America’s seniors were once considered among the most financially secure, with retirement at the top of the agenda. By the time people reached their 50s and 60s, Social Security and pension payments kicked in, 30-year mortgages were paid off, and it was time to revel in the senior years.
The Great Recession has changed all that, as millions of older people nationwide are now carrying more mortgage debt than ever before. According to a recent analysis by AARP’s Public Policy Institute, 1.5 million Americans over the age 50 lost their homes to foreclosure between 2007 and 2011. The findings, which were based on nationwide data from 2007 through 2011, showed that age and race had no impact on results; no single group has been spared during these tough economic times.
According to the analysis, more than 3 million older Americans are currently at risk for losing their homes, and approximately 3.5 million home loans held by people over 50 are underwater, indicating the house is mortgaged for more than its value. Now seniors are not only at risk of losing money if they are required to sell their homes, but they also have no equity to draw upon in an emergency. AARP reported 600,000 loans held by people over 50 were in foreclosure and another 625,000 loans were considered delinquent by more than 90 days.
Causes of the Crisis
Older Americans are losing their homes as the result of a combination of issues: the rapid decline in home values, cuts in pensions and dwindling stock portfolios, along with the increase in cost of living and medical costs. At the end of the month, there typically isn’t any money left over for savings. The result is that 50 percent of households whose head is between 65 and 74 years old have no money saved in a retirement account, according to the Federal Reserve.
The AARP report indicated that homeownership may no longer be the American Dream for millions of older Americans. A home used to be viewed as shelter as well as an asset. The equity built up in a property could be used to fund large expenses. Now, with less equity and property appreciation, millions of older Americans have little sense of financial security, according to the report.
In light of the analysis, AARP’s Public Policy Institute has dubbed homeownership as the Nightmare on Main Street instead of the American Dream.
The mortgage and financial security crises are affecting more than the pocketbook, as the AARP Public Policy Institute study showed a connection between foreclosures and poor health in America.
One report used by the institute found that a particular neighborhood with a large number of foreclosures saw an increase in medical visits for mental health conditions, such as anxiety and suicide attempts. Local residents also experienced more cases of hypertension and other stress-related physical complaints.
Another study reviewed by the institute found a correlation between mortgage delinquencies and mental health impairments in people over 50. Those behind on payments were more likely to suffer from depressive symptoms. The study showed these individuals cut back their grocery bills and were not able to purchase the prescription drugs they needed to stay healthy.
Not only does the mortgage debt crisis affect the financial security of America’s elderly, but it has an effect on psychological and physical health as well.