One of the hardest hit groups: Those aged 75 and older, according to a report by AARP based on mortgage data from 2007 through 2011.
All told, more than 1.5 million Americans aged 50 and older lost their homes in the five years from 2007 through 2011.
While the percentage of foreclosures was higher among younger Americans, the rate for homeowners age 50 and older grew faster in recent years.
And in that over-50 group, the 75+ crowd had the highest foreclosure rate in 2011, according to the AARP report, which cited data from CoreLogic, a provider of mortgage-loan data, and other sources.
Among homeowners age 75 and older, 3.2% lost their house to foreclosure in 2011, up from the 0.33% in that age group who faced foreclosure in 2007.
That compares to 3.5% among homeowners under age 50 in 2011, up from 0.42% in 2007.
The foreclosure rate was 2.9% in 2011 among all homeowners 50 and older, up from 0.3% in 2007.
While the AARP report does not pinpoint precisely why older Americans faced this predicament, it cites data that helps explain why so many more people had trouble paying their mortgage bill.
For one, older Americans greatly increased their mortgage-debt load in the two decades preceding the housing-market crash, with the 75+ age group notching the greatest increase in mortgage debt over the past 20 years.
While financial planners often advise people to pay off their mortgage before they retire, fully 24% of households headed by a 75-year-old or older person had mortgage debt in 2010, up from 6% in 1989, according to the AARP report, which cited the Federal Reserve’s Survey of Consumer Finances.
Mortgage debt also increased among other 50+ Americans: 54% of families headed by a 55- to 64-year-old had mortgage debt in 2010, up from 37% in 1989. And 41% of families headed by a 65- to 74-year-old owed money on a mortgage, up from 22% two decades earlier.
“This increase partly reflects increased borrowing that was spurred by historically low interest rates and high home values prior to the housing market collapse,” the report said. “It may indicate that the oldest borrowers have tapped their home equity to finance their needs in retirement.”
Combine that outstanding debt with lower incomes, rising property-tax bills and health-care costs — and you get homeowners facing a severe financial crunch.
“America’s oldest homeowners have been struggling to maintain their financial security as their incomes are falling, and as mortgage payments, property taxes and health-care costs are increasing.”
The ATM is empty
And tapping home equity is no longer a cash-flow solution for the some 3.5 million older Americans, who are now “underwater” on their homes (they owe more than the house is worth).
About 23% of loans nationwide — borrowers of all ages — were underwater in December. That figure rises to 28% among younger homeowners, those under age 50, versus 16% for borrowers over age 50, the report said.
Still, “While it was expected that older homeowners would have accumulated more home equity than younger people, the fact that 3.5 million borrowers age 50+ have no equity at all is alarming,” the report said. “Research has shown that negative equity is an important predictor of default, even more so than unemployment.”
Meanwhile, for borrowers over age 50, 600,000 loans were in foreclosure and 625,000 were 90 or more days delinquent as of December, the report said. The delinquency rate for borrowers age 50 and over is now 6%, up from about 1% in 2007.
To help homeowners of all ages, AARP called for policy and program changes, including greater use of loan-principal reduction as a tool when modifying loans, mediation programs for borrowers and lenders that provide specific timelines and a framework for meeting and for exchanging documents, loan-servicing standards that apply to all lenders, and a greater emphasis on programs that maintain foreclosed properties, such as the FHFA’s “REO-to-rental” program.
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