Old and foreclosed

[Gob]

MABLETON, Georgia: Roy Johnson fell so far behind on his $US1000-per-month mortgage payments that last year he allowed the red brick, three-bedroom ranch he had owned since 1963 to lapse into foreclosure.

''I couldn't pay it any longer,'' he said. ''One day, I woke up and said, 'Hell, I'm through with it. I'm walking away from the house'.''

That decision swept Mr Johnson, 79, into a rapidly expanding demographic: older Americans who have lost their homes in the great recession. As he hauled his belongings by pick-up truck from this Atlanta suburb and moved into his daughter's basement, Mr Johnson became one of the 1½ million Americans over the age of 50 who lost their houses to foreclosure between 2007 and 2011. Of those, the highest foreclosure rate was for homeowners over 75.

Once viewed as the most fiscally stable age group, older people are struggling. Last week, the American Association of Retired Persons (AARP), released what it described as the most comprehensive analysis of why the foreclosure crisis struck so many Americans in their retirement years.

The report found that while people under 50 are the group most likely to face foreclosure, the risk of ''serious delinquency'' on mortgages has grown fastest for people over 50.

While the study classified even baby boomers as ''older Americans,'' its most dire findings were for the oldest group. Among people over 75, the foreclosure rate grew more than eightfold from 2007 to 2011, to 3 per cent of that group of homeowners, the report found.

''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 3 million are at risk of losing their homes,'' the report found. ''As the mortgage crisis continues, millions of older Americans are struggling to maintain their financial security.''

The report was based on nationwide loan data that covered a five-year span. The profile of those facing foreclosure has changed since 2007. As the average age and wealth of those people rise, their foreclosures are less likely to involve high-interest loans. In fact, most foreclosures are now the result of prime loans rather than subprime ones, according to the Federal Reserve Bank of New York.

Instead, older Americans are losing their homes because of pension cuts, rising medical costs, shrinking stock portfolios and falling property values, according to Debra Whitman, AARP's executive vice-president for policy.

They are also not saving enough money. Half of households whose head is between 65 and 74 have no money in retirement accounts, according to the Federal Reserve.

Other older foreclosure victims have managed to negotiate with banks to stay in their houses.

Selling houses is also a challenge for many older people. The value of real estate has collapsed, especially in wealthy suburbs of some cities.

For Roy Johnson, it was painful to watch the house he built 48 years earlier sell for only $33,000 at auction last year.

Now he lives in what his 55-year-old daughter calls his ''man cave'' in her basement. It is an hour away from his old house. Although Mr Johnson is grateful to have been helped by a relative, he misses having space for all of his belongings and the tree from which he made pear preserves.

''I planned to die in that house,'' he said. ''But I guess it won't work out that way.''

The New York Times



Read more: http://www.smh.com.au/world/older-ameri ... z225Jk0WxA

The one thing that puzzles me is how did a man of 79 still have such a huge mortgage running?

[Econoline]

Exactly. If he's owned the house for 48 years, why did he have a mortgage at all?

[Crackpot]

2nd mortgages

[dgs49]

This is ENTIRELY a self-imposed crisis, and is newsworthy for the single fact that this old guy has been incredibly foolish in how he handled his financial affairs.

The reason why there is a "...perception that older Americans are more housing secure than younger people..." is because unless they have behaved like fools, they own their homes and have no mortgage payments. And this is true for the vast, vast majority of retired persons, at all levels of the financial spectrum.

And BTW, there is no shame in living with an adult child. My father lived with me for the last twelve years of his life BECAUSE I INVITED HIM TO, and we were both better off for it, as was my son.

Sheesh.

[Scooter]

Of course the fact that more and more older Americans are facing medical costs that they find out are uninsured has no relationship to the amount of mortgage debt they are holding.

No, far better to claim that getting sick and screwed over by their insurance companies was "entirely self-imposed".

[Sean]

It's nice to know that behaving like a fool is the only possible reason for anyone needing to remortgage their home.

[dgs49]

If Mr. Roy Johnson had had some extraordinary calamity in his life that resulted in him being "upside down" on his mortgage at age 79, I'm sure it would have been mentioned in the article.

The unwritten subtext of the article - that somehow Old People should be protected from losing their houses just because they are old and pathetic - is vacuous socialist nonsense.

[Scooter]

You were the one who posted the moronic generalization that the only way older people are carrying mortgages is because they "behaved like fools". Of course, if you are now admitting you were a moron for saying so...

[Guinevere]

You obviously missed this part of the article:

The report was based on nationwide loan data that covered a five-year span. The profile of those facing foreclosure has changed since 2007. As the average age and wealth of those people rise, their foreclosures are less likely to involve high-interest loans. In fact, most foreclosures are now the result of prime loans rather than subprime ones, according to the Federal Reserve Bank of New York.

Instead, older Americans are losing their homes because of pension cuts, rising medical costs, shrinking stock portfolios and falling property values, according to Debra Whitman, AARP's executive vice-president for policy.

