A foreclosure is a legal proceeding in which the holder of a mortgage, usually a lender like a bank, obtains a court order allowing it to repossess the property after the borrower defaults or fails to make the payments as required under a mortgage agreement. There is usually a promissory note secured by a lien on the property that is in default. The lender will generally sell the property at a value below the market price and sometimes sue the defaulting party for any unpaid balance on the note.
With high rates of unemployment, a recession and a depressed real estate market, foreclosures have been rising in recent years. Even celebrities with their wealth and mass market appeal have not been immune to this turn of events.
Despite being one of Hollywood’s best paid actors, Nicholas Cage lost two New Orleans homes to foreclosure in 2009, worth a total of $6.8 million. Cage reportedly owed $5.5 million in mortgage payments and over $100,000 to the city in real estate taxes. The actor’s Los Angeles mansion was also lost to foreclosure in 2010. The 11,817-square-foot property was put up for auction for $10 million, far less than the perceived market value of $35 million. Mr. Cage has a $20 million lawsuit against his former business manager accusing him of taking excessive fees.
Victoria Gotti, daughter of the late gangster John Gotti and star of her own reality show, lost her Long Island home to foreclosure in 2009 after fighting foreclosure for two years. According to J.P Morgan, the lending bank, her monthly mortgage payments were $25,000, and she had failed to make any payments for two years. Her television series was cancelled in 2005.
Jose Conseco, the former baseball star and author of a bestseller about steroids in baseball, simply walked away from his $2.5 million home in Encino. Although he has reportedly lost over $7 million in his two divorces, his reasons for defaulting were not financial. He stated that he walked away as he could not see paying for a property declining in value and owned by someone else.
Many stars spend recklessly and without any financial guidance, believing that their income stream is endless. Others may have borrowed huge sums of money, gambling that their success to date will continue. Unfortunately, fame can be fleeting and without careful money management and wise investments, even the wealthiest celebrities can end up destitute.