Don’t Despair If You Fall Behind on House Payments

If you are older than 50 and in a mortgage jam, your choices for getting out are fewer and starker.

In Kansas City, one of the cities hardest hit with foreclosures, Elliott Clark does not want to become another statistic in the economic downturn. Clark, 58, left his longtime employer last year for a warehouse company that offered better promotion prospects. Then Clark lost that job in October. Clark and his wife, Aquilla, tried to get by on her income as a housecleaner, but they fell behind on the $965 monthly mortgage payments for the century-old home they’ve been fixing up since 1995.

“We even talked about doing a short sale, then looking for someplace to rent,” Clark said. “But the $400 or $500 we could afford won’t get anything you want to live in.”

The couple caught a break in March, when troubled loan specialist American Home Mortgage Servicing Inc. bought their mortgage and approached the Clarks with a deal. The company offered to reduce their mortgage to $421 a month immediately by cutting their 12 percent interest rate to 5 percent, then raising it incrementally to a capped 7.1 percent later.

There is a catch. Clark still needs a job to make the deal work, and finding one is difficult—even with hiring preferences for federal jobs that he was awarded for injuries he suffered as a Marine in Vietnam. “In this job market, I can’t even get a job cleaning floors at the VA,” he said.

Foreclosure papers were filed on more than 40,500 Missouri homes in 2008, reports RealtyTrac, an industry watcher. That’s 33 percent higher than a year earlier. An AARP Public Policy Institute study based on 2007 numbers near the beginning of the recession suggests that borrowers who are 50 or older are struggling more with troubled loans.

Kelly Edmiston, a senior economist at the Federal Reserve Bank, has been watching Kansas City area foreclosures spread from subprime-heavy inner cities into more affluent suburbs. She said growing numbers of today’s older homeowners are boomers who historically took on more debt than generations before them. They also tapped deeper into home equity for things such as home repairs or their children’s college costs, she said. Now, job losses or unexpectedly limited retirement incomes make it difficult to keep up with their payments and the cost of living. And being an older job hunter today is not for the faint-hearted, as Clark discovered.

Help is available for older borrowers in trouble, said Norma Collins, associate director for advocacy for AARP Missouri.

“The challenge is getting the word out that it is out there,” Collins said. “Many people have never seen times such as these before and don’t know where to turn.”

The United Way 2-1-1 information line in either Kansas City or St. Louis is a start. It links to more than a dozen organizations in each city that provide HUD-approved financial counseling, foreclosure counseling, job search assistance and other help. AARP Foundation’s Real Relief project provides similar help from a broader resource base, Collins said.

Lenders working through the HOPE NOW alliance have helped almost 60,000 Missouri borrowers in danger of foreclosure since its hotline opened in July 2007. HOPE NOW can be reached at 1-888-995-4673 toll-free.

Missouri legislators are looking at relief measures. State Sen. Jolie Justus, a Kansas City Democrat, has introduced a bill to increase funding for the Missouri Housing Trust Fund and allow more low-income Missourians to qualify for grants and other assistance. AARP supports the bill.

Gene Meyer, formerly of theWall Street Journaland theKansas City Star, has covered personal finance for nearly 20 years.