They are also not saving enough money. Half of households whose head is between 65 and 74 have no money in retirement accounts, according to the Federal Reserve.

Other older foreclosure victims have managed to negotiate with banks to stay in their houses.

Selling houses is also a challenge for many older people. The value of real estate has collapsed, especially in wealthy suburbs of some cities.

For Roy Johnson, it was painful to watch the house he built 48 years earlier sell for only $33,000 at auction last year.

Who knows what combination of events led to his situation -- maybe he didn't save enough cash, or the value of his protfolio dropped precipitously, maybe he had calamitous health costs, maybe he used his house like a checking account and took out too many home equity loans. All or any combination of the above could result in his losing his home. Not all were a result of him being a "fool."

[rubato]

Study: Many Americans die with ‘virtually no financial assets’
Innovative research shows large divergence in retirement saving outcomes, with the single elderly faring worse than married couples.
Peter Dizikes, MIT News Office

It is a central worry of many Americans: not having enough money to live comfortably in old age. Now an innovative paper co-authored by an MIT economist shows that a large portion of America’s older population has very little savings in bank accounts, stocks and bonds, and dies “with virtually no financial assets” to their names.

Indeed, about 46 percent of senior citizens in the United States have less than $10,000 in financial assets when they die. Most of these people rely almost totally on Social Security payments as their only formal means of support, according to the newly published study, co-authored by James Poterba of MIT, Steven Venti of Dartmouth College, and David A. Wise of Harvard University.

That means many seniors have almost no independent ability to withstand financial shocks, such as expensive medical treatments that may not be covered by Medicare or Medicaid, or other unexpected, costly events.

“There are substantial groups that have basically no financial cushion as they are reaching their latest years,” says Poterba, the Mitsui Professor of Economics at MIT.

However, the study — one of the first to examine Americans’ end-of-life finances — also reveals a diversity of outcomes among senior citizens. Between 1993 and 2008, it found, unmarried older individuals had median wealth of about $165,000 roughly a year before they died — a figure that includes current and future Social Security income, job-related pension benefits, home equity and financial assets. In the same period, the median wealth for continuously married senior citizens, roughly a year before they died, was more than $600,000.

“There is a lot of divergence in how people are doing,” Poterba says. Those disparities also complicate the public-policy issues relating to the new findings.

“One of the clear messages is that it is very hard to do a one-size-fits-all retirement policy,” Poterba says. “We need to recognize that, for example, if we were to substantially reduce Social Security benefits for those later in life, that there is a share of the elderly households for whom that would translate very directly into reduced income, because they seem to have accumulated little in the way of financial resources.”

The paper appears as a chapter in a book edited by Wise — “Investigations in the Economics of Aging” — newly published by the University of Chicago Press.
... "

___________________________-

yrs,
rubato

P.S. Peter Dizikes is the son of John Dizikes; Professor emeritus at UCSC.

[dales]

You can't take it with you.

[Joe Guy]

You can't take it with you.

My maternal grandfather died at age 62 with no money to his name. My parents and aunts & uncle all chipped in money to bury him. He was divorced at the time and his ex wife wasn't involved with the burial.

He was a musician and had his own radio show in the midwest. He had a lot of fun but no money.

He had nothing to take with him even if he had wanted to take something.

[Sean]

You can't take it with you.

We'll see about that...

[Gob]

The US housing market may slowly be rebounding. But the construction and buying binge of the mid '00s will never return, and millions of American homeowners may never recover their investment.

Few people have seen quite so much of the property pain the US has been through as Heather Mooney.

For seven years she has been a foreclosure prevention officer in Washtenaw County, Michigan, trying to help those in tax arrears and mortgage debt.

She has watched as tens of millions of Americans have suffered astonishing losses when their properties fell in value following one of the biggest bubbles the market had ever seen.

"On average in Washtenaw County, you are looking at a 20% loss," she says. "I'm certainly looking at $30,000 (£19,382) to $40,000 that I have lost in my own home."


And about 40% of homeowners in the higher end of the area owe more to the bank than their home is worth, she says. They're "underwater".

Across the US that figure is one in four, though it should fall as house prices creep up.

Heather Mooney's clients' stories are tangled tales of woe - arrears brought on by divorce and illness, banks racking up repayments as early discounts ended.

Aurora Lopez, 42, is one of them. She has a three-bedroom house in Ypsilanti's historic quarter. It has two stories - it's comfortable, not grand.

But when her mortgage repayments went from $770 a month to more than $1,800, arrears mounted and penalties kicked in.

"We purchased it for $135,000," she says, sitting at her dining table. "Right now the balance [on the mortgage] is $150,000."

"And the house is worth," she says, pausing briefly to recall the horrible number, "$75,000."

That's nuts, I say.

"Tell me about it. It's ridiculous. But you have to live somewhere. You have to keep on hoping, dreaming, this is the American dream. What you going to do?"

