Visionary Home Builders of California

A surprising yet disturbing trend is taking hold of the industry, which is that senior’s are also being affected by the housing crisis and in many cases becoming the biggest targets for “rescue scammers”. Most research and news related to foreclosure often focuses on the racial and socio-economic factors and overlooks age, especially older age. In many respects the notion of seniors being strongly affected by foreclosure almost seems baffling due to the widely held assumption that many of those who own homes have built up substantial equity, and purchased before the housing boom and advent of exotic subprime mortgages. But, when one factors in other conditions such as rising costs of living, increasing medical expenses and the fact that their substantial equity may render them vulnerable makes the current state of affairs seem logical. Recently the issue has been addressed by the AARP which released an unprecedented report describing the effects of the foreclosure crisis on seniors. The U.S. Senate’s Committee on Aging also held a hearing in February of 2008 examining the effects of foreclosure on seniors. The purpose of this article is to raise awareness and inform seniors and all those who are interested in this issue in order to help mitigate the problem.

In a panel hosted by the AARP, William Apgar of Harvard’s Joint Center for Housing Studies gave an explanation of how the housing crisis affects seniors by stating the following:

“We can make it seem like this is the result of reckless behavior, but it’s the result of thousands of little decisions to take a little bit more loan out to pay for the kids education, to cover a health bill, to deal with the fact that housing costs are high relative to income. It’s a reflection of the failure to deal seriously with our housing affordability issues”.

The fact is that seniors are being equally affected by rising costs and the effects of a slow economy as are other groups, so like others they are finding themselves in the same dire circumstances. But unlike younger more able bodied individuals many seniors can only count on retirement savings or social security as their only sources of income. In an article for Consumer Affairs Diane DiDonato claims that Seniors have become a primary target for predatory lenders due to the substantial equity many have in their owns and also the fact that rising expenses have left many in need of cash. According to DiDonato these circumstances have led many predatory lenders to target seniors in order to convince them to borrow lots of money on their property or to refinance into exotic sub-prime loans.

Another area of concern is related to the fact that a large percentage of seniors facing foreclosure are more likely to be minorities with subprime loans. This phenomenon related to race, predatory lending and foreclosure seems to be a key component in the collapse of the housing market. Most research and findings all seem to focus on young minority first time home buyers as the main victims of subprime loans and foreclosure. Additionally the media seems to portray the victims of subprime loans and foreclosure as irresponsible home buyers who went in over their head. Perhaps in some cases it is true that those who resorted to subprime loans and purchased homes at artificially inflated prices did go in over their head, but according to the AARP many elderly minority home buyers and home owners were aggressively targeted and sought out by predatory lenders. In fact according to the AARP African Americans over the age of 50 represent 14% of foreclosure of cases in their age group and Latinos over 50 represent 16% of foreclosures in their age group. Furthermore the study also demonstrates that combined, African Americans and Latinos over the age of 50 have a foreclosure rate of 0.51% compared to a rate of 0.19% for Whites.

Most troubling, and perhaps disturbing, component of this phenomenon is that so called mortgage consultants (mortgage scammers) are becoming aware of the situation and taking advantage of one the most vulnerable groups in society. During Senate Testimony on seniors and foreclosure, Special Committee on Aging Chairman Senator Herb Kohl (D-WI) stated:

“seniors are particularly vulnerable to rescue scams because many of them are on fixed income and rely on the equity of their homes as their primary financial asset. They are particularly attractive to financial predators because they tend to have a larger amount of equity in their homes.”

A primary cause for this phenomenon seems to lie in the fact that mortgage terms and documents are often very complicated and difficult to understand. Rachel Dollar who testified before the Senate mentions in her testimony that in this situation seniors are at the mercy of often aggressive mortgage brokers who push seniors into less than favorable loans. Additionally, outright fraud is being committed against seniors who have faced foreclosure or are on the brink of facing foreclosure. Often times scammers contact senior homeowners facing financial difficulties and promise to take care of the situation. During Senate testimony it was described that these scammers then collect money or sometimes have the title of the house transferred to the scammer’s name.  In the end, these scammers often take the victims money or make the situation worse than it was before.

Seniors have always been considered vulnerable segment of society, we often hear of seniors being taken advantage of or scammed in one way or another. But we also think of seniors as responsible homeowners who are enjoying their golden years oblivious and immune to the problems many younger people face. Unfortunately this unprecedented housing crisis seems to have shaken our perception by affecting just about every segment of society, wreaking havoc on society as a whole. It is unfortunate that rising costs of living are forcing many elderly homeowners to seek out additional money only to be taken advantage by unscrupulous lenders who make their already difficult situation even worse. Of course the most favorable solution would be to find these unscrupulous individuals and scammers and banish them from the face of the Earth, but is not very realistic. Instead a realistic solution would be for all of us, seniors included to become fully aware and educated in order to avoid these problems. For this reason, it’s imperative for anyone considering purchasing a home, refinancing, borrowing, or going through foreclosure to take advantage of the services offered by HUD approved housing counseling agencies.