FEATURE-Getting older now means more housing distress

By Lynn Adler

NEW YORK, June 22 (BestGrowthStock) – Amma Holmes expected to pay
off the mortgage on her Tampa, Florida, home in the next few
years. Instead, she lost her job and her two adult sons have
moved back in to help pay her bills.

She isn’t alone.

For the first time in generations, getting older means
carrying more mortgage debt and less savings into retirement,
thanks to the housing crash and rising joblessness among those
45 and older.

The average age of borrowers seeking foreclosure prevention
help from CredAbility, a national nonprofit credit counseling
agency based in Atlanta, rose this year to 48 from 46 last
year, and 43 in 2006.

Holmes, 53, modified her mortgage earlier this year,
cutting monthly payments by $375 a month. But she lost her job
at Tampa General Hospital, and her sons moved in to help pay
the debt.

“In 2014, my house would have been paid for,” she said,
but the end date is now 2036 after the modification. “I feel
good about the modification, but it’s like starting all over
again.”

Holmes originally bought her home in 1993. But she
refinanced with an adjustable-rate mortgage in 2006, and then
struggled to make payments when her hours were reduced.

With the wage cut, “I was always behind, with my paycheck
what it was. I didn’t have that much to pay,” said Holmes, who
is looking for a new position at the hospital where she worked
for over 20 years.

Older homeowners are a fast-growing share of distressed
borrowers, but have fewer years to recoup declining home
equity and greater difficulty replacing lost income.

Unemployment is near record highs for people aged 45 and
older, just as they hit peak wage-earning years. The heavy job
losses and financial markets crises have eaten away at
retirement accounts, hiked medical costs and stifled
spending.

“Someone of this age is hoping to have their home paid off
by the time they retire, and instead, they’re looking at
exactly the opposite: the threat of losing that home that
they’ve put years and perhaps decades of responsible payment
history behind,” said Gail Cunningham, spokesperson for the
National Foundation for Credit Counseling in Silver Spring,
Maryland.

DARK SIDE OF THE BOOM

The share of older owners with mortgages rose during the
boom years, when getting loans was much easier and buying
second homes or tapping home equity were the norm.

By 2007, in the early stages of the deepest housing crash
since the Great Depression, 53 percent of homes headed by
owners aged 50 or older had a mortgage — up from 34 percent
two decades earlier, the AARP said, citing Harvard data.

And more of those people are out of work or carrying more
debt. Older workers have higher salaries, and often rack up
credit-card debt while unemployed as they try to find a job
commensurate with experience.

Median weekly earnings were highest for workers aged 55 to
64, followed by those aged 45 to 54, first-quarter data from
the federal Bureau of Labor Statistics show.

But unemployment in those age groups is at levels not seen
since the postwar period: At 7.7 percent for the 45- to
54-year-old group, just below a record 8 percent last
September, and 7.1 percent for workers 55 and over, a hair
below last December’s record 7.2 percent. These BLS records
date back to 1948.

STARTING OVER, AGAIN

For the first time, lower income due to unemployment and
underemployment was the main motivator for credit counseling
last year, Cunningham said.

“Prior to that, the No. 1 reason had always been financial
mismanagement,” she said.

Last year about one-quarter of the 4 million consumers
NCFF counseled sought help for mortgage troubles. More than
half of those borrowers were 45 or older.

Retirement plans are interrupted as many struggling older
borrowers seek full- or part-time jobs to supplement income.

With many of these borrowers “taking a significant hit in
both home value and retirement savings, you’re seeing a lot
more people eventually dropping out of the middle class,” said
David Certner, the AARP’s legislative policy director.

Home price losses averaging 30 percent from the 2006 highs
also decimated equity for many borrowers, shutting down
another source of spendable funds and making refinancing
impossible.

“There isn’t the cash and equity available to be able to
do renovations and improvements or other consumer spending,”
said John Taylor, president and chief executive officer of the
National Community Reinvestment Coalition in Washington. “It’s
going to contribute to a negative pull on our economy.”

Making foreclosure prevention mandatory for lenders is
critical to stabilize housing prices, aid more senior
homeowners and build future economic growth, he contends.

Craig Thomas, senior economist at PNC Financial Services
Group in Pittsburgh, said that while the bleeding stopped in
some housing markets, others with high concentrations of older
homeowners, such as Florida or the Upper Midwest, still
suffer.

Investing Advice
(Reporting by Lynn Adler; Editing by Jan Paschal)

FEATURE-Getting older now means more housing distress