Okay, enough of the whole, “look at the really rich celebrity getting caught up in the foreclosure crisis!” thing. Seriously. It seems like over the past few months, the media just can’t get enough of showing swanky celeb estates in foreclosure. "Look! They're in trouble just like everybody else!" They are not everybody else.
First it was it was the widow Veronica Hearst’s 52-room Villa Venezia in Palm Beach, then of course Michael Jackson’s Neverland, then Ed McMahon’s place in Beverly Hills, and today it’s Evander Holyfield’s 54,000 square-foot home in suburban Atlanta. It seems that we are supposed to lump all these folks in with the subprime borrowers in Northern Virginia and the speculative investors in the Miami condo market. Come on!
Evander Holyfield’s home reportedly has 109 rooms, including 17 bathrooms and a bowling alley. Not only is he not paying the mortgage, he’s not paying child support either. I don’t know exactly how much the only four-time heavyweight champion pulled in during his boxing days, but I have to imagine that it was a lot, and if invested correctly probably would continue to keep him and all nine of his kids in his 17 bathrooms.
And then there’s McMahon. His story sounds a bit sadder; he had a terrible injury to his neck that took him out of the work force, and he has been trying to sell his home to pay off the 4.8 million dollar loan for two years now.
But I have to think again that during his heyday in TV, sitting next to Johnny every night, he must have pulled in some serious coin. And then I’m guessing American Family Publishers cut him some nice checks as well. So what was he doing with a nearly 5 million-dollar loan anyway? Well he told Larry King last night, “If you spend more money than you make, you know what happens.” Yes, we do. But McMahon still went on to blame his woes on the economy.
Still, what makes my blood really boil is when I read these stories that should be relegated to the gossip pages instead in the mainstream news pages, and inevitably coupled with stats on the national foreclosure crisis and the mortgage meltdown. They are not comparable!
I can’t believe this, but as I’m writing this, I just got an email from some PR gal pitching an “Expert Source” on Foreclosure and the Super Wealthy: “The subprime movement that enabled virtually anyone to gain a mortgage was used by many wealthy Northeastern residents. Now, those million dollar balloons are due, and the values of those properties are worth nowhere near that value,” she writes.
My blood is boiling again. There was no such thing as a subprime “movement.” There were a lot of new loan products requiring no money down that lenders used in targeting subprime borrowers. Rich folks, many perhaps overstepping their over-rich bounds anyway, took advantage of the products too, putting very little money down on massive loans for massive homes, and now they’ve gotten themselves in the soup.
They were not subprime borrowers lured into the American Dream of owning their first home. Subprime borrowers weren’t buying million-dollar homes. Should I be worried about the “ripple effect on the Hamptons,” as she puts it? Excuse me while I go digging for a Percocet, but my sensibilities are in pain!
I understand that multi-million-dollar homes are losing value right alongside the cheaper ones in the blue-collar neighborhoods. The New York Post is blabbing a blurb today about Ted Koppel having to slash the price of his suburban DC home by more than half. He put it on the market for $4.1m in 2005 and is now asking a bare $1.94m for the 9000 square-foot home with indoor pool and horse barn. Apparently he and his wife have already moved to a larger place. I’m wondering how much the home appreciated before he put it on the market. That's what you get when you play the real estate game.
But back to the celebrity foreclosures: What exactly is society supposed to do? Shall we send Michael Jackson to the Hope Now Alliance and see if he can get a refi? Shall we see if FHA could back a new loan for Evander Holyfield? Shall we see if maybe Fannie Mae could help Ms. Hearst, who just sold her Fifth Avenue co-op for “top price” and may have to spend the steamy summer days at her 45-acre estate in New Castle, NY? Maybe she could qualify for one of those new temporary jumbo-conforming loans at a fixed rate?
No, we shall not. These folks don’t need our help; they need to hire better investment advisors, and they need to give a quick call over to Suzie Orman, who I’m sure can educate them on the value of a dollar.
Questions? Comments? RealtyCheck@cnbc.com