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Older homeowners in trouble

By Judy Martel · Bankrate.com
Tuesday, August 7, 2012
Posted: 6 am ET

More Americans older than 50 have mortgages than in the past two decades and for larger amounts, causing a growing number to be at risk for foreclosure.

A report from the AARP says 3.5 million homeowners older than 50 are in danger of losing their homes. Most won't have the time or resources to recover from such a financial setback as they head toward retirement. Since 2007, more than 1.5 million homeowners in this group have already had their homes foreclosed, raising the foreclosure rate from 0.3 percent in 2007 to 2.9 percent in 2011.

Older homeowners were enticed by the same initially low rates on subprime mortgages as everyone else. As the values of their homes decreased and the rates increased, many found they owed more than their homes are worth.

There is help for distressed homeowners. Free advice from a counselor approved by the Department of Housing and Urban Development can steer homeowners toward ways to reduce monthly expenses.  It might be worth it to try to get a loan modification to reduce your monthly mortgage payment or see if you qualify for the government Home Affordable Refinance Program to refinance at a lower rate. Those older than 62 and with equity in their homes could consider a reverse mortgage. As a final option for avoiding foreclosure, a short sale through the Home Affordable Foreclosure Alternatives government program allows the homeowner to walk away from the home and the mortgage debt.

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63 Comments
Jim
August 30, 2012 at 11:16 am

You have to take care of business. I'm 55 and paid off my place. That's the secret--pay off the mortgage. Do not refinance! Even if you are stuck with a 30 year 6 percent loan, stick it out. If you have to refi, go with a 15 or even a 10 year mortgage. Get rid of everything you don't need--cable, cell phones, boats, RVs, and use the savings to pay down the mortgage. Just sayin'....Good luck out there.

giovanna
August 16, 2012 at 12:04 am

These stories are so terrifying. I worked for years as a freelancer. I am a professional artist, and typical of the "stereotype", I did not plan and scrimp for the future. I made a 6 figure income for many years. I was a "free spirit" and chose to travel while I was still physically able to do so. When I turned 50, I decided it was high time to settle down and buy a condo or apt. I did not want anything fancy. However, I live in SoCal where the real estate bubble was absolute insanity. By the time I decided to buy a house/condo there was nothing but run-down shacks available for under $600,000. I was told to continue to rent, calm down, the prices would stabilize. Well, did they ever. So many folks I've met now have "under water" mortgages. We are all in our 50's, turning 60, with no prospect of jobs, and terrifying amounts of debt. What is going to happen to all these people? These are decent, hard-working people who paid taxes all their lives. Are we all going to end up sharing 1 bedroom apartments, trying to care for one another since nobody can afford health insurance either? This is a freaking nightmare. I have no idea what to tell people with children, except to hammer into their heads to work hard, save all their money, and trust no one. So many people in my generation were sold so many lies by the banks, by Lehman Bros., by bulls&&& investment "advisors" who managed to lose all the savings in their 401Ks with their "expertise". I am so scared I can barely sleep at night.

Patricie
August 15, 2012 at 1:44 pm

I too am 50+ with an MBA. My position was recently eliminated in January 2012. I am still on the hunt for a job, but since the economic downturn companies have restructured their salaries and it is difficult to find a job offering a comparable salary. In addition to that, even though I am in my State's Hardest Hit Fund program since April 2012, the Bank of America still adjusted my interest rate from 3.550% to 7.55%! I am so frustrated because I am on unemployment, seeking employment, and have been abiding to the terms of the HHF contract.

Should the Bank be allowed to adjust the mortgage interest rate while homeowner is actively participating in the Hardest Hit Fund program?

MJ
August 09, 2012 at 5:39 am

Many people were suckered in when "experts" told them to refinance to lower rates. It makes no sense to refinance a 7% loan to a 5% 30-year loan when you've been paying on it for 15 years. Then, they were talked into refinancing again to 4%. You will never pay your home off if you keep refinancing for another 30-year time period. That merely offers short-term cash flow help.

Also, people move regularly due to job and personal reasons and they sell one home and buy another and take on another 30-year mortgage.

Also, many people had to take on 30-year mortgages in parts of the country because homes were pushing 1/2 million or more. They didn't have the down payment until they were in their 30s and add 30 years to that, and you get a homeowner who is in his 60s when the mortgage is paid off. Throw in some home depreciation and job losses, and you have a recipe for fiancial disaster.

kim
August 09, 2012 at 3:41 am

We have a mortgage with Bank of America, and started to have trouble making payments on time.Encouraged by them to enter a program making only interest payments for 6 mos while being considered for a loan modification,they strung us along for months waiting for approval and then denied we were served with forecloseure papers.Decided to file bankruptcy to try and salvage the house and struggling every month to do so.After a year and half of into it we are wondering whether it is all worth it.ready to walk away.Bank of America are idiots,Every person you talk to has a different answer and knows nothing about your previous call.A real nightmare this has been.

s. johnson
August 09, 2012 at 12:31 am

Well, this is just another eye opener for the average 30 year old who had thought they would be "entitled" to their parents estate later in life. Pretty much another reason why todays youth won't be better off than their parents. Boomers may need to set their kids down for a little reality check on why those 4+ years of college may have painted a very "liberal" view of life in the U.S. of A. but another vote for Obama may end their hopes of a "better life" and any inheritance !

leslie
August 09, 2012 at 12:14 am

can't believe the letter one person wrote about how they were in danger of losing the house they built with their own two hands 21 years ago. huh? why didn't they pay it off?

i'm in the same boat as alot of you. lost a job, house underwater..not enough income to refinance at a cheap rate and stay in the house.

but until you pay for it, IT'S NOT YOUR HOME!

too many people using their homes as a piggy bank.

cut your losses and walk away. don't look for the banks or the government to help you out. they're the one's that made this mess along with people who forgot how to use common sense.

we ALL contributed to this mess with our apathy about what the government is doing and turning our backs on tradition values and common sense.

hope we can all finally decide to fix this for our kids and grandkids.

Pam Richman
August 09, 2012 at 12:13 am

Susie we feel your pain. We are traditional middle class citizens that are fighting to keep ourselves ahead of the retirement curve and provide support to other family members trying to survive on minimum wage jobs or retirement funds. While we are very slightly above water at this point age discrimination is alive and well, young adults can not live on minimum wage or slightly above incomes and elder care is an oximoron. All of this puts us baby boomers smack in the middle with a narrow path to win. I predict we will as our parents raised us to be survivors.

Susie
August 08, 2012 at 10:25 pm

I agree with Kathy. I am 50+ and have been downsized out of decent jobs twice in the last 10 years so that the companies could hire younger and cheaper employees. I cannot find a decent job in the last 4 months that pays more than$8.50 per hour. I have a Master's degree in Business and 30 years of credible experience and I cannot even get a response to resume or online applications. I know it is my age. I am intelligent and still have a lot to offer a company but they see me as a dinosaur. I have a mortgage, am a single mother and will probably end up losing everything that I worked for in the last 30 years. This country has to challenge and provide incentives to the business sector to stop age discrimination or all seniors will eventually be in poverty and dependent on government assistance.