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As the economy continues to navigate uncertain waters and inflation for ordinary Americans worsens, a worrying trend has emerged in the Bluegrass State: a steady rise in residential mortgage defaults.
Kentucky, once hailed for its resilience, now faces a growing number of homeowners falling behind on their loan payments.
Recent data paints a worrying picture for Kentucky real estate. According to a report from personal finance company WalletHub, the state ranks in the top 20 nationally for the proportion of mortgages with payments more than 30 days past due.
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During the first three months of 2024, 1 in 11 mortgage loans in Kentucky were delinquent, a 15% increase from the previous quarter.
Experts attribute this increase in mortgage defaults to a confluence of economic pressures weighing on Kentucky homeowners.
“If you are behind on a mortgage debt, you typically have until the debt is 30 days past due (meaning you have missed two payments) to catch up. After that, the lender will report the delinquency to the credit bureaus, which will damage your credit score. Therefore, it is important to try to catch up on your debt as quickly as possible. If you are having financial difficulties that are preventing you from paying, ask your lender if they will allow you a temporary forbearance until you get back on your feet, which can prevent you from being reported as delinquent,” said Cassandra Happe, an analyst at WalletHub.
The situation in Kentucky reflects a broader national trend. The Mortgage Bankers Association’s National Delinquency Survey found that seasonally adjusted default rates increased 3.94% at the end of the first quarter on all loan types, including conventional, Federal Housing Administration and mortgage mortgages. Veterans Affairs.
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Rising foreclosures may put downward pressure on home prices as distressed properties flood the market. This, in turn, can erode the equity and wealth of homeowners who have managed to stay current on their mortgages, further exacerbating the financial strain on Kentucky families.
The housing crisis may also impact the construction industry, as reduced demand for new homes and uncertainty surrounding the future of the market may cause a slowdown in residential development. This can have a cascading effect on employment and economic growth in related sectors.
As Kentucky faces the growing challenge of mortgage defaults, policymakers, industry stakeholders, and community leaders must work together to design comprehensive strategies to support homeowners and stabilize the housing market.
However, Kentucky is not alone.
Vermont is the state where mortgage debt delinquencies are increasing the most. About 24% more mortgages in the state were delinquent in the first quarter of 2024 than in the fourth quarter of 2023, the largest increase in the country. In total, Vermonters are delinquent on 7.1% of their mortgages, which is the 14th highest delinquency rate.
Interestingly, in addition to having a big spike in mortgage delinquencies recently, Vermont also ranks high when it comes to the share of people with troubled credit accounts, meaning they’ve been allowed to delay payments due to hardship. financial. This shows that residents are having trouble paying off all different types of debt.
Nebraska had the second-highest increase in mortgage delinquencies from the fourth quarter of 2023 to the first quarter of 2024, with residents falling behind on nearly 23% more mortgage payments. However, Nebraskans only have the 28th highest delinquency rate overall, at 6%.
Overall, Nebraska has a relatively weak state economy and some of the highest tax rates in the country, so those factors can contribute to Nebraska residents having trouble making their mortgage payments.
Mortgage delinquencies in Rhode Island increased nearly 20% between the fourth quarter of 2023 and the first quarter of 2024, ranking third nationally. However, people in the state still have only the 32nd highest delinquency rate overall, at 5.3%.
Rhode Island has a very low proportion of people who have been allowed to delay debt payments due to financial hardship. This means that when many people in Rhode Island fall behind on their mortgage payments, their score will continually decrease, without any special provision from their bank. Some Rhode Islanders may want to apply for “forbearance” or a “hardship program” to temporarily avoid having payments marked as late until their situation improves.
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