The pace of Provo foreclosures shot up by 579 percent over the past couple of years largely because of record numbers of borrowers who took out costly loans and who bought more house than they can afford.
In 2009, 4.17 percent of homeowners in Provo were in default or in foreclosure. The city was 30th among metro areas in foreclosure activity and posted the biggest foreclosure rate statewide.
Provo has largely escaped the devastation brought about by foreclosures during the first year of the housing crisis as its economy has been strong and its employment much more stable than other cities. Provo is the second biggest metropolitan area in the state and is the site of the Brigham Young University.
Scott Schaeffer, finance professor at Utah State University, said that the number of home foreclosures for sale began to increase in Provo only last year as the economy slowed, but the economy did not suffer as much as other cities. He added that home prices did not shoot up to unsustainable levels during the boom, unlike what happened in bubble markets.
According to Schaeffer, the one thing that hurt Provo was the prevalence of predatory lending. He said that a huge portion of Provo foreclosures arose from unaffordable mortgages that fell into default. He said that unscrupulous agents infiltrated churches and community organizations, gained the trust of members and then enticed them to buy larger houses and take out bigger loans.
Real estate executive Dan Christenson said that Utah foreclosures soared in 2009 because a large number of borrowers took out big loans that they can no longer afford to pay when the economy declined.
Nearly three percent of all households in Utah went into default or foreclosure in 2009, a jump of 83 percent from 2008 and a staggering 265-percent increase from 2007. With more than 27,000 of its households hit with default or foreclosure notices, Utah was fifth nationwide in a ranking based on foreclosure rates.
Aside from the Provo-Orem area, two other metro areas in Utah suffered record foreclosure rates last year. Salt Lake City posted a 2.94-percent rate and the Ogden metro area posted a 2.53-percent rate. The cities were ranked 43rd and 52nd, respectively nationwide.
The only Utah city that surpassed the pace of Provo foreclosures in 2009 was the 6.42-percent pace of Saint George, which was not included in the ranking of 203 metro areas because of its smaller population.