Million-dollar-plus foreclosures like the Graus' are rare, but are on the rise, according to RealtyTrac, a California company that follows the foreclosure market. Although the numbers of foreclosures on properties with mortgages over $1 million are still tiny - less than 2 percent of all foreclosures nationwide - they have more than doubled since 2007, RealtyTrac said.
For buyers of luxury homes, the rising number of foreclosures in this price range offers the potential for better deals, since such dwellings generally sell at discounts that could total hundreds of thousands of dollars.
As in the case of the Graus, several observers said, high-end foreclosures often involve business owners.
But whether it's a $200,000 house or a $2 million house, the basic story is the same. During the housing boom, households took on too much debt, in the form of mortgages or home-equity loans. Often, the mortgages were exotic loans with low initial payments that were followed by higher costs later.
When families faced job losses or other setbacks as the economy fell into recession, many couldn't keep up with the mortgage payments, said Daren Blomquist, a RealtyTrac vice president.
High-end homeowners in trouble have taken longer to fall into foreclosure because they typically had more of "a financial cushion to fall back on to keep making their mortgage payments," Blomquist said. "They've been able to hold out longer."
Phyllis Salowe-Kaye, head of New Jersey Citizen Action, the state's largest housing counselor, said those homeowners often took equity out when their houses appreciated in value during the boom.
"We've seen instances where the husband and wife both worked on Wall Street, and three years ago they lost their jobs," she said. "They're doing different jobs and living in homes with mortgages up to $1 million, and there's no way they can pay that.
"They have the same problem as someone who has a $200,000 house or a $400,000 house that's being foreclosed," Salowe-Kaye said. "At some point, somebody's going to take their house."
But million-dollar homeowners often have less access to help from government programs. For example, the New Jersey Homekeeper Program, which helps unemployed homeowners, is not open to households with mortgages above $429,619.
Some owners of high-priced homes try to head off foreclosure by seeking short sales, in which the lender accepts less than is owed on the mortgage. Awilda Delgado, of Century 21 Calabrese Realty in Englewood Cliffs, N.J., has such a listing - a five-bedroom, 4,100-square-foot home with an asking price of $1.2 million, down from its 2006 sale price of $1.3 million.
She's had several short-sale listings for $1 million and up.
"A lot of these people had interest-only, adjustable mortgages," Delgado said. By the time they were hit with higher monthly mortgage payments, the sour economy had torpedoed their businesses or jobs, and they could not afford their homes, she said.
The Graus bought their 6,561-square-foot, 12-room home in Cresskill in 2008. They paid $3.05 million, taking a $2.5 million mortgage from the seller, Paul Schmidt, an executive at an Englewood apartment-management company. At 7.5 percent, the Graus' mortgage payments came to $17,500 a month, according to public records.
They apparently had trouble keeping up with the payments because Schmidt began foreclosure proceedings in early 2011. He repossessed the property at a county sheriff's auction earlier this summer, when no one outbid him.
Neither Schmidt nor the Graus responded to requests for comment.
The house, with a library, a two-story great room and pool, recently went on the market, with an asking price of just under $2.7 million.
According to listing agent Donnie Belgiovine, of Coldwell Banker in Tenafly, a buyer quickly made an offer, and it went under contract for an undisclosed price.