Another little slice of that dream can be found just 10 minutes drive from downtown Ypsilanti.

Here houses are set back from the road behind little lawns; children cycle beneath the trees that line the street; barbecues and basketball hoops wait for lazy summer days.

At the height of the boom, one-storey houses here changed hands for around $130,000. Now they might sell for $35,000.

But here, as across much of America, it looks like the market has rebounded from the bottom.

Real-estate agent Jim Manolakis places the trough in January.

"That's when we shifted from what has traditionally been a buyer's market in this area for the past five or six years," he says.

"We saw our inventory has reduced, we needed more homes to sell. What we see now is a seller's market."

Home sales are up - 10% in May from the year before. Home construction has rebounded, too. After years of dragging down the US economy, it is now contributing to its (albeit meagre) growth.

About 10 minutes outside Ann Arbor, what will be eventually be a lovely big house is taking shape. The frame is going up, workmen stride over the boards wielding circular saws and nailguns. Country music - what else? - pumps out of a radio.

Ann Arbor Builders, who are doing the construction, employed about 30 people at the height of the boom. Now that's down to five.

But its president Alex de Parry, who has been in the business since the early 1970s, says things have picked up since the leanest years of 2008 and 2009.

House building does more than line the pocket of real-estate agents. It also pumps money in the pockets of local craftsmen and manufacturers, he says.

"Lumber, steel, electrical, lighting, plumbing, mechanical, roofing, windows, doors," Alex de Parry lists the knock-on benefits.

"Our local suppliers benefit, manufacturers benefit, so there's a very pronounced ripple effect when new construction gets going again."

It will never be the same as 2004 and 2005, he says. Then, when his company was building 50 houses a year, there was too much easy money about.

But Americans still want to own their own homes, he reckons, and that's not going away, however bad the crash was.

Back in Ypsilanti, Tamara Tucker, a 35-year-old biology instructor, has picked up a bargain - a house that has seen $100,000 sliced from its value.

She bought it for her grandparents to live in, close to the house where she lives with her husband and child.

After the home has lost so much value, why buy?

"It depends on why you are buying a house," she says. "My generation, I think we came up at a time when buying a house was an investment, a house was an asset.

"Buying a house in this day and age is very different. It's really based on functionality in terms of buying a place on that's going to suit your family's needs and fit your budget."

Ms Tucker's attitude represents a big shift from just a few years ago. It harkens back to a time older Americans will recognise, when the ambition was simply to own a home, rather than to make huge sums selling it.

The recovery in housing is not spectacular. Many of those "underwater" will be there for some time, and it's difficult to see how people like Aurora Lopez will ever escape their burden.

But there is solid good news in the housing market, in an economy with too little of it about.

[Scooter]

Something that would help stem the flood of foreclosed homes being dumped in the market (and therefore help stablilize prices) would be if the mortgage on every home that is underwater would be written down to its current market value, if that would mean that the owner would be able to afford the lowered payments. When prices recover, the banks can recoup what they wrote down when the house is sold or transferred via inheritance, etc.

[Sean]

That's a bit too sensible to even be considered Scoot...

[Guinevere]

I'd agree that the market is rebounding. One of my recently divorced friends has been trying to sell their marital home for the past two years. Not one offer last year. Relisted it this spring and it was sold in 90 days. On the other side, trying to purchase a new home has been far more competitive. He went through three or four homes (making offers, being outbid, or some other issue making the deal fall through) before he closed on one last month.

Scooter, I have a vague recollection of their being proposed legislation to that effect -- I think it was possibly part of one of the early bailout packages -- but of course it was never approved. And BTW, I don't think prices will fully recover, not for a while any way. Even here in eastern MA where prices were high and have stayed high (there is no such thing as a 100K home anywhere near Boston that is safe and inhabitable), there is still a difference in values from the height of the market.

[rubato]

Something that would help stem the flood of foreclosed homes being dumped in the market (and therefore help stablilize prices) would be if the mortgage on every home that is underwater would be written down to its current market value, if that would mean that the owner would be able to afford the lowered payments. When prices recover, the banks can recoup what they wrote down when the house is sold or transferred via inheritance, etc.

Nixed by a functionary recently; a holdover from the Bush era (whose replacement has been blocked by the party of 'no' for 4 years) blocked implementation of Obama's policy even though it was endorsed by the economists of Fanny and Freddy..

Gotta go, no time to look it up.

yrs,
rubato

[dgs49]

Allow me to clarify:

"...the mortgage on every home that is underwater would be written down to its current market value..."

That is, stealing tens - and possibly hundreds - of thousands of dollars from the stockholders of the mortgage bank, and trying to pretend that there is no theft going on.

Those banks advanced the funds in consideration fo the mortgage note. Every dollar of it. The borrowers promised to repay the loans. If they had said, "we will pay them back, but only if the value of the property remains the same or increases," they wouldn't have gotten the loans, would they?

[dales]

So, the banks invested and lost.

BFD.