700,000 Retirees are Behind on Mortgages
In the second half of 2020, the number of retired homeowners who fell behind on their mortgage payments doubled to about 1 million per month.
By July of this year, it had dropped to 680,000 retirees. The federal Consumer Financial Protection Bureau (CFPB), which issued the report on homeowners over age 65, said about 12 percent of this population is vulnerable to imminent foreclosure and possibly homelessness. Some of the people who are having the hardest time paying their loans either have disabilities or are over 75.
But most of the retirees in the CFPB report are largely reliant on Social Security, so their income is stable. To understand why they’re having problems paying the mortgage requires reading the tea leaves in the CFPB report. More than half of the retirees with past due mortgages live with at least two other people, including children and teenagers.
Lower-income people in multigenerational households typically share the burden of paying their living expenses. If a retired homeowner’s adult family member lost a job because of the pandemic, the homeowner might not be getting the money she needs to pay the mortgage. The CFPB survey confirms this is occurring: more than a third of older homeowners who are behind on their mortgages said a family member was unemployed.
Many of the retirees who are struggling had less than $25,000 in retirement income or were people of color. The family members who live with them – presumably people of color – may have worked in lower-paid jobs, which bore the brunt of last year’s layoffs and reduced hours at work.
And it’s probably no coincidence that the spike in past due mortgages occurred during the long dry spell between the first pandemic relief check issued in the spring of 2020 to workers and retirees and the second round of checks early this year.
The media have paid a lot of attention to the several million renters who are in danger of being evicted if the CDC’s moratorium on evictions expires in October. Another housing crisis is unfolding more quietly among retired homeowners.
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One solution for at least some of these borrowers is an FHA insured HECM. Obtaining one sooner rather than later offers the most help. See my book “Why a Reverse Mortgage?” for a longer narrative.