AARP: Older Homeowners Hit Just as Hard by Foreclosure Crisis

A report released Thursday from AARP suggests that older Americans may not have escaped the foreclosure crisis unscathed, as some previously thought.

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The report, titled ""_Nightmare on Main Street: Older Americans and the Mortgage Market Crisis_"":http://www.aarp.org/content/dam/aarp/research/public_policy_institute/cons_prot/2012/nightmare-on-main-street-AARP-ppi-cons-prot.pdf, showed that many of the country's older citizens are taking their mortgage debt with them into retirement. As of December 2011, an estimated 3.5 million older (age 50 and up) mortgage holders were underwater. Approximately 600,000 older homeowners were experiencing foreclosure, and another 625,000 were 90 or more days delinquent.

Between 2007 and 2011, an estimated 1.5 million older homeowners lost their homes. The foreclosure rate on prime loans in 2011 for older borrowers was 2.3 percent, 23 times higher than rate in 2007 (0.1 percent).

Even more worrying was the fact that homeowners age 75 and older showed the fastest rise in mortgage debt and had a higher foreclosure rate than younger members of the 50-plus group (3.2 percent).

""More older Americans are carrying mortgage debt than in the past, and the amount of that debt is also increasing … leading to their worsening situation,"" said Debra Whitman, AARP executive vice president for policy. ""It's one thing if your housing value goes down in your 50s. It's another thing if you're 75. For some people, it's not like you can go back to work.""

There are many potential issues unique to older citizens that may be fueling their foreclosure crisis. One such cause is the combination of fixed incomes and higher living costs. Seniors also cited the death of a family member as reason for default.

Adding to the problem is the fact that older Americans are more likely to have a mortgage rate above 8 percent (13 percent of Americans age 50 or older, as opposed to 10 percent of younger homeowners).

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The effects of lost home equity and foreclosure can be drastic for an aged population with few-if any-working years left with which to build a cushion for retirement. Home equity is usually a source of money for retirement expenses, so a sudden loss of that equity is a serious concern.

""You may have been working for years toward paying your mortgage, and the security you thought you'd have isn't there,"" said Whitman. ""Not only that, the downturn in the market meant savings fell flat. Pensions are going away. It's really this huge storm of things hitting people right now.""

Minorities saw the worst news, with foreclosure rates on prime fixed-rate mortgage loans hitting 3.9 percent for Hispanics and 3.5 percent for African-Americans in 2011. These figures were about double the rate for white borrowers (1.9 percent).

African-Americans had the highest subprime foreclosure rate among older borrowers in 2007, being overtaken in that statistic by older Hispanics starting in 2008. Hispanics had the largest percentage of delinquent subprime loans (25.9 percent) in 2011, followed closely by Asians (25 percent) and African-Americans (24.9 percent). Older white borrowers had a delinquent percentage of 24.4 percent.

The one piece of good news for older homeowners was that they had a slightly lower overall foreclosure rate (2.9 percent) in 2011 than the younger population (3.5 percent). However, the older group's rate grew at a faster pace.

Examining the data, AARP's Public Policy Institute called for more foreclosure mediation programs and expanded access to housing counseling programs. In addition, the group recommended development of rent-to-own programs to help people buy bank-owned or vacant homes, as well as an agreement with all loan servicers to follow practices that would prevent abuse and misconduct leading to foreclosure.

""Regulatory uncertainty in the housing finance system needs to be resolved promptly and must maintain an appropriate balance between consumer protection and access to capital. The foreclosure backlog requires concerted action at the federal, state, and local levels to implement the recent settlements and regulatory actions. Additional efforts need to evaluate and strengthen the current array of assistance programs to meet the needs of struggling homeowners, especially older homeowners,"" said the report.