Montana Avoids Sub-Prime Mortgage Meltdown

While Montana has avoided the brunt of the sub-prime meltdown, Montana will not escape the problem all together. Stats show that Montana is well below the national average for just about every category related to the sub-prime mortgage meltdown but homeowners still feel the pains of declining home prices.

In 2006, of the 34,152 loans originated in Montana about 22 percents of these mortgage were considered sub-prime mortgages, according to the Home Mortgage Disclosure Act..

The national rate of foreclosures is roughly 1.8 percent with the state of Montana at about 1 percent according to Michael Grover of the Federal Reserve Bank in Minneapolis. Mortgage delinquencies in Montana are about 2.5 percent compared with 4.5 percent nationally in 2006, he said.

The reason Montana was able to avoid much of the sub-prime mortgage mess is simply because investors looked towards “hot spots” to buy, build and flip homes such as California, Florida and Arizona.

With lenders making it easy for anybody who had a pulse to get a home loan, borrowers were willing to take on the risk of home ownership. From 2004 to 2006, a majority of lenders were willing to borrower 100 percent of the value of the home, which made it much easier for Americans to achieve home ownership.

With no down payment required, low teaser interest rates, and even mortgage loan programs that didn’t require you to pay all of the interest let alone any principle it was often cheaper to own a home rather then rent.

Now that home values have began to drop, many home owners who did not put anything down on their home have no problem with simply walking away. After all, the home owner has no equity in their home and the cost of owning a home after their interest rate adjust doesn’t make sense compared to renting.

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