

Their spouses could leave them when they discover that their net worth has collapsed to eight figures from nine. Friends and business associates could avoid them as they pass their lunchtime tables at Barney’s or the Four Seasons. And these snubs could trickle down to their children.

“They fear their kids won’t get invited to the right birthday parties,” said Michele Kleier, an Upper East Side-based real estate broker. “If they have to give up things that are invisible, they’re O.K. as long as they don’t have give up things visible to the outside world.”

So New York’s very wealthy are addressing their distress in discreet and often awkward ways. They try to move their $165 sessions with personal trainers to a time slot that they know is already taken. They agree to tour multimillion-dollar apartments and then say the spaces don’t match their specifications. They apply for a line of credit before art auctions, supposedly to buy a painting or a sculpture, but use that borrowed money to pay other debts.

It's a tough life indeed and it just again illustrates that there are a lot more people with education than educated.

Today, the NYT reported that Leona Helmsley who became super rich by marrying a New York real estate magnate, and became infamous for her comment that "only the little people pay taxes," left $12 million in her will to her dog, Trouble. But that, it turns out, is nothing much compared with what other dogs may receive from the charitable trust of Helmsley, who died last August.

Her instructions, specified in a two-page “mission statement,” are that the entire trust, valued at $5 billion to $8 billion and amounting to virtually all her estate, be used for the care and welfare of dogs, according to two people who have seen the document and who described it on condition of anonymity.

Two people who described the statement said Helmsley signed it in 2003 to establish goals for the multibillion-dollar trust that would disburse assets after her death.

The first goal was to help indigent people, the second to provide for the care and welfare of dogs. A year later, they said, she deleted the first goal.

It would indeed be nice to think that there is such a place as hell for folks like her but on second thoughts she would probably enjoy even that.

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