Mortgage crisis robbing seniors of golden years: Sacramento CA foreclosures

By Stephanie Armour, USA TODAY

Howard Weiss is 77 and scared.

This year, the semiretired distributor from Phoenix ran into financial problems and stopped making his mortgage payments. He was told his home was scheduled for a foreclosure auction in May.

So Weiss scraped together more than $2,000 to stave off the foreclosure. He's still trying to figure out if he can get a mortgage modification so he can afford his home.

"This is the biggest mess I've had in my life," Weiss says. "I could break down and cry. I was about to lose everything. I've been through (the Korean War), through a lot of crises. Now I've turned everything over to the Lord. ... I'm so stressed this is going to kill me."

The worst economic crisis since the Great Depression has slashed home values and triggered an unprecedented surge in foreclosures across the nation. It's also taking an especially harsh toll on an often overlooked demographic: seniors who are retired or nearly so.

Conventional wisdom holds that most seniors have paid off their mortgages or have significant equity in their homes, but in reality hundreds of thousands are suffering in the housing crisis.

This population is being hit on all fronts. More than 600,000 seniors are delinquent or in foreclosure, according to AARP. A separate report by AARP found that 25.5 million seniors ages 50 and older have a mortgage. Unlike younger people, many are on fixed incomes and lack the money or job opportunities to catch up on payments when they fall behind.

Some seniors have been victimized by predatory lenders or made bad financial decisions, taking on adjustable-rate mortgages that reset to payment levels they couldn't afford. For others, their mortgage problems grew out of other financial pressures, such as staggering medical bills or helping adult children through financial difficulties.

Even those who own their homes free and clear are finding they can't rely on equity as a retirement nest egg because home values have dropped severely, especially in retirement-rich areas such as Florida, Nevada and California.

Some seniors who had planned to sell their homes and move into retirement communities have had to postpone their plans because they can't afford to take a loss on the sale of their current homes. Some older homeowners had been so confident that rising home values would provide retirement wealth that they neglected to save.

Now they face their final years with a dearth of financial resources to draw on. Thirty-six percent of workers ages 55 and older say the total value of their household's savings and investments — excluding the value of their primary home and any defined benefit plans — is less than $25,000, according to the Employee Benefit Research Institute.

Reversal of fortune

"It's terrible," says Dean Wegner, a certified credit counselor and mortgage specialist in Phoenix who has worked on Weiss' case. "I've got a lot of seniors who have just been nailed. They don't have retirement savings, and they've exhausted their equity. They're upside down (owing more on their mortgage than their homes are worth), they can't refinance and they're on a fixed income. They're scared to death. You can hear it in their voices. It's a sad situation."

Weiss' case reflects what many seniors are going through.

He was paying about $1,700 a month on his mortgage when he began having problems making payments because he was helping his son, who was unemployed. Because his home had lost so much value — from $290,000 to about $120,000 today — he couldn't refinance and lock in a lower rate.

Instead, he contacted an organization in Florida that he says offered to help him get a loan modification from his lender before Wegner got involved in the case.

Weiss says a counselor there advised him not to make payments on his home loan so he would be in a better position to negotiate a modification with his bank. He says he sent the organization $2,400 upfront to get the modification started.

So far, Weiss hasn't gotten any modification of his mortgage.

And because he got behind in payments, Weiss' lender began foreclosure proceedings on his home. According to Wegner, Weiss' bank also tacked the three months of back payments he hadn't made onto his loan balance.

That has left Weiss, who lives on a fixed income, scrambling to come up with money to save his home and pay $2,400 a month to catch up. That includes interest on the payments he didn't make.

His monthly income is about $4,000, which includes veteran disabilitychecks, money from his wife's retirement fund, his income and Social Security.

His wife, who lives at home with him, has Alzheimer's disease and is unaware of the situation, leaving Weiss to carry much of the financial worry.

Many others share his plight. Americans 50 and older represent nearly 30% of all delinquencies and foreclosures, according to an AARP analysis released in September.

The analysis found that more than 684,000 seniors 50 and older were delinquent on their mortgages or in foreclosure. Among those, nearly 50,000 were in foreclosure or had lost their homes.

The impact of subprime lending also has fallen disproportionately on those 50 and older.

Older Americans with subprime first mortgages — those given to borrowers with less-than-perfect credit — are nearly 17 times more likely to be in foreclosure than Americans of the same age with prime loans, according to AARP. For those under 50, the comparable multiple is about 13.

