Older Amer­i­cans buried by hous­ing debt


Al and Saun­dra Karp have found an un­con­ven­tional way to raise money and help save their Miami-area home from fore­clo­sure: They’re lining up gigs for their fam­ily jazz band.

They en­joy per­form­ing. But it isn’t ex­actly how Al, an 86-yearold Korean War vet, or Saun­dra, 76, had ex­pected to spend their re­tire­ment.

Of all the fi­nan­cial threats fac­ing Amer­i­cans of re­tire­ment age — out­liv­ing sav­ings, fall­ing for scams, pay­ing for long-term care — hous­ing isn’t sup­posed to be one. But af­ter a home-price col­lapse, the worst re­ces­sion since the 1930s and some calami­tous de­ci­sions to turn homes into cash ma­chines, mil­lions of them are strain­ing to make house pay­ments.

The con­se­quences can be se­vere. Re­tirees who use re­tire­ment money to pay hous­ing costs can face dis­as­ter if their health de­te­ri­o­rates or their sav­ings run short. They’re more likely to need help from the gov­ern­ment, char­i­ties or their chil­dren. Or they must keep work­ing deep into re­tire­ment.

“It’s a big prob­lem com­ing off the hous­ing bub­ble,” says Cary Stern­berg, who ad­vises se­niors on hous­ing is­sues in The Vil­lages, a Florida re­tire­ment com­mu­nity. “A grow­ing num­ber of se­niors are strug­gling with what to do about their home and their mort­gage and their re­tire­ment.”

The baby boom gen­er­a­tion was al­ready fac­ing a re­tire­ment crunch: Over the past two decades, em­ploy­ers have largely elim­i­nated tra­di­tional pen­sions, forc­ing work­ers to man­age their re­tire­ment sav­ings. Many boomers didn’t save enough, in­vested badly or raided their re­tire­ment ac­counts.

The Con­sumer Fi­nan­cial Pro­tec­tion Bureau’s Of­fice for Older Amer­i­cans says 30 per­cent of home­own­ers 65 and older (6.5 mil­lion peo­ple) were pay­ing a mort­gage in 2013, up from 22 per­cent in 2001. Fed­eral Re­serve num­bers show the share of peo­ple 75 and older car­ry­ing home loans jumped from 8 per­cent in 2001 to 21 per­cent in 2011.

What’s more, the me­dian mort­gage held by Amer­i­cans 65 and older has more than dou­bled since 2001 — to US$88,000 from US$43,400, the fi­nan­cial pro­tec­tion bureau says.

In mar­kets hit hard­est by the hous­ing bust, a sub­stan­tial share of older Amer­i­cans are stuck with mort­gages that ex­ceed their home’s value. In At­lanta, it’s 23 per­cent of home­own­ers 50 and older, ac­cord­ing to the real-es­tate re­search firm Zil­low. In Las Ve­gas, it’s 26 per­cent.

In the worst cases, hun­dreds of thou­sands of older Amer­i­cans have lost homes to fore­clo­sure. A 2012 study by the AARP found that 1.5 mil­lion Amer­i­cans 50 and older lost homes be­tween 2007 and 2011.

In mid-2010, Tod Lind­ner lost his ocean­front home in Cal­i­for­nia’s Marin County. He ran into trou­ble af­ter the fi­nance com­pany that em­ployed him was ac­quired and the new own­ers re­fused to pay him fees he thought he was owed and which he was count­ing on.

Lind­ner had bought the house for US$330,000 in the late 1980s. But he’d re­fi­nanced to pull out money to in­vest, swelling the mort­gage to US$680,000. Lind­ner tried to work out a mod­i­fied mort­gage, but his bank fore­closed in­stead. He and his wife sought bank­ruptcy pro­tec­tion, rented an apart­ment and slashed their spend­ing.

“At age 70, I just started work­ing for an­other com­pany” in bank­ing, Lind­ner says. “My plan would have been to re­tire.”

Se­niors fell into hous­ing trou­ble in vary­ing ways. Some lost jobs. Some over­paid for homes dur­ing the hous­ing boom, think­ing they could cash in later. Prices crashed in­stead. Some made un­wise de­ci­sions to re­fi­nance mort­gages and pull cash out of their homes to meet un­ex­pected costs, help their chil­dren or em­bark on spend­ing sprees.

Jim, 67, and LaRue Carnes, 63, moved to Sacra­mento, Cal­i­for­nia, in 1978 and bought a house for US$54,000. For 33 years, Jim worked as a news­pa­per re­porter and edi­tor. They re­fi­nanced their mort­gage sev­eral times and pulled money out of the house and took on higher mort­gage pay­ments. “Fool­ishly, like so many Amer­i­cans, we used the house as a bank,” LaRue says.

In 2011, Jim was laid off, and the cou­ple fell be­hind on mort­gage pay­ments. Three times, they dipped into re­tire­ment sav­ings to fend off fore­clo­sure. Even­tu­ally, with a US$25,000 grant from a state pro­gram, Keep Your Home Cal­i­for­nia, they ne­go­ti­ated a new mort­gage they could af­ford.

Still, they’re still strug­gling. Once a month, they eat free break­fast at a church, bring­ing home bagels and fruit. They “never thought we would be par­tak­ing of such,” LaRue says.

Al and Saun­dra Karp bought their three- bed­room home in North Miami Beach, Florida, for US$77,000 in 1980. They re­fi­nanced, partly to pay down credit-card debt, and their mort­gage swelled to US$288,000.

Al kept work­ing as a tax ac­coun­tant into his late 70s. But Alzheimer’s dis­ease forced him into re­tire­ment.

The cou­ple is get­ting by on about US$2,500 a month in So­cial Se­cu­rity and Vet­er­ans Ad­min­is­tra­tion benefits, plus food stamps and help from their two sons. They stopped pay­ing the mort­gage and are fight­ing fore­clo­sure in court.

To ease the stress and earn some cash, they per­form old mu­si­cal stan­dards as the Karp Fam­ily — Saun­dra on vo­cals, Al on sax, son Larry on key­boards.

“I’m try­ing des­per­ately to stay here,” Saun­dra says. As for Al: “He thinks the mort­gage is paid. He hasn’t got a clue.”


In this May 11 photo, Al Karp, left, plays the sax­o­phone as he re­hearses with his son Larry, cen­ter, and wife Saun­dra at their home in North Miami Beach, Florida. The trio per­forms old stan­dards lo­cally as the Karp Fam­ily to ease stress and help raise money to save their home from fore­clo­sure.

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