The statistics are alarming: 634,000 Americans age 50 and over are delinquent on their mortgages, with another 50,000 in foreclosure or having lost their homes.
Twenty-eight percent of all delinquencies and foreclosures happen to people age 50 and older, and 3.5 million homeowners 50 and older spend more than half of their income on housing. Compared to two decades ago, the number of older homeowners holding a mortgage increased 18 percent, to 53 percent.
And these sobering statistics, from the AARP Public Policy Institute, cover only the six-month period ending December 31, 2007. Things have gotten worse since then.
What can older people at risk of losing their homes do?
First of all, some basic information about the two main types of foreclosure, mortgage foreclosure and property tax foreclosure.
Foreclosure for failure to make mortgage payments can happen very quickly. By the third missed mortgage payment to your lender, the home is put into the foreclosure process, and by the fourth month the homeowner receives notice of the sheriff’s sale of the home. Lenders can sometimes work out an agreement with the homeowner to reduce the terms of the mortgage or arrange a short sale, in order to avoid foreclosure.
Property tax foreclosure is a longer process, with many counties operating on a three-year cycle. When the homeowner fails to pay property taxes for three years, the home goes into foreclosure. Usually, county treasurers are willing to work with the homeowner to avoid foreclosure, and housing counseling agencies are often successful at keeping homeowners in their homes if property taxes are the problem.
Some points to keep in mind if you’re worried about foreclosure:
• Don’t panic. Panic can lead to an inability to act, which is what you need to do now to save your home.
• “Contact a housing counselor who works at a nonprofit organization and does not charge for services,” said Margaret Loy, foreclosure prevention coordinator at University of Michigan Health System Housing Bureau for Seniors. HUD-approved housing counseling agencies do not accept money and exist to help you keep your home, or figure out a solution for your particular situation. Loy cautioned against agencies and for-profit companies that charge fees or guarantee results.
• Don’t ignore phone calls and notices. Keep in touch with your lender or, in the case of property tax issues, your county treasurer. “Do not be afraid to answer the phone, to answer mail,” said Genevieve Pajulio, housing counselor for Oakland Livingston Human Service Agency. Communication is important and can open doors to solutions, she said.
• If facing mortgage foreclosure, ask to speak to the loss mitigation or home preservation department of your lender, advised Pajulio. They are often open to helping homeowners work out solutions to avoid foreclosure.
• Know what’s coming up and what the foreclosure process entails. For example, many clients think the sheriff sale date of the home is the date the homeowner must move out, said Tamara Orza-Ramos, also a housing counselor at Oakland-Livingston Human Service Agency. Not true: homeowners in Michigan have a 6-month redemption period before they have to vacate the property.
• After foreclosure, don’t forget about taxes, advises Pajulio. It may seem cruel, but if your home is sold in a short sale (where your lender allows the property to be sold for less than the amount owed on a mortgage and takes a loss) you may still owe taxes on the sale of the home. The Mortgage Forgiveness Debt Relief Act of 2007 taxpayers exclude debt forgiven on their principal residence if the balance of their loan was less than $2 million. Make sure to talk to a HUD-approved housing counselor or your tax preparer about this.
• Go to seminars on foreclosure, offered in various communities, advised Pajulio and Orza-Ramos. Just learning about foreclosure can demystify the process and make it easier for you to take action.
• Don’t be afraid to let go. “Although they might have an emotional attachment to a home, sometimes it might make sense to leave, to improve their quality of life,” said Pajulio. “Foreclosure is an emotional matter, not just a financial one.” This can mean talking the homeowner through the emotional aspects of selling a home, often a place replete with memories of raising a family. Helping the homeowner feel comfortable with that decision is important.
Augustine Cox, director of Bethel Housing Counseling Agency in Detroit, agreed. In some cases, she said, “It may be better to just sell the house. We try to make them feel good about what they’re doing.”
• Address underlying issues, advised Pajulio. This can be a change in the homeowner’s situation that has led to reduced money for housing, such as a spouse dying, loss of a job, decreased benefits, a health crisis or an increase in food and medicine costs.
Property tax foreclosure often happens because the taxable value of the house has gone up and the homeowner, on a fixed income, can no longer afford the taxes, said Loy.
Bottom line: See a housing counselor to help you determine the underlying issues that have led to risk of foreclosure.
• Get on a budget. Cox sees many homeowners who don’t have a budget. She sits down with the homeowner and together they look at income, expenses, and discretionary spending. Clients often are surprised at what they’re spending money on and where they can cut, Cox said.
“Seniors are eligible for a lot of property-tax credits they don’t know about,” said Loy. At Housing Solutions for Seniors, clients are offered a package of budget-counseling services that includes information on tax-saving strategies, she said.
• Beware of predatory lending and scams. Do not refinance your mortgage, take out home equity loans or a new mortgage, complete a reverse mortgage or make other changes to your mortgage without having a HUD-approved housing counselor or a lawyer you trust review the documents. “We want to make sure [homeowners] know what kind of product they’re getting,” said Orza-Ramos. Many older Americans have fallen prey to companies claiming to help them, only to find the actions they’ve taken will cost them their homes.
This rule also applies to companies that claim they will help you get out of debt or avoid foreclosure. Most HUD-approved housing counseling agencies will do the same work for you for free, while for-profit companies charge a fee or take a cut of any money you’ll save.
Additional Resources:
HUD Guide to Avoiding Foreclosure
Hope Now (Provides free foreclosure prevention assitance)
United Way 211 (Call 2-1-1 to reach someone who can help you find resources in your area.)
E-Mail Story
Print Story
