Utah's subprime exposure: Crisis is worse in rest of U.S.

When Josh and Summer Adams moved to Utah earlier this summer, they hoped to buy a house for their growing family. But when they started looking at their finances — including Adams' new job with a health management software company and impending student loan payments — the couple realized that all signs were pointing toward only one option: a subprime mortgage.

"My wife and I realized that the only way we'd be able to get into a house is to do something similar to what everybody else is now paying for," Adams said.

Rather than jump into the troubled subprime market, which has all but imploded over the past year, the couple opted to rent a house in Utah County until the volatile housing market settles into a more predictable pattern.

"It's hard to throw away the money each month for rent, but I'd rather throw my money away for a year ... than to get into something and a year or two from now I'm upset because I acted off emotion," Adams said.

The subprime crisis is the result of millions of would-be homeowners taking advantage of low interest rates, high appreciation rates and loose lending standards to create a national housing boom. Several factors, however, led to a housing slowdown, which is fast approaching a housing bust, resulting in turmoil on Wall Street, with dozens of lenders shuttering their doors and homeowners across the country facing default and foreclosure.

Shock waves have rippled into the traditional mortgage market, as well. Home lenders have tightened standards across the board for all types of borrowers, whether they live in hard-hit areas such as Phoenix and Las Vegas, or in Utah, which has, so far, escaped much of the trauma gripping other parts of the nation.

"The bubble was not as big here as it was in other places," said Kelly Matthews, executive vice president and economist at Wells Fargo in Salt Lake City.

While no one is saying that Utahns will escape the crisis completely unscathed, the extent of the impact is still unknown.

"I think everybody's kind of holding their breath and waiting to see what happens," said John Norman, executive director of the Utah Mortgage Lenders Association.

In 2005, approximately 14 percent of all loans offered in Utah were subprime loans, according to numbers kept by the Mortgage Bankers Association. The year before that, 18 percent — or 24,928 loans — were subprime.

The numbers put Utah just slightly below the national picture, where about 16 percent of all U.S. loans were subprime in 2005, according to the latest data available through the Home Mortgage Disclosure Act.