Monday, February 25, 2008

Des Moines Register analysis predicts rural Iowa faces major foreclosure problems

The nation's foreclosure crisis has been felt everywhere, but rural Iowa could "be hit much harder" than other areas, reports Paula Lavigne of The Des Moines Register. She explains that the cost of ownership will rise this summer when adjustable-rate mortgages are set to even higher interest rates. For this story (and others in this series on foreclosures), The Register used data from the Mortgage Bankers Association and First American CoreLogic, LoanPerformance, a private firm that tracks the lending industry.

"The Register's analysis found that the impact could be more acute in rural areas, where borrowers have been more likely than their urban counterparts to receive higher-interest loans," Lavigne writes. "Iowa State University economist David Swenson said thus far the state's growing foreclosure problem is not a statewide crisis, but it is creating 'pockets of stress' across the state. Foreclosures affect the larger economy as home values fall, and people lose equity and have less money to spend, he said."

Even just a few foreclosures can diminish property value in a small town, and problems such as addiction and divorce sometimes rise as well. "The value of every property in the town drops dramatically," John Baker, an attorney with Iowa Concern, a hot line for financial and legal assistance for Iowans, told Lavigne. "(Deterioration of vacant houses) has a cascading effect."

Lavigne presents a wealth of data, and she highlights the reasons why rural borrowers are more likely to have higher-rate mortgages and are more likely to struggle to make payments. The main reasons are the lower incomes of many rural Iowans, which lead to high interest rates, and the nature of rural housing market, where sales are less frequent and thus appraised values can fluctuate. (Read more)

The story is part of a larger package on foreclosures called "Distress Hits Home." In another story, Lavigne talks with homeowners who say they were tricked by mortgage brokers. The package also includes an interactive map that lets users search high-interest loans by census tract.

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