The New Foreclosure Challenge: The Increase in Older Americans Losing Their Homes

Written by: John Landers

A casualty of the foreclosure crisis, which has caused nearly 4.5 million Americans lose their homes has been the population of retirees or individuals close to retiring. The American Association of Retired Person’s (AARP) Public Policy Institute (AARP) released a report entitled “Nightmare on Main Street: Older Americans and the Mortgage Market Crisis,” which addressed this issue.

Many Americans over the age of 50 have become seriously delinquent in their monthly home mortgage payments and have a high risk of losing their homes to foreclosure.

Looking at the AARP Numbers

According to the study, many homeowners counted among the populace who lost their homes since the start of the housing total about 1.5 million homeowners over age 50. The rate climbed to 3.2% in 2011. Overall, the foreclosure rate for homeowners age 50 and up increased from 0.3% in 2007 to 2.9% in 2011.

Borrowers under age 50 foreclosed at a 0.42 % rate in 2007, increasing to 3.5% in 2011. The AARP study reveals that homeowners 75 years of age and older have taken the hardest hit. In 2007, 0.33% of seniors in this group lost their homes to foreclosure.

In fact, the foreclosure rate for homeowners 75 and older increased from 0.3 % in 2007 to 2.9% in 2011. Furthermore, 3.5 million of these homeowners help make up the estimated 11 million Americans with underwater mortgages. These homeowners owe more on their mortgages than the market value of their homes.

Americans 50 and Older Increased Mortgage Debt

Although the report does not specifically address why many older homeowners face the possibility of foreclosure, it presents data that show why the average person over 50 has problems making their monthly mortgage payments.

In the 20 years before the market crash in 2008, over 50 homeowners increased their average mortgage-debt load. Following is a breakdown of the increase in mortgage debt for older Americans from 1989 to 2010:

  • 75-year-old or older person: 6% to 24%
  • 65- to 74-year-old: 22% to 41%
  • 55- to 64-year-old:  37% to 54%

Homeowners 75 and older registered the biggest percentage increase in mortgage debt. The AARP report based its findings on data obtain from the Federal Reserve’s Survey of Consumer Finances.

The increase debt load came amidst an environment of easy credit and borrowing against home equity because of low interest rates and high home values. When the real estate market crashed and home prices plummeted, many homeowners had borrowed on the equity they counted on (to continue appreciating) for retirement.

In addition, many people have lost sources of income at a time when other costs, such as general taxes, property taxes, health care and other expenses, have increased.

What the AARP Recommends

The AARP reports has a few recommendations on how to help older homeowners avoid foreclosure and stay in their homes:

  1. Use principal reduction or forgive a portion of the mortgage debt.
  2. States should pass mandatory foreclosure prevention programs in which the services must go through a review and mediation to try and avoid foreclosure
  3. Target foreclosure scams that dupe homeowners into paying a large fee to save their homes and get nothing in return

A report by the Lawyers’ Committee for Civil Rights reveals that older homeowners make up 50 percent of people targeted by foreclosure frauds.


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The New Foreclosure Challenge: The Increase in...

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