The Atlantic Ocean looks truly amazing when you stand on the edge of a Cape Cod bluff and look out at it. The water is very blue and spread out. In the early morning, the light does a certain thing. This is the kind of place where people spend a lot more than they should. But that’s pretty much what happened in November 2021. Of course, the full picture is usually more complicated than a simple story of bad choices.
People from Wellfleet, Massachusetts, paid $7.8 million for a house that sits above Cape Cod Bay. The problem, which was written down and talked about for a long time before the sale went through, was that the bluff under the property was sinking about six to seven feet per year. A nearby newspaper had already said that the house was “endangered.” Bonomi had to tear down the building before the ocean could do it for him less than four years after he bought it.
Now he’s in federal court, asking the judge to throw out the $5.4 million mortgage he got through JPMorganChase. He says he wasn’t mentally capable of signing the document and the loan itself was unfair. His complaint says it “strains credulity” that the bank didn’t see that the property would lose its value over time as collateral. Regarding the claims, JPMorganChase says it did not do anything wrong and that it followed all the rules. Neither side’s story has been proven.
You might read this lawsuit and think the answer is clear: no responsible lender should give money to a house that is already falling apart. But waterfront lending doesn’t really work that way, and the rules that govern it are more strange than most people think. According to Fannie Mae’s rules, appraisers are not expected to know a lot about environmental risks. It’s not their job to figure out how many years a building has left; it’s to figure out what a condition does to its current market value. Even if the risk is well known, market data can support a high valuation if similar sales in the same area show buyers still paying millions for similarly exposed homes. This is clearly the case since Wellfleet’s median listing price more than doubled between 2019 and 2024.
That is the tension at the heart of this case, and it’s a bad one. Coastal real estate markets have long put a high value on being close to water. The view, the ease of getting to it, and the fact that it’s hard to get have real monetary value. But that desire is right on top of a very real physical risk. As one marine economist put it, “very difficult to separate.” Even though buyers keep coming, the risk doesn’t go away.
In Wellfleet, the danger wasn’t kept secret. When the original owners tried to get building permits in 2010, they were told that erosion could be very bad. For years, they brought in sand by truck to slow down the retreat. They asked the town for permission to build a stone wall along the bank, but it was turned down. When they put the house on the market, they were still fighting that denial. The history doesn’t seem to have stopped the deal from going through.
There is something important to think about in that chain of events. One expert on the coast says that during the early and mid-2010s, erosion rates near the property were sometimes twice the published long-term averages. He thinks that this was because of very strong storm seasons. That kind of difference is very important for a house that is 14 feet from the edge of a bluff that is receding.
The John Bonomi mortgage lawsuit isn’t just about one man’s regret, no matter how bad the situation is. It makes me wonder how the financial system values land that is disappearing and if the rules we have now are enough to handle it. The same erosion that is destroying the Wellfleet bluff is also slowly threatening coastlines all over the country. The houses are still on the list. The loans keep going away. The water keeps coming.
