AARP Executive Vice President Nancy LeaMond today reacted with optimism to President Obama's proposal to stabilize the mortgage market and aid homeowners but urged the Administration to get behind Congressional nitiatives to change the bankruptcy code to allow judges to modify home mortgages. Following is her statement:
"The plan announced today by President Obama offers hope to homeowners at risk of foreclosure by both dedicating substantial resources to addressing the problem of mortgage foreclosures and approaching the problem from a variety of directions. Yet, while the foreclosure plan will help many homeowners protect their homes from foreclosure, it doesn't address all situations. It will still leave too many homeowners who are too far behind in payments, or whose incomes are severely reduced by loss of a job, with little recourse short of bankruptcy. This makes it even more important that the Administration become fully engaged in persuading Congress to enact Bankruptcy Code changes to allow judges to modify mortgages on primary residences in Chapter 13 proceedings.
AARP has consistently argued that we cannot address the broader economic crisis without first resolving the current foreclosure crisis. Families need help to stay in their homes, and communities need to be stabilized, before the economy can start growing again. AARP is frequently asked about our members who need to move and can't, who have lost investment savings and need to tap the equity in their homes, or who live in neighborhoods hit hard by foreclosures.
"Retired individuals, particularly those on a fixed income, and those nearing retirement, are especially vulnerable to the current volatile economic circumstances. Recent AARP research shows that homeowners age 50+ hold more than one of every four mortgages in delinquency or foreclosure and far greater numbers of older persons are carrying substantial mortgage debt into retirement. According to the recent AARP research ( http://www.aarp.org/research/credit-debt/mortgages/i9_mortgage.html).
Americans age 50 and over hold about 41 percent of all first mortgages.
More than 684,000 homeowners age 50 and over were either delinquent or in foreclosure at the end of 2007, representing 28 percent of delinquencies and foreclosures.
Homeowners age 50 and older with subprime first mortgage loans are nearly 17 times more likely to be in foreclosure than homeowners of the same age with prime loans; homeowners under age 50 were 13 times more likely to be in foreclosure with subprime loans.
Allowing bankruptcy judges to modify mortgages and provide sensible loan workouts that will be affordable and sustainable will save those most at risk of losing their homes.