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Housing collapse hit seniors hardest

A new report finds that Americans over 50 are facing unprecedented financial hardship.

By MSN Money Partner Jul 20, 2012 4:15PM

This post comes from Steve Yoder at partner site The Fiscal Times.


The Fiscal Times on MSN MoneyRetirement and old age is typically associated with stability and relaxation. But after the mortgage meltdown, many seniors have found just the opposite. According to a report released this week by the AARP, Americans over 50 are facing unprecedented financial hardship.


Image: Home with foreclosure sign in front yard © Ariel Skelley/Stockbyte/Getty ImagesIn the first study to look at how the crisis affected people older than 50, researcher Lori Trawinski found that between 2007 and 2011, the rate of serious delinquencies actually grew faster among that group than younger homeowners.


Overall, the study found that about 3.5 million loans (16%) held by people age 50 or older were underwater, 600,000 were in foreclosure, and another 625,000 were 90 or more days delinquent. That's in addition to the 1.5 million older Americans who lost their homes during these five years.


Though the AARP didn't do a geographic analysis of the data, many retirees live in epicenters of the collapse -- Florida, Arizona and Nevada, for example. More broadly, though, the finances of older Americans are not as robust as in the past, says Debra Whitman, AARP executive vice president for policy. They are living longer and running through their retirement money, and many deal with huge unexpected health care costs


Some were also targeted by predatory lenders -- purchasing a home with an adjustable-rate mortgage, or taking out a second mortgage on their current home. (Post continues below.)

A study last year from the University of Michigan Law School found that those 65 and older are the fastest-growing segment of the U.S. population filing for bankruptcy and that older Americans carry 50% more credit card debt than younger debtors.


That's not news to Derek Runion, who runs the government-certified housing counseling agency All-American Housing Solutions in Cape Coral, Fla. One of his clients is a 72-year-old retiree who sank her savings into a large down payment on her house in 2005. Now that the home has lost much of its value, she's left with about $5,000 in equity and is returning to work. "It's a common situation here in southwest Florida," he says.


Especially surprising is the number of people older than age 75 who have home loan trouble. The foreclosure rate in this group grew from about 0.4% to about 3.2% in the five years covered by the research -- a 700% increase. And since 1989, the proportion of those older than age 75 who carry mortgage debt has quadrupled from 6% to 24% -- an unusual trend for a group who traditionally have paid off their mortgages by that age.


The challenges seniors face to dig themselves out of a mortgage hole are much greater than for younger people. Whitman cites a recent national study showing that two-thirds of people ages 75 and older have no money in their retirement accounts. And unlike younger people, they can't hope for future high-earning working years to rebuild their lost savings.


Worse, they're headed into a period of life when they've traditionally used the equity in their houses to finance high medical costs or the price of an assisted-living facility. "When they lose their house, it's the last piece of equity they were going to rely on for the rest of their life," Whitman says.

The report's recommendations include offering principal reduction modifications to homeowners with loans held by Fannie Mae and Freddie Mac, providing more subsidized rental housing for older Americans who have lost their homes, and offering short-term financial assistance to those who are stuck in underwater homes.


Failing that, many of those who have lost their homes will end up relying on their kids, says Whitman. "I think a lot of children of these folks are going to give up their guest rooms for at least a while," she says, noting that she has a family member in that circumstance. "It's the worst of all worlds."


More on The Fiscal Times and MSN Money:

Jul 20, 2012 5:19PM
Ahh who cares its just old dumb deadbeat people! We need to spend our tax dollars bailing out an unregulated fraud riddled industry run by junkies and idiots, that is all that matters! They need their bonuses and should never be removed from the teat of the tax payers, they are the most special people in the whole wide world!!!!
Jul 26, 2012 9:00AM
what is a 65 year old woman doing buying a new house with a large downpayment? I'm sure that there was some predatory loans made in this mess, but anyone at or near retirement should have more commom sense than to take on any debt. If you have any finacial sense at all you know better. If not, don't blame the ever present "them" for your problems.
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