One retiree, 63, in Fort Lauderdale, Fla., who asked that his name be withheld, says he is hopeful about the settlement but is unsure how it will affect him.
He’s been in loan modification negotiations with his lender for more than a year because he won’t agree to the terms — a “teaser” fixed interest rate that increases over time, with a “super balloon” on the end of the mortgage “when we could least afford it.”
He and his wife are facing foreclosure, he says, because medical problems forced him into retirement. He could no longer afford his mortgage payments, which have a higher interest rate than current rates.
Rachel Goldberg, director of aging policy at B’nai B’rith, an advocacy organization that sponsors subsidized housing for low-income older adults, says older homeowners “aren’t discussed much in the foreclosure debate.” But foreclosure actions tend to hit them harder, because they have less time to recover from such a severe financial blow.
Moving into an assisted living, long-term care or retirement community is often predicated on the sale of a home. “The loss of value in property affects people’s ability to retire,” she says.
A share of the settlement would also go to states to set up housing counseling funds, legal services or other related programs. New rules for bank conduct when homeowners are in default would also go into effect.
“There’ve been other multistate settlements against the banking industry for bad origination and foreclosure practices, but this one is huge,” Ira Rheingold, executive director of the National Association of Consumer Advocates, says. The foreclosure “process was tainted because these servicers screwed it up, so there will be a remedy for those homeowners.”
The mortgage meltdown began in 2008, fueled by risky subprime mortgages that reset to rates the borrowers couldn’t afford. As the economy continued to sour and millions of people lost their jobs, the foreclosure crisis spread to people with traditional fixed-rate mortgages, including many who’d been in their homes for years.
Several economists have said that the settlement won’t likely push the housing market to recover sooner. But it could make it easier for distressed borrowers to hold on to their homes.
“We’ll still see a high rate of foreclosures,” says Dean Baker, codirector of the Center for Economic and Policy Research in Washington. “In some ways, it may speed it up because there were delays in the foreclosure process suit.”
Carole Fleck is a senior editor at AARP.org.
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