Jim Bellino, a real estate investor better known for his role on "The Real Housewives of Orange County," wants to make one thing clear: Defaulting on the $4.6 million loan for his family's stately home in Newport Beach, Calif., made perfect sense.
"Here's the assumption everybody makes when you're getting your loan modified -- you're destitute and you're bankrupt," he said. "That's not the case. It can strictly be a business decision, especially when you're talking about several million dollars."
While the pace of foreclosures has receded in the general housing market, it continues to rise in well-to-do pockets of the country, especially Southern California.
In growing numbers, minor and major celebrities as well as ex-athletes are seeing their million-dollar homes revert to lender ownership, foreclosure analysts said.
"It really cuts all across the board," said Sean O'Toole, founder and CEO of ForeclosureRadar.com, a California-based company that documents the perils of the housing market.
Data from ForeclosureRadar.com shows that in Los Angeles County the number of bank owned million-dollar-plus homes tripled in the second quarter compared with the same period three years earlier. The affluent county is home to the majority of Southern California's high-end lender-owned houses, known as REO, or real-estate owned, according to analysts.
"Higher income people are more likely to go into default than lower income people," said Richard Green, director of the Lusk Center for Real Estate at the University of Southern California. "They're more ruthless about their finances than maybe middle-class and low-income people because perhaps they have other resources available to them. They could afford to take the hit on their credit record that others don't."
But even celebrities may not be off the hook when it comes to walking away from their debts. Depending on the state and the type of mortgage, lenders can come after them for the difference if the house sells for less than what is owed.
The majority of foreclosures involved homes priced at $417,000 and below. But the spike in top-of-the-market foreclosures likely signals that more affluent homeowners were better equipped to weather the first years of the downturn, he said.
"Our impression is that there are quite a few delinquencies in those higher-priced homes but they're less likely to be pushed through to foreclosure," O'Toole said.
The landscape of Southern California is dotted with mansions that the wealthy defaulted on or lost to foreclosure because of unfortunate financial management, lost businesses or sinking home values.
Last month, a beachfront house in gated Malibu Colony that gained notoriety as the alleged Wells Fargo party house was sold for nearly $15 million – almost 30 percent less than the original $21.5 million asking price.
The spectacular bank-owned home made news last year when a Wells Fargo executive who handled foreclosures allegedly used it for lavish social events. The executive was later fired. The original home owners were victims of Bernard Madoff's fraud scheme.
"What's driving foreclosures out here is negative equity, as much, or more so than job loss or anything else," O'Toole said. "We put an awful lot of home owners from '05 to '07 in homes almost double what they were worth. You have a lot of folks out here living in million-dollar homes that are living above their means."
The mortgage crisis doesn't discriminate. Earlier this year, Oscar-winning actor Nicolas Cage's English Tudor mansion in Bel-Air – once owned by Dean Martin and Tom Jones – was put up for sale by the lender, Citibank. Once listed at $35 million, the nearly 12,000-square-foot estate is selling for $11.8 million, according to Redfin.
"The key thing is just because you bought a million-dollar house doesn't mean you're rich," Green said. "There are people who are rich who are just walking away and saying, 'Screw you,' and then there are those who weren't rich who got into a million-dollar house they shouldn't have bought in the first place."
Another luxury lender-owned property up for sale is the Thousand Oaks, Calif., mansion owned by former Phillies and Mets star Lenny Dykstra, who filed for bankruptcy last year. The ex-ballplayer has now launched a new company – predatorylendingrecovery.com – to help struggling homeowners stay in their houses, according to the website.
Dykstra, who after baseball found fame as an investment guru, has claimed that Washington Mutual, which J.P. Morgan purchased in 2008, put him into a $12 million loan he couldn't afford in the $17.5 million purchase of hockey legend Wayne Gretzky's mansion. The bank has denied wrongdoing.
"Even multi-millionaires can make mistakes," Dykstra said on the website.
The real-life drama of foreclosure has even touched the well-heeled personalities of the Housewives reality-TV shows.
Last Spring, Orange County's Tamra Barney dealt away her Tuscan-style house in a short sale. The 4,300-square-foot Ladera Ranch went for $1.12 million, down from the original $1.6 million asking price. In a short sale, the lender agrees to a price less than what is owed in order to help troubled owners avoid foreclosure.
Fellow Housewives cast member Jeana Keough earlier used a loan modification earlier this year to avoid foreclosure on her seven-bedroom, nine-bathroom home.
After defaulting on a $4.7 million loan for their 6,600-square-foot Newport Beach home, Jim and Alexis Bellino, also of "Real Housewives of Orange County" fame, have received a loan modification from Chase Bank to avoid foreclosure.
Jim Bellino said he paid $5.8 million for the home in 2007, at the height of the real-estate frenzy; He owed $4.7 million. "I put a million-two down on my house," he said. "It wasn't 100 percent financed. It wasn't a frivolous decision. Listen, we all got caught."
He insisted that the decision to stop making mortgage payments was pure business.
"It doesn't have anything to do with being financially ruined, which people assume when you're not making payments," Bellino said. "It has to do with a decision to not throw good money after bad."