Montana still a bright spot in housing crisis

Jacqueline King explained the national housing crisis with a simple analogy: "It feels like two trains on the same track - one northbound, one southbound - and neither knew they were on the same track" until it was too late.

King, assistant vice president of the Federal Reserve Bank of Minneapolis, was one of several speakers at a Montana Financial Education Coalition workshop Friday in Kalispell that focused on the impact of foreclosures in Montana.

America had good intentions when it sought homeownership for everyone, she told an audience of lenders, real-estate agents and title/escrow personnel. Owning a home historically has meant stable environments for children so they do well in school, plus it leads to healthy neighborhoods and all-around stability.

So a few years ago when mortgage underwriting criteria were softened, the "goal was to have a mix of products to help everyone," King said. But as more people tried to buy homes, housing prices went up, then went up some more.

When homebuyers couldn't afford the down payments for homes they realistically couldn't afford in the first place, the adjustable-rate mortgages kicked into full force about 2004, King said.

"Buyers figured their equity would increase," she added, but when they found themselves with not enough equity to refinance when their adjustable-rate loans came due, and no buyers in sight, the trains collided.

Thankfully, King said, the mortgage crisis isn't as bad in Montana as it is in the rest of the country. Yes, housing prices have dropped, but Montana is still "in the plus category" when it comes to home value, she explained, as someone in the audience asked her, "Can you talk to our appraisers?"

Even though the subprime lending fiasco didn't bite Montana as hard as it did the Sun Belt and Rust Belt states, King red-flagged a few spots in the state with the highest activity of subprime lending.

Flathead County is one of those red zones, and adjustable-rate mortgages that are yet to come due in the coming months could spell trouble for many Flathead homeowners, she said.

A snapshot of the state housing market in October 2008 showed that of the 181,500 mortgage loans in Montana, just 5.5 percent or 9,960 are subprime loans. Slightly more than 3 percent of the mortgage loans statewide are more than 30 days past due; just 0.9 percent are in foreclosure.

Even so, recent foreclosure filings remain the highest in Flathead County, said Maureen Rude, operations director of NeighborWorks Montana. The number of "notice of trustee sales' filed at county offices statewide has increased 70 percent from 2006 through the fall of 2008.

"There are more life events than bad mortgages putting people behind," Rude said.

Job loss, divorce or separation and medical crises are among the biggest forces that drive people to foreclosure.

NeighborWorks Montana offers foreclosure prevention loans and counseling. The state organization, funded by the Montana Board of Housing and an affiliate of the national NeighborWorks Network, can be reached toll-free at 1-866-587-2244, or go online to www.nwmt.org.

Tim Robbins, director of counseling for the Consumer Credit Counseling Service in Montana, talked to the group about the importance of early intervention if people are in trouble with credit-card debt or their mortgages.

"We tend to get people before they default on their mortgage loans, but have credit-card issues," Robbins said.

Counselors help clients make a detailed budget, and the agency offers a debt repayment plan that typically includes much-reduced interest rates as people work to repay the debt.

The average Montanan who seeks out help from the counseling service has eight credit cards and an average balance of $17,000, with a 29 percent average interest rate because he or she has missed payments. And at that high interest rate, there's no way most people can hope to pay off their debt, Robbins said.

Clients make monthly payments to the counseling service, which in turn pays the creditors. But if clients miss two payments, they're booted out of the program and won't get another debt-repayment opportunity for five years, Robbins said.

"About 65 percent pay in full [over a number of years' and that's a pretty dang good rate," he added.

In Kalispell, people with credit-card trouble can contact Consumer Credit Counseling Service representative Megan Keltner at 257-4069.

Features editor Lynnette Hintze may be reached at 758-4421 or by e-mail at lhintze@dailyinterlake.com