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Foreclosing on seniors

By Al Norman

 My friend Bob is 73 years old. He lives alone with his dog Moxie in a small town in western Massachusetts. For all his adult life, Bob has worked as a builder and carpenter. When things were going well, Bob had a construction crew that could repair anything from roofs to basements. Bob can no longer climb up ladders, or exert himself. His gait is unsteady, and he has survived a bout of cancer that doctors said would kill him years ago. His income now is $16,000 a year from Social Security, which puts him about 133 percent over the federal poverty level.

But Bob is fighter. His latest battle is not about his health – it’s about a wealthy bank. Bob took out a mortgage loan with a bank in 2003. Over the years, his loan was bought and sold by several different companies, but now it is owned by the Bank of New York Mellon. This bank has around $1.3 trillion in assets under management. By that measure, Bob’s $153,000 loan seems trivial. But in late July, Bob was notified by a mortgage collector that his house was going to a foreclosure sale.

According to a 2012 report by AARP’s Public Policy Institute, mortgage debt has been increasing among older Americans. The study found that as of December 2011, 3.5 million older mortgage holders were “under water,” meaning they owed more than their homes were worth. 625,000 were 90 or more days delinquent on their loans. 600,000 were in foreclosure.

Homeowners age 75 and older showed the fastest rise in this kind of debt, and had a higher foreclosure rate (3.2 percent) than younger members of the 50-plus group. The foreclosure rate on prime loans in 2011 for older borrowers was 2.3 percent, 23 times higher than the 0.1 percent rate in 2007.

“More older Americans are carrying mortgage debt than in the past, and the amount of that debt is also increasing, leading to their worsening situation,” an AARP spokeswoman said. “It’s one thing if your housing value goes down in your 50s. It’s another thing if you’re 75. For some people, it’s not like you can go back to work.”

On July 31, Bob’s home went up for sale. Nobody bid enough to satisfy the Bank of New York Mellon, so they bought it themselves for $144,000. The story of Bob’s foreclosure made the front page of the local newspaper the next day. Bob had called the state’s Division of Banks for help, and a few days later, the bank’s mortgage collector, Shellpoint, sent a letter to the division announcing the July 1 sale had been rescinded. But Bob was not out of danger.

He called a staffer at Shellpoint’s “Loss Mitigation” department, who told Bob he had three options: 1) pay back his $153,000 loan in one lump sum; 2) pay it back in 12 monthly installments; or 3) pay the bank the 84 payments that were past due. None of these options were remotely feasible on Bob’s income. A fourth option was a “short sale,” by which the bank accepts a sale for something less than the appraised value of the home. “My main goal,” the man from Shellpoint said, “is to help you not go into foreclosure.”

But given these choices, in all likelihood Bob will go back into foreclosure, and if the bank of New York Mellon buys it again, they will eventually evict Bob, which could take several months. During that time, he can have legal aid to represent him in court, and he will have help finding an apartment.

The Bank of New York Mellon could probably let Bob live out his days in his home, and its shareholders would get his property in due time. They could give him a repayment rate that did not impoverish him further, but they won’t.

After ending his career, fighting off cancer, and now dealing with a bank foreclosure, Bob admitted to me, “I’m feeling pretty beat up.”

Al Norman is the executive director of Mass Home Care. He can be reached at info@masshomecare.org or at 978-502-3794.  

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