Foreclosures on the Elderly

There is a common stereotype of the elderly couple spending their golden years in their own home. It's the image of senior citizens who have lived in a home for many years, comfortable with each other and their surroundings -- reluctant to change or move, content, as they should be. Perhaps they live in paid-for homes; or maybe they have saved money all their lives and have robust bank accounts; it's possible their children are prepared to support them in return for the years of love and care as the children grew.

However, as the latest recession proved, this is not always the case -- in fact, it is far from the truth in many cases. While the number of foreclosures on senior citizens' homes is on a downward trend, senior citizens have been among those hardest hit by home foreclosures in the last decade

A New York Times story dating to July 2012 estimates that 1.5 million homeowners over 55 lost their homes between 2007 and 2011, with the largest group being over 75 years of age.

An AARP study shows the stereotype of the financially stable elderly holds mostly true, but the fastest growing group facing foreclosures between 2007 and 2011 was the 50+ age group. The rate of foreclosures for this group rose three percent in that time frame.

AARP suggests that the reason for the rise in elderly foreclosures was due to a combination of factors, including pension cuts, rising medical costs, shrinking portfolios and falling property values, and the fact that, like other age groups, people over 50 were not saving enough money.

Part of the issue is that when expenses rise, many individuals are unable to keep up and quickly fall into debt. This is especially true of senior citizens, who often live on fixed incomes and are unable, because of their age and sometimes health, to find jobs which pay enough to help them get out of debt.

One option many senior citizens have turned to in the last few years is to utilize what is known as a reverse mortgage. Reverse mortgages are federally-insured loans based on the equity of a home; they defer payments until a house is sold or the loan-holder moves out or passes away. The home owner, in turn, is expected to pay property taxes and upkeep on the home. The program was created in 1989 and covers about 635,99 loans, according to a story in the Washington Post.

However, according to statistics released by the federal department of Housing and Urban Development (HUD), in fiscal year 2017 more than 90,000 loans held by senior citizens had fallen behind by 12 months or more in taxes, insurance or, in most cases, both -- a number that has increased by about 50 percent from 2016. The reason for this is that laws have gotten much stricter. Whereas previously the homeowner was able to negotiate a payment plan for back taxes and insurance, they are far more likely now to have their home foreclosed on because of a strengthening of federal guidelines. The Post reports that part of the issue is that when the loans were initially given, the only requirement was the amount of equity in the home, and ultimately the loan money ran out and the homeowner was left unable to keep up with the taxes and insurance. Now, however, a full financial assessment is given before a reverse mortgage is approved. Still, the issue is a bleak one – it's estimated that 18 percent of loans approved between 2009 and 2016 will go into default this year.

There are, however, some safeguards. The Consumer Financial Protection Bureau closely watches loan and foreclosure practices by reverse mortgage companies. In 2015, they fined three companies for fraudulent claims made in order for the companies to more easily foreclose on homes owned by individuals with reverse mortgages.

This group, along with the Federal Administration on Aging and a few others, attempts to help the elderly, especially more vulnerable elderly groups such as those with diseases like Alzheimer's and dementia, avoid foreclosure. FAA, for example, offers free legal assistance for seniors to avoid foreclosure. The group sponsors legal aid offices in most jurisdictions that can be found on the Department of Health and Human Services website, as well as the Legal Services Corporation website. In addition, most locales also have local administrations on aging that offer assistance.

The elderly who are suffering from memory loss, dementia or Alzheimer's also have extra legal protection. It is illegal to serve foreclosure papers to an elderly individual who is suffering from any disease affecting memory, although the practice still sometimes exists. Instead, any sort of notice of foreclosure should be sent to someone handling the individual's affairs – usually a close relative or someone holding a power of attorney -- who can then decide whether to catch up the debt or allow the home to be sold.

Despite legal aid services for the elderly and laws protecting those with diseases, the number of senior citizens faced with foreclosure is alarmingly high. Unfortunately, that seems to be inevitable as those without savings and on fixed incomes cannot keep up with inflation and the rising, recurring costs of home ownership.