Bankruptcy Over 50 in Massachusetts
The AARP recently published the results of a study on the recent mortgage crisis and how it affected people in their target population: folks over 50. 80% of those people own a home. The study was undertaken with data from 2007 through 2011 and looked at information from across the country. They claim that it was the first study ever to measure the effect of the recent mortgage crisis on people over 50.
One result was determining that a much greater percentage of older Americans are carrying more mortgage debt than the perception might be. Between 2007 and 2011 over 1.5 million homes of older Americans were lost. The AAPR study determined that over three million people over 50 are currently in danger of losing their homes; 3.5 million homes were valued at less than the outstanding mortgage. Of those, 600,000 were already in foreclosure and an additional 625,000 were delinquent for over 90 days. These are the folks that often end up calling a Boston bankruptcy lawyer.
The numbers are even scarcer when analyzed on a year by year basis: in 2007, 1.1% of folks age 50 and over were seriously delinquent on their mortgages; in 2011, the rate was 6%, a 456% increase.
Who are these people who are under such economic stress? The study found that 53% of the foreclosures were against folks with incomes between $50,000 and $124,999. That is, the middle of America. Folks with incomes below $50,000 accounted for 32% of the foreclosures.
The problems with the above study, as it impacts on older Americans, is that in the new financial world we anticipate a three legged stool for retirement: Social Security, which, notwithstanding lots of negative media attention, is still a solid leg; a pension or 401k plan, which a great many folks have, and can protect in Massachusetts bankruptcy; and, a paid off home, the American dream. That leg was even used by some, in reverse mortgages, to live happily at home forever! Unfortunately, the mortgage crisis uncovered a dirty little secret: folks had been convinced that their homes would continue to skyrocket in value and they could take money out of their homes, by refinancing, and consume the money. And it was all gone. One leg of the stool, for millions of folks, is gone.
The study broke down the foreclosures between prime loans and subprime loans. As we have all come to know, prime loans are your grandfather’s type of loans: a loan by a lender that looks at your income and credit history and conservatively gives you a loan. Subprime, or non conforming loans, were the stuff of dreams in the middle of the last decade: money given to folks with low credit ratings or income and whose only hope was to refinance against soon because they could not, over time, pay the real costs of those loans. The AARP study found that the foreclosure problem was vast among the subprime market for their population – it went from 2.3% in 2007 to 12.9%.
Sadly, a separate study published by the Urban Institute found that the problem is deeper than some folks losing homes. Neighborhoods with increased foreclosures have higher mental health issues.