Thursday, May 17, 2018

By John Voket Ten years after the global financial crash, many are wondering how Americans are doing in relation to their mortgage debt, and where the largest proportions of over-leveraged mortgage debt are located.

In a recent report, WalletHub looked at 2,500 cities across the country to determine which are home to the most over-leveraged mortgage debtors.

The report found that while New Jersey, Virginia and Pennsylvania have communities in the 99 percentile point range, California and Hawaii dominate the grid, with a couple of Texas locations and one from North Carolina thrown into the mix.

Some key stats:
- East St. Louis, Ill., has the lowest mortgage debt-to-income (DTI) ratio, 141 percent, which is 7.2 times lower than in Lahaina, Hawaii, the city with the highest at 1,016 percent.

- Naples, Fla., and Bronxville, N.Y., have the lowest mortgage debt-to-house value ratio, 22 percent, which is 8.6 times lower than in Willis, Texas, the city with the highest at 190 percent.  

- Scarsdale, N.Y., has the highest median income, $185,106, which is 9.7 times higher than in Lake Placid, Fla., the city with the lowest at $19,153.

What if someone is currently over-leveraged and has trouble affording their mortgage payments? Vaneesha Boney Dutra at the Daniels College of Business at the University of Denver weighed in with some good advice.

Dutra says the first step is to talk with your mortgage company. After the financial crisis, many banks and mortgage companies established programs that help homebuyers restructure their mortgage if they run into trouble, such as a loss of employment or reduction in salary.

Communication is key, Dutra says. Mortgage holders should make contact with their bank as soon as financial distress develops, so that there is more time to work out a potential solution.

Over-leveraging, by definition, is generally not a good financial situation to be in, says Dutra. She suggests if you are already cash-strapped and are attempting to purchase a home, consider renting until your situation has improved. Homeownership often comes with many hidden and unexpected expenses, which can further deplete cash reserves.

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