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Seniors' mortgage challenges examined by CFPB
WASHINGTON (5/8/14)--The Consumer Financial Protection Bureau released a report Wednesday spotlighting the mortgage debt challenges faced by a growing number of older Americans. These challenges include more mortgage debt, less affordable housing and a greater risk of foreclosure.
 
"A home can be a place of security for older Americans in their retirement years--a roof over their heads as well as a valuable asset," said CFPB Director Richard Cordray. "But as more seniors carry significant mortgages into retirement, they put themselves at risk of losing their nest eggs and their homes."
 
Approximately 80% of the 41 million Americans age 65 and older own their home, the highest homeownership rate among all age groups. But while their rate of homeownership has remained constant over the last decade, the percent of older homeowners holding mortgages has increased.
 
The report's highlights include:
  • More senior homeowners with mortgages: For homeowners age 65 and older, the percentage carrying mortgage debt increased to 30% from 22% from 2001 to 2011. Among those aged 75 and older, the rate more than doubled during that same time period, to 21.2% from 8.4%.
     
  • Median mortgage debt for seniors increased by 82%: From 2001 to 2011, the median amount older homeowners owed on mortgages increased 82% from about $43,300 to $79,000. In addition to carrying increased mortgage debt, many older Americans have also accrued less home equity than their age group did a decade ago.
     
  • Less affordable housing: More than half of the 4.4 million retired homeowners with mortgage debt spend 30% or more of their household income in housing related costs. Housing affordability is threatened when housing costs exceed 30% or more of a homeowner's income.
     
  • Senior delinquency and foreclosure rates increased after financial crisis: From 2007 to 2011, the percentage of homeowners age 65 to 74 who were seriously delinquent in paying their mortgage, meaning more than 90 days late or in foreclosure, increased to 4.96% from 0.85%. For those over 75, it increased to 5.87% from 1.01%. Older consumers have greater difficulty recovering from foreclosure than their younger counterparts due to their increased incidences of health problems, cognitive impairment and difficulties returning to the work force.
The CFPB also issued an advisory highlighting three issues that older Americans should consider while managing mortgage debt in retirement: determining their mortgage pay-off date, the risks of getting home equity loans or refinancing and what less income during retirement will mean while still paying a mortgage.
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