"When the mortgage mess erupted, some economists believed that rural America wouldn't be heavily affected," writes Nick Timiraos of The Wall Street Journal. "Farms were prospering. The housing boom largely bypassed small rural towns. And exotic, new mortgages at first were seen as an urban and suburban phenomenon. But rural homeowners, it turns out, were just as susceptible to subprime loans and easy lending as the rest of the country, often refinancing existing mortgages to take out cash or pay off debts." And now "The home-foreclosure crisis ... has spread to rural America."
Foreclosures are still less common in rural areas than in metropolitan areas, and the decline in home values has also been less in rural areas, but "defaults in rural counties are rising rapidly and setting off concerns that the population in these already sparsely populated towns will decline further," Timiraos reports, using Minnesota as his object example.
The vulnerability appears greater among rural residents who do not farm, or farm only part-time. "Full-scale farms are in somewhat better shape because agricultural mortgage lenders didn't follow the looser standards that prevailed elsewhere," Timiraos writes. "Two years of record commodity prices have given farms a financial cushion, but the manufacturing and construction trades that were tied to agriculture are reeling." (Read more)
Continued layoffs by automobile companies, parts suppliers and other manufacturers in the Midwest could also raise rural foreclosure rates. Many factory workers in the region live in rural areas, farm part-time and finance their homes through agricultural lenders.
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