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Kentucky borrowers having harder time getting financing

Chris Otts from the Courier-Journal has a good roundup:  Yesterday I linked to a new Wall Street Journal analysis showing that Kentucky borrowers had more trouble, on average, getting new or refinanced mortgages in 2010.

I asked Louisville mortgage loan officer Adam Hall, president of the Mortgage Bankers Association of Kentucky, what he makes of the report.

Hall cited several factors, including vacant properties in Louisville, manufactured homes in rural areas of the state and a significant percentage of the population without bank accounts or credit histories.

Here are his full comments:

Adam Hall

In the urban areas of the state, like Louisville, we have a significant issue with foreclosure and vacant property since 2005.  Since this has been so prolonged and predominantly concreted in the West and Southwest, you have pockets in the community where lending is very challenging.  Freddie and Fannie and FHA  both require appraisers to complete, and underwriters to review, a market conditions report.  This report provides context to the nature of the sales in the market (i.e. how many foreclosures, how many vacant homes, based on current sales trends how much supply is there? etc).

When you look at an neighborhood like Portland or Russell where 20-25% of the properties are vacant, and values even from the PVA, have declined 15%  for two consecutive years, making that loan is a challenge.


When you look at more rural parts of the state, a good portion of those properties are going to be manufactured homes.  The lending standards over the last several years have become  much stricter for this property type.

There are a lot of reasons for this but the biggest is that these property types typically depreciate over time.  From a legacy perspective, lenders did not always make sure the vehicle title was properly retired and so that calls into question lien enforcement.  And finally, frequently people will build on or move a manufactured home.  If this occurs, it  is not longer eligible for mortgage financing.


Finally, in more rural areas, the value of property is more the value of the land and less the value of the structure.  For traditional mortgage financing, if the value of the land exceeds 1/3 the overall value of the property, it is not eligible for financing.


From the borrower perspective, in the urban areas, you have a lot of folks who have suffered through foreclosure.  20-25% of our population is unbanked or under banked so they lack the credit histories to qualify for financing.  And our unemployment rate is among the top 20 in the country and has held at around 10% for a very extended period of time.


With all those factors, we are a more challenging market to lend in with the current, more restrictive requirements.

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