Foreclosure mystery: Why can't conservative Utahns afford their mortgage?

Utah missed the big property run-ups in California and elsewhere, but it's No. 5 in foreclosures, according to a new RealtyTrac study.

What is it about Utahns?

During the housing bubble, they led the nation in bankruptcies. Now that the bubble is bust, they're among the top states in foreclosures. A RealtyTrac report released Thursday showed they had the fifth-highest foreclosure rate among the states, with 1 in 231 homes receiving a foreclosure notice in January. That's nearly double the national rate and not far from No. 4 Florida's rate of 1 in 187.

The US foreclosure rate actually fell 10 percent from December's level – and Utah was down nearly 12 percent – but RealtyTrac suggested they could surge again in coming months if last year's pattern holds true.

It's relatively straightforward why the housing bubble walloped Florida and the other Big Four foreclosure states (Nevada, Arizona, and California). Home prices there more than doubled since 2000 and people who stretched to buy those homes were pummeled when real estate values plummeted.

But Utah homes rose only half that much during the decade. What's going on in Utah?

"It's a lot of younger people who spent way, way beyond their means, absurd amounts of money trying to keep up with their folks," says one Utah resident who helps counsel financially troubled families at his church. They're "cool, nice, wonderful people, but an awful lot of them don't know how to spend money very wisely."

In mid-decade, when Utah was tops in bankruptcies, various commentators pinned the blame on Mormon religious and cultural practices, such as tithing, creating large families, buying homes at a young age, and as one critic put it: "the pressure in Mormonism to be, or at least appear, financially successful as proof the Lord is blessing them."

Indeed, Mormons in 2004 had a bankruptcy rate that was approaching twice that of the national average. But a 2007 study by two Harvard Law School graduates found that rates among non-Mormons in Utah were even higher, suggesting that religion, if anything, was restraining bankruptcies.

So what's causing it? The Harvard researchers suggested it might have to do with low wages and high medical costs. Another research project pointed out that two-thirds of bankruptcy filers in Utah had at least one dependent child, twice the national average.

"Due to the large size of Utah families, it would invariably place Utah among the top 15 states in bankruptcy filings," writes Jerry Basford, professor of personal finance at the University of Utah, in an e-mail.

Last year, a study by two Brigham Young researchers attributed a big part of the problem to garnishment laws. Because Utah makes it easy for lenders to garnish the wages of borrowers who don't pay up, people are more likely to file for bankruptcy to avoid companies automatically taking part of their paychecks, the researchers said. The study also pointed to the high number for repeat filers for bankruptcy and the effect of having a large proportion of young, middle-class people earning $30,000 to $60,000 a year as reasons for Utah's bankruptcy surge.

Having lots of young people in your population is a good thing for an economy unless, for whatever reason, they decide to buy homes they can't really afford.