But contrary to popular belief, the Bal Harbour, Fla.-based consulting firm says, loan defaults are more costly to lenders in pricey Palm Beach County than in Miami-Dade, which is often considered the epicenter of the South Florida downturn.
Indeed, defaults in Palm Beach are on pace to surpass the $20 billion threshold by the end of the year, a feat that even the devastated real estate market of Miami-Dade County is unlikely to achieve, says Peter Zalewski, a principal in the firm.
Since the beginning of the year, lenders have initiated nearly 44,000 foreclosure filings in Miami-Dade, Pam Beach and Broward Counties, seeking the repayment of some $12 billion in outstanding balances. And borrowers in the region are on track to default on more than $18 billion in loans by the end of the year, according to the report, which is based on county records.
"An interesting trend is emerging in South Florida in that the number of foreclosure filings is decreasing but the average loan amount in default in increasing, due in large part to borrowers who are strategically defaulting," Zalewski said. "Our research suggests that many South Florida borrowers are opting to not pay their mortgages, and virtually live for free, until the banks can repossess their properties by way of the foreclosure process."
Of the 250,000 foreclosure filings in the region since 2007, almost a third have been by the nation's 10 largest banking institutions. And the percentage is even greater among failed institutions like Washington Mutual, Seattle, whose troubled loans are now lumped in with the banks that absorbed them.
