Nearly 1 Million 65+ homeowners at risk of foreclosure
It’s not a headline you’ll see in the national media. Over 900,000 homeowners 65 and older could be at risk of foreclosure. While evening news stories recount the struggles of millions of homeowners across all ages the CFPB looked closely at their mortgage data and more specifically which age groups are struggling to make their monthly mortgage payment.
The bureau’s latest data reveals some disturbing numbers. As of July 2021 about 682,400…
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…older homeowners were behind on their mortgage payments. Then there’s another 236,000 homeowners 65 and older who have no confidence…no confidence that they will be able to make their next month’s mortgage payment. Together, that’s nearly one-millions older homeowners at risk!
Non-white and older homeowners with annual incomes below $25,000 lead all groups struggling to stay current on their mortgage. Another prevailing trend of older households who are delinquent on their mortgage is they have three or more residents which increase the number of individuals who would be displayed in a foreclosure. Strangely, there appears to be a disconnect among those 682,000 plus older homeowners who are already behind on their mortgage. Only 12.2% of this group believe they are likely to face foreclosure. This group may be in for a rude awakening once eviction and foreclosure moratoriums end. What then?
Understandably, no one likes to openly discuss the fact they are at risk of foreclosure, especially older homeowners who often pride themselves on their independence. The challenge is how do we get in front of those at-risk homeowners who have substantial accumulated equity before it’s too late? Some reverse mortgage professionals are reaching out to their local banks and credit unions. Others are working with nonprofit organizations seniors often reach out to amid a financial crisis. As we’ve mentioned on this show, unfortunately, regardless of age, it is the homeowner with a significant equity position in their home who is likely to be foreclosed on promptly. It may seem heartless, but for the bank, it provides the means to recoup some money when foreclosure losses surge.
Television and media outlets are eager to cover stories related to the current housing and foreclosure crisis. Seizing upon that interest increases your odds of being a featured guest, columnist, or local expert. The message is simple. Older homeowners behind on their mortgage who have significant equity could find relief with a Home Equity Conversion Mortgage, and in some cases even generate additional monthly cash flow. To boost your credibility you could work alongside a local credit counselor or mortgage professional who can provide options for those who don’t have the equity to qualify for a reverse mortgage.
There’s not much that keeps me awake at night, but there’s one exception. The thought of hundreds of thousands of older homeowners losing their homes; some unnecessarily so because they had options that were never explored.
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3 Comments
The most effective form of consumer protection is AWARENESS. Thank you, Shannon and HECM World, for this critical message. It’s not the CFPB’s job to promote reverse mortgages. It’s our job to make sure everyone knows the HECM product is the aging-in-place solution for older Americans.
Thank you Dan!
My book “Why a Reverse Mortgage?” tells specific stories of how people in this group have been helped. I also have specific stories of people being forced from their home because they waited too long to get a Reverse Mortgage. Any Reverse Mortgage originator can get a loan done if the borrower contacts them when the first payment is about to be made late. It’s hard to help when the call comes a few days before the foreclosure sale date.
Few people understand that they can make optional payments on a Reverse Mortgage just like on a forward mortgage. If the Reverse Mortgage is in place when a crisis like Covid hits, the borrower can stop making payments, schedule monthly payments to the borrower, or take draws from the line of credit to get through the crisis, and then return to making payments when the crisis ends.
Unfortunately, FHA rules make it difficult to help some people. One example is a prospect who did a rate and term refinance in January 2021 to lower his payments because his business was slowing rapidly. Later this year, he realized a Reverse Mortgage would be helpful, but his refinance into a Reverse Mortgage was blocked because he received $900 cash back on the rate and term refinance. His business has gone to $0. His Social Security income is adequate to qualify for a HECM. A Reverse Mortgage would help. FHA doesn’t think he should be allowed to get a HECM within a year of the prior rate and term refinance. It’s an obvious case of FHA rules preventing a responsible borrower from being helped by a HECM.
If this borrower had taken time to understand his options, he could have had a HECM in place long before the Covid crisis. He could have been making payments on the HECM before the crisis. When the crisis hit, he could have stopped making payments or drawn on the line of credit. When business resumes, he could have returned to paying down the loan. He would not need forbearance any other government assistance.