More Older Americans at Risk of Foreclosure
While reports emerge about the nation’s improving housing market, the effects of the ongoing foreclosure crisis still affects millions of Americans, especially the elderly. The American Association of Retired Persons (AARP) recently reported that nearly than 600,000 people age 50 and older are facing foreclosure, and an estimated 625,000 are at least 90 days delinquent on their mortgage payments. At the end of 2011, nearly three percent of loans held by older Americans had been foreclosed; eight times the number of foreclosures affecting older homeowners in 2007 (the year before the crisis).
The report also highlighted an even bigger problem for older homeowners: the vanishing equity in their homes. 3.5 million older homeowners are now “underwater” in their mortgages; meaning that they now owe more on their mortgage than the property is worth. This dilemma prevents many from downsizing or creating additional retirement income from selling their home for a profit.
The problem is compounded when these homeowners (many of whom live on fixed incomes) fall behind on payments or have little savings. According to a report by the Federal Reserve, just over half (51 percent) of families headed by people aged 64-74 had no retirement savings. Among families headed by a person aged 75 or older, two-thirds had no such savings.
For those forced back into the workforce, the situation is not promising. Older Americans have fewer working years left to build back what they may have lost, and do not have the same earning power as they once did. With few options to increase income and pay down debt, older homeowners often succumb to foreclosure.
These issues exemplify the need for elderly homeowners to understand how foreclosures work, and the various options available to prevent them from losing their homes. For example, a Chapter 13 bankruptcy may be an option in order to save a home. The automatic stay imposed through a bankruptcy filing buys a debtor more time to establish a repayment plan. No collection efforts may take place while the stay is in effect. As such, foreclosure proceedings are halted as long as a foreclosure sale has not taken place.
A bankruptcy can also reduce (or eliminate) other troubling debts, such as high interest credit cards and medical bills, making it easier to afford the mortgage. Moreover, bankruptcy allows a debtor may keep assets accumulated through a retirement plan (instead of sacrificing them in an attempt to pay down bills) and remain in possession of the home while following a court-approved payment plan.
Troubled homeowners also have the option of seeking a mortgage modification, which would lower payments to match the current value of the property and the homeowner’s income.
If you are facing foreclosure, it is important to understand all of your legal options, even before considering bankruptcy. Contact an experienced attorney to learn more.