Such seniors "have saved up very little outside of their home and banked on home prices rising. No one talked about them falling, so they were heavily leveraged," says Dean Baker, an economist at the Center for Economic Policy and Research.

"This whole group is going to be hugely dependent on Social Security, and people don't fully appreciate the magnitude of the problem."

Some are simply planning to walk away from homes they no longer can afford.

Shawn Lee, 56, a retiree who owns a home in Seattle, had planned to sell it and retire to his other property in Mesa, Ariz.

He bought the Arizona home for $400,000 a few years ago; it's now worth about $200,000. With his retirement savings hit hard by stock market declines, he doesn't want to spend what savings he has making payments on the second home.

"I would have to spend my little bit of savings. It's a very tough situation," says Lee, who retired from the import and export business. "I decided I have to walk away. I won't have any money for retirement if I keep up with the payments."

Carrying mortgages at 60

Many seniors still owe on their homes.

In the fourth quarter of 2008, about 46% of older Americans around 60 who researched reverse mortgages had an existing traditional mortgage with an average debt of $149,683, according to Golden Gateway Financial. A reverse mortgage is one that makes payments to the homeowner from a home's equity.

There are few special programs among lenders or government agencies geared to help seniors with mortgage problems.

Mortgage giants Freddie Mac and Fannie Mae have none, and neither do some of the nation's largest lenders, such as JPMorgan Chase and Bank of America. The Department of Housing and Urban Development does offer a reverse-mortgage program for seniors.

Much of the help comes from non-profits and other services aimed at helping seniors. Legal Services, which provides counseling for low-income clients, reports that seniors with fixed incomes are especially vulnerable to being displaced by foreclosure.

The mortgage woes facing seniors also are creating challenges for retirement communities and assisted-living centers, which are finding that new members can't move in because they are saddled with homes they can't sell.

"We have found that the retirement communities, in particular, are struggling, since people usually sell their homes to finance the entry fees," Lauren Shaham, spokeswoman for American Association of Homes and Services for the Aging, said in an e-mail.

Two years ago, Fred Schoch, 75, a retired butcher in Hartwell, Ga., got on a waiting list for a retirement community. But now he can't sell his lakefront, 1-acre property because the market is so sluggish. A neighbor has had his home on the market for more than a year.

So Schoch and his wife, Joyce, have had to delay their retirement plans and are struggling to maintain the land. "Sooner or later, it'll be too much to take care of," Schoch says. "To buy into another place, we need money from this place. If we could sell, we'd move now."

Housing bubble's legacy

A substantial proportion — perhaps one-third — of older householders ages 55 to 64 will be less secure in retirement because of the housing bubble and its aftermath, according to a September analysis by the Center for Retirement Research at Boston College.

Vanished equity may be most threatening to seniors who own homes in markets that have seen the steepest price drops, such as Arizona, Southern California and South Florida.

"Their home is their largest asset, and that's taken a substantial hit. It's really impacting retirees right now," says Pete Flint, CEO of, a real estate search service.

"It's sad to see them go into foreclosure in their twilight years. It's very tragic," says Flint.

Macon McDavid and her husband, Jim, aren't facing foreclosure, but the vision they once had of their golden years is no more.

Instead of retiring, McDavid, 72, is sending out résumés in hopes of getting a job to help make ends meet. She and Jim own a home in Raleigh, N.C., and a vacation cottage in Sunset Beach, N.C.

When their son became ill, they spent about $70,000 on his medical care before he died. They were forced to take out a second mortgage. Meanwhile, the retirement savings they'd invested in the stock market lost about half its value.

Macon McDavid says they now have no choice but to sell one of the properties. The problem: There are no buyers, and the couple can't afford to take the loss they'd incur at current market prices.

"Our concern is about making payments. We have to decide which house to sell, but just because you put it on the market doesn't mean it will sell," McDavid says.

"All our life we worked to be where we are, and we're not there anymore."

Estimated wealth of households in the 55-64 age group and 65-74 age group in 2009 and change compared with households in those age groups in 2004*:
Households ages 55-64
Median net worth
Median financial assets
Median equity in all real estate
Households ages 65-74
Median net worth
Median financial assets
Median equity in all real estate
* = excludes wealth in defined benefit pensions. Source: Center for Economic and Policy Research

I wonder what the California foreclosures situation will look like in a year.
Easy home improvement tips are a sure way to increase the value of your home.
I have been looking at several Fresno CA foreclosures, but none seem right for us.

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