Nightmare on Main Street: Older Americans and the Mortgage ...

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AARP Public Policy Institute

E L E B R AT I N

years

Nightmare on Main Street: Older Americans and

the Mortgage Market Crisis

Lori A. Trawinski, Ph.D., CFP? AARP Public Policy Institute

Research Report

Nightmare on Main Street: Older Americans and

the Mortgage Market Crisis

Lori A. Trawinski, Ph.D., CFP? AARP Public Policy Institute

AARP's Public Policy Institute informs and stimulates public debate on the issues we face as we age. Through research, analysis and dialogue with the nation's leading experts, PPI promotes development of sound, creative policies to address our common need for economic security, health care, and quality of life. The views expressed herein are for information, debate, and discussion, and do not necessarily represent official policies of AARP.

#2012-08 August 2012 ?2012, AARP Reprinting with permission only AARP Public Policy Institute 601 E Street, NW, Washington, DC 20049

Acknowledgments The author would like to thank Susan Reinhard and Elizabeth Costle for their

direction and comments; Richard Deutsch, George Gaberlavage, Gary Koenig, Gerri Madrid-Davis, Vivian Vasallo, Rodney Harrell, and Jean Constantine-Davis for helpful suggestions and comments; Ari Houser and Carlos Figueiredo for statistical advice and assistance; Christena Schafale of Resources for Seniors for housing information; Kat Pearison of NeighborWorks America for data on housing counseling; and Nancy Vanden Houten, CFA of Stone & McCarthy Research Associates for insightful comments. The author is grateful for the support and guidance of staff at CoreLogic. The author is responsible for any errors that may remain in the report.

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Table of Contents

Acknowledgments .......................................................................................................... iv

Executive Summary ........................................................................................................1

Introduction...................................................................................................................... 3 More Older Americans Carry Mortgage Debt ..............................................................3 Foreclosure Affects More than Finances........................................................................4 Data and Methodology...................................................................................................5 Definitions ......................................................................................................................6

Results.............................................................................................................................. 7 Results for All Loans .....................................................................................................7 Results for Prime Loans.................................................................................................8 Results for Subprime Loans...........................................................................................9 Prime Loan Performance by Race/Ethnicity .................................................................9 Subprime Loan Performance by Race/Ethnicity..........................................................10 Foreclosures by Income Bracket..................................................................................12 Foreclosures by Income Bracket and Race/Ethnicity ..................................................13 Serious Delinquency by Origination Year ...................................................................14 Underwater Loans as of 2011 ......................................................................................15

Outlook ...........................................................................................................................15

Current Public Policy Programs .................................................................................17 Federal Programs ........................................................................................................17 State Attorneys General Foreclosure Settlement ........................................................18 Office of the Comptroller of the Currency Foreclosure Review .................................19

Policy Solutions.............................................................................................................20 Increase the Use of Principal Reduction as a Modification Tool .................................20 Consider Mediation Programs ....................................................................................20 Return Real Estate-Owned Properties to Use ..............................................................21 Set Mortgage Loan Servicing Standards that Apply to All Servicers .........................21 Expand Access to Housing Counseling ......................................................................22 Prevent Foreclosure Scams ..........................................................................................22 Expand Legal Assistance to Homeowners ...................................................................22 Develop Housing Assistance Programs for Older Americans ....................................23 Develop Short-term Financial Assistance Programs....................................................23

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