Are older Americans at greater risk of foreclosure?
More than 3 million borrowers over the age of 50 are at risk, according to the report, with more than 1.5 million homeowners (age 50 or older) having already lost their homes since the beginning of the housing crisis. The report also showed that another 3.5 million owners are underwater in their mortgages, owing more than their homes are worth.
So why is this happening? There appears to be an underlying problem with greater debt. According to the report, older Americans are "carrying more mortgage debt than ever before." When it comes to the actual amount of debt these older homeowners have accumulated, the numbers don't look good.
According to the Federal Reserve, families with mortgages held by someone 75 or older jumped to 24.2% in 2010, versus only 6.3% in 1989. Over the same time period, the amount of debt mortgage holders carried shot up to a median of $52,000, versus only $11,800 in '89. Part of this, of course, has to do with the inevitable rising of prices over time. However, such a dramatic jump seems to be a cause for concern among housing experts.
A recent article on CNN Money explained that many older homeowners were burdened by subprime loans or lured by cash out refinances that they didn't work out in their favor. (Cash out refinances refer to taking out a loan for more than the mortgage is worth and using the difference to make repairs, pay bills or consolidate debt).
While cash out refis don't necessarily lead to foreclosure, and in some cases can be quite beneficial, experts warn that very careful consideration should be taken before signing on the dotted line. Financial mistakes or poor refinancing choices certainly happen within all age groups, but it is usually more difficult for elderly homeowners to bounce back from a financial crisis.
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Nat Criss is one of the publishers of ForTheBestRate.com, a consumer directed websites focusing on mortgage rates, insurance, and finance.
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