Three Million Seniors at Risk of Losing Homes: AARP
By: Brian O'Connell

NEW YORK (BankingMyWay) -- Are U.S. seniors facing a nightmare on Main Street bound to leave them homeless?
 
Alarmingly, that seems to be the case for a burgeoning number of upper-middle age and elderly Americans, according to a study from AARP
 
The pioneering study, “Nightmare on Main Street: Older Americans and the Mortgage Market Crisis” from the AARP’s Public Policy Institute, for the first time looked at the impact of the mortgage crisis on Americans aged 50-and-older.
 
It was worth a look, and the picture isn't pretty. 

“Despite the perception that older Americans are more housing secure than younger people, millions of older Americans are carrying more mortgage debt than ever before, and more than three million are at risk of losing their homes,” the study indicates. “Although the serious delinquency rate of the under-50 population is higher than that of the over-50 population, the increase in the rate of serious delinquency of older Americans has outpaced that of younger homeowners from 2007 to 2011. As the mortgage crisis continues, millions of older Americans are struggling to maintain their financial security.”
 
AARP pegs the number of underwater senior homeowners (with home values less than the mortgage owed on the property) at 3.5 million, as of December 2011. 
 
The study details how severe the foreclosure crisis is -- and may yet become -- among older Americans: 
 

  • 600,000 home loans for 50+ Americans were in foreclosure.
  • 625,000 home mortgages were “seriously” delinquent, meaning at least 90 days late.
  • From 2007 to the end of 2011, 1.5 million homeowners in this age category lost their homes due to the housing collapse.
  • The percentage of home loans that were seriously delinquent rose by a staggering 456% from 2007 to 2011, from 1.1% to 6%.
  • As of December 2011, 16% of home loans owned by the 50+ demographic were underwater.
  • Borrowers with incomes ranging from $50,000 to $124,999 accounted for 53% of foreclosures of the 50+ population in 2011. Borrowers with incomes below $50,000 accounted for 32%, AARP reports. 
     

Since most 50+ Americans do own homes –- at an 80% rate, according to AARP -- the fact that so many of them are either in foreclosure or facing it is one more slap in the face to the vaunted American home ownership dream. It's not surprising, though, that older Americans would be affected by the mortgage crisis.

With a homeownership rate for people age 50+ at 80%, the percentage of people carrying mortgage debt as they age and the amount of that debt have increased steadily over the past 20 years. The largest increase in the percentage of older homeowners with mortgage debt has been the 75+ age group. The 55–64 and 65–74 age groups have also exhibited sharp increases in mortgage debt. This increase partly reflects increased borrowing that was spurred by historically low interest rates and high home values prior to the housing market collapse. It may indicate that the oldest borrowers have tapped their home equity to finance their needs in retirement.
 
This trend, unfortunately, triggers a domino effect, with older Americans raiding their retirement funds to pay their mortgages, leaving them with less cash to eat, pay bills, and enjoy their retirements. That’s a problem that is difficult to reverse.
 
“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, in a statement. “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.”

More on senior finances and housing:

Seniors suffer the most from HUD cuts

Recession hits social security

—For more ways to save, spend, invest and borrow, visit MainStreet.com.

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