A Welcome Change: Utah Foreclosures Actually Fall

Across the nation, you can read about rising foreclosure rates within housing markets.

But not in Utah.

Buoyed by the state’s strong real estate market and high job growth, fewer residents are falling behind on their mortgages and losing their properties to foreclosure.

Utah is bucking a national trend of higher numbers of past-due loans, the Mortgage Bankers Association (MBA) reported in its National Delinquency Survey. Only 0.68% of mortgages in Utah were in foreclosure in the third quarter, down sharply from 1.06% in the same period in 2005 and 1.52% in 2004, the association said.

The drop is not going unnoticed.

“Over the past three months, we’ve seen a big decrease in people who say they are near foreclosure,” said Preston Cochrane, president of credit counseling company AAA Fair Credit Foundation in Salt Lake City.

Once among the highest in the country, Utah’s foreclosure rate is well below the national average of 1.05%, according to the MBA report, which covers government-insured and conventional loans. Foreclosures nationally were up eight basis points from the third quarter of 2005.

The state’s rate on delinquent Utah mortgages - which measures the total share of loans that are more than 30 days past due but not yet in foreclosure - was 3.71% in the third quarter, down from 4.12% in 2005 and 4.64% in 2004. Nationally, the share of delinquent loans rose to 4.67%, up from 4.44% last year.

Nationwide, interest rates are rising, which in many cases has increased the monthly payment for borrowers with adjustable-rate home loans. Some families struggle with higher payments, and mortgage refinancing at fixed rates offers no relief because rates are so much higher.

If those homeowners are in one of many markets nationwide right now in which homes are taking longer to sell and prices are flat or even falling, they may feel they can’t sell fast enough and for enough money to cover their mortgage obligations.

So they simply walk away.

“But if it’s easy to sell a home and home prices are going up, people in financial trouble can often avoid foreclosure,” said John Mitchell, U.S. Bank regional economist.

That, he says, is exactly what is happening in Utah, where home sales and appreciation over the past year have been strong.

Job growth is another factor, said Douglas Duncan, chief economist for the Mortgage Bankers Association.

States with high job growth and low unemployment often have low delinquency and foreclosure rates. And Utah, which is near the top in both those categories, is no exception. People in these states are more likely to find a job fast if they lose one and can continue to make their mortgage payments.

They also are more likely to see wage gains - either from their existing employer or by switching jobs.

Nationally, Utah had the 16th-lowest rate of delinquencies among all states in the third quarter, down from No. 21 in the third quarter 2005. Utah had the 17th-lowest rate of foreclosures in the past quarter, down from No. 20 in 2005.