Approximately 3.5 million loans of people age 50 and older were under water as of December 2011, according to a recent report from the AARP Public Policy Institute. “Nightmare on Main Street” analyzes how the mortgage crisis has affected people age 50-plus over the past five years.

 

Data examined for the report found that 600,000 loans of people age 50 and older were in foreclosure, and another 625,000 loans were 90 or more days delinquent.

 

What’s more, from 2007 to 2011, more than 1.5 million older Americans lost their homes as a result of the mortgage crisis, the report found.

 

These figures present a startling dilemma, since many retirees rely on their homes’ equity to finance their relocations to independent living and assisted living facilities.

 

Without said funds, millions of seniors will be unable to take advantage of such services.

The Great Recession has had a serious impact on seniors, particularly with regard to mortgage delinquency rates. Despite the fact that higher rates of serious delinquency exist among the under-50 population, the rate of increase concerning serious delinquency was much higher for the 50-plus population from 2007 to 2011, with the percentage of loans defined as seriously delinquent skyrocketing by 456 percent for the age 50-plus community.

Delinquency rates are particularly problematic for the 50-plus community because these individuals lack extended periods of time to recover lost funds or regain their overall financial security, said James Carr, chief business officer for the National Community Reinvestment Coalition.

At a July 23 Solutions Forum, economists and civic leaders united to tackle issues presented in the AARP report. The panel concurred that no singular tool was going to solve the housing crisis.

The notion of mass refinancing and principal reduction was brought to the forefront of the discussion.

“We’re talking about individuals,” said David John, senior research fellow at the Heritage Foundation.

John emphasized the importance of utilizing individualized mediation techniques to better address specific problems.

The report offers some policy solutions that could make it easier for seniors to make the move to independent or assisted living in their golden years.

One recommendation included the development of short-term financial assistance programs that aid homeowners who want to sell their homes to finance a move into an assisted living facility or continuing care retirement community.

“In recent years, occupancy rates of continuing care retirement communities and assisted living facilities have fallen, partly as a result of homeowners’ inability to sell their homes quickly or at a reasonable price because of the housing market collapse,” the report said.

“Programs that address the short-term financing needs of older Americans trying to sell their homes would facilitate their ability to move to more appropriate housing in a timelier manner.”

Minority Seniors More Burdened

The significance of gathering regional data was raised by Janis Bowdler, director of the Wealth-Building Project at the National Council of La Raza. Having worked closely with the Hispanic community, Bowdler described the ripple effect a single foreclosure can cause a family.

She recounted stories of families under “dual track,” when, despite being in discussions for loan modification, foreclosure proceedings advanced, and families lost their homes in default.

The study found that in 2011, Hispanic borrowers age 50 and older had foreclosure rates of 3.9 percent on prime loans, African American borrowers had 3.5 percent, and Caucasian borrowers had 1.9 percent.

The panel agreed that the foreclosure crisis has damaged the credibility of American financial institutions, but that specialized government programs like the Home Affordable Modification Program (HAMP), which modifies loans to an affordable level for struggling individuals, can assuage fears and offer relief.

The study is the first of its kind to contextualize the age, race, and income brackets of the individual borrowers studied.