Nightmare on Main Street: Older Americans and the Mortgage Market Crisis by Lori A. Trawinski, Ph.D., CFP® AARP Public Policy Institute
This is the first study to measure the progression of the mortgage crisis and its effect on people age 50 and older. Based on an analysis of nationwide loan-level data provided by CoreLogic for the years 2007 through 2011, this study examines loan performance based on borrower age, loan type, and borrower demographics. The study shows that no age group, race, or ethnicity has been spared from the effects of declining home values and the financial difficulties caused by the Great Recession and continuing economic weakness.
Despite the perception that older Americans are more housing secure than younger people, millions of older Americans are carrying more mortgage debt than ever before, and more than three million are at risk of losing their homes. Although the serious delinquency rate of the under-50 population is higher than that of the over-50 population, the increase in the rate of serious delinquency of older Americans has outpaced that of younger homeowners from 2007 to 2011. 1 As the mortgage crisis continues, millions of older Americans are struggling to maintain their financial security.
As of December 2011, approximately 3.5 million loans of people age 50+ were underwater—meaning homeowners owe more than their home is worth, so they have no equity; 600,000 loans of people age 50+ were in foreclosure, and another 625,000 loans were 90 or more days delinquent. From 2007 to 2011, more than 1.5 million older Americans lost their homes as a result of the mortgage crisis.
To date, public policy programs designed to stem the progression of the foreclosure crisis have been inadequate, and programs that focus on the needs of older Americans are needed.
- Among people age 50+, the percentage of loans that are seriously delinquent increased 456 percent during the five-year period, from 1.1 percent in 2007 to 6.0 percent in 2011. As of December 2011, 16 percent of loans of the 50+ population were underwater.
- Serious delinquency rates of borrowers age 50–64 and 75+ are higher than those of the 65–74 age group. People in the 75+ age group are facing increasing mortgage and property tax expenditures and decreasing average incomes. Serious delinquency rates of the <50 population are higher than those of the 50+ population.
- Of mortgage borrowers age 50+, middle-income borrowers have borne the brunt of the foreclosure crisis. Borrowers with incomes ranging from $50,000 to $124,999 accounted for 53 percent of foreclosures of the 50+ population in 2011. Borrowers with incomes below $50,000 accounted for 32 percent.
- The foreclosure rate on prime loans of the 50+ population increased to 2.3 percent in 2011, 23 times higher than the rate of 0.1 percent in 2007. The foreclosure rate on subprime loans of the 50+ population increased from 2.3 percent in 2007 to 12.9 percent in 2011, a nearly sixfold increase over the five-year period.
- African American and Hispanic borrowers age 50+ had foreclosure rates of 3.5 percent and 3.9 percent, respectively, on prime loans in 2011, double the foreclosure rate of 1.9 percent for white borrowers in 2011.
- Since 2008, Hispanics have had the highest foreclosure rate on subprime loans among the 50+ population—14.1 percent in 2011. African Americans age 50+ had the highest foreclosure rate in 2007. White borrowers age 50+ had the lowest subprime foreclosure rate until 2010, when their rate was slightly higher than that of African Americans and remained higher in 2011.
- One-quarter of subprime loans of borrowers age 50+ were seriously delinquent as of December 2011.
- More policy solutions are needed to assist all homeowners, particularly older Americans. Policy solutions that should be considered include: principal reduction loan modifications; mediation programs; more access to housing counseling and legal
AARP’s Public Policy Institute informs and stimulates public debate on the issues we face as we age. Through research, analysis and dialogue with the nation’s leading experts, PPI promotes development of sound, creative policies to address our common need for economic security, health care, and quality of life.
The views expressed herein are for information, debate, and discussion, and do not necessarily represent official policies of AARP.
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