AARP And Foreclosure: A Sad Tale

By
Real Estate Appraiser with PahRoo Appraisal & Consultancy

 

When you think about your parents or even your grandparents, does homelessness come to mind?  Likely not, but that doesn’t mean it couldn’t happen to them.

Just two weeks ago, we received a call from an older couple who had lived in their suburban house for a couple decades.  Things had not gone so well recently and they fell behind on their mortgage and needed an appraisal to see if there was any equity left in the house to determine if they should just avoid the fight and walk away.  Ultimately, they chose to give up their family home and accept foreclosure.  Now they are trying to find a home they can afford to rent in the same neighborhood, which will be a longshot.

In recent years the number of Americans aged over 50 years who have been losing their homes to foreclosure is alarming. According to a Wall street Journal report, “all kinds of debt held by this age group have risen, but the big problem is mortgages. Thirty-nine percent of households with heads aged 60 through 64 had primary mortgages in 2010 and 20% had secondary mortgages, including home-equity lines, that was up from just 22% and 12%, respectively in 1994.”


While traditionally older Americans are believed to have very little mortgage debt or paid off mortgages, the recent financial crisis has left many with little savings, rising mortgages and negative equity in what was supposed to be their biggest asset, their homes. A recent report from AARP’s public policy institute found that older borrowers with incomes from $50,000 to $124,999 accounted for 53 percent of foreclosures in 2011; those earning below $50,000 accounted for 32 percent. The report also found that higher living costs and fixed incomes appeared to contribute significantly to older Americans’ plight.

 

The study found that as of December 2011, 3.5 million older mortgage holders were “under water,” meaning they owed more than their homes were worth, 625,000 were 90 or more days delinquent on their loans and 600,000 were in foreclosure. It is believed that increased borrowing that was spurred by historically low interest rates and high home values prior to the housing market collapse may have led borrowers in the age group to tap their home equity to finance their needs in retirement

 

To combat the problem AARP suggested that all states implement foreclosure mediation programs to help more homeowners stay in their homes; Returning vacant bank-owned properties to homes through funding for community banks and assistance to local and state programs; Developing rent-to-own programs to help people buy bank-owned or vacant homes; Setting loan servicing standards for all servicers and expanding access to housing counseling programs

Michael Hobbs, SRA, LEED GA, PahRoo Appraisal & Consultancy

 Twitter @Pahroo

 Job Opening We're Hiring: 2 residential real estate appraisers (Chicago or suburbs)

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Tags:
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Rainmaker
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Brian Kuhns
Coldwell Banker Roth Wehrly Graber - Fort Wayne, IN
Fort Wayne Real Estate by Brian Kuhns

53% seems like a pretty alarming number considering the income level for that bracket. Won't be long before I'm in that age category...I'd better get busy saving!

Sep 24, 2012 10:13 PM #1
Rainmaker
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Alisa McKeel Willson
Appraisal Pros in Texas - Huntsville, TX
Certified Res. Appraiser

Michael, I appraise in the Huntsville TX area north of Houston.  I am seeing a large increase in the number of reverse mortgage orders I"m getting.  Unfortunately it's not a program that helps you if you don't have any equity....which seems to be the case if the requests for value reconsideration I"m getting are an indication.

Thoughtful post! 

 

Sep 24, 2012 10:49 PM #2
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Rainer
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Michael Hobbs

SRA, LEED GA, RAA
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