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-year-old 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.
"Foolishly, like so many Americans, we used the house as a bank"
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.
In Las Vegas, Janet Snyder, struggling with a financial burden left by her late husband, is bracing for what happens if her lender proceeds with plans to evict her from her home in July.
"I'll live on the streets, I guess," she says ruefully, contemplating homelessness at age 74.
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 $88,000 from $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. The numbers are probably higher now, says Lori Trawinski, a director at the AARP's Public Policy Institute. And among homeowners 50 and older, foreclosure rates are highest for those 75 and up.
Foreclosures help explain why homeownership among those 50 to 64 dropped 5 percentage points to 75 percent from 2005 to 2013, according to Harvard University's Joint Center for Housing Studies.
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 $330,000 in the late 1980s. But he'd refinanced to pull out money to invest, swelling the mortgage to $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 in the recession or its aftermath. 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 to meet unexpected costs, help their children or go on spending sprees.
Ralph Kanz, 60, and Martha Lowe, 56, of Oakland bought too much house at the wrong time: They paid $487,000 for a home in Oakland, California, in 2005.
At the time, Lowe was making $51,000 at an environmental consultant. Kanz was experimenting in commercial fishing and earning around $10,000. Drawing on an inheritance, they made a down payment of $137,000 and took on a $350,000 mortgage.
They say they shouldn't have qualified for a loan that big. They alleged in an unsuccessful lawsuit against two mortgage firms and a title company that "someone" without their knowledge had inflated Lowe's income on the loan application to get the mortgage approved. (A court ruled in 2013 that "a reasonably prudent person" should have spotted "the alleged wrongdoing" in the application in 2005.)
Worse, the couple took on a dangerous mortgage: They had to pay only interest for 10 years. They would then be hit with bigger payments, including the principal, for the next 20. The bigger payments are set to begin in June.
In the meantime, Lowe contracted a rare disease and went on disability. They still hope to renegotiate the mortgage.
West Virginia natives Jim, 67, and LaRue Carnes, 63, moved to Sacramento, California, in 1978 and bought a house for $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 Carnes fell behind on mortgage payments. Three times, they dipped into their retirement savings to fend off foreclosure. Eventually, with a $25,000 grant from a state program, Keep Your Home California, they negotiated a new mortgage they could afford.
Still, they're still straining to meet the lower payments. Once a month, they eat a free breakfast at a church, bringing home bagels and fruit. They "never thought we would be partaking of such," LaRue says.
They've haven't gone on a vacation in years. When they want to see a movie — Jim is an entertainment writer — they attend discounted matinees.
Some retirees ran into trouble with reverse mortgages. These are loans against the equity in a home that provide cash but come due once the homeowners die or sell the house.
Problems can arise when only one spouse signs a reverse mortgage — in order to qualify for a bigger loan — and dies relatively soon. The lender can then demand repayment in full — and foreclose if it doesn't collect.
Janet Snyder, who gets by on a $1,215 monthly Social Security check, says she didn't even know that her husband, Theodore, had taken out a $225,000 reverse mortgage on their Las Vegas town house. When he died in 2010 at age 77, the bank wanted its money back and "would not talk to me," Janet says.
She's working with Christine Miller of the Legal Aid Center of Southern Nevada to try to keep her home. But unless they engineer a delay, "I have to move out by July 24," she says.
"I'm 74 years old... I don't know where I'm going to go from here."
When seniors seek to renegotiate mortgages they can't afford, lenders often refuse. One reason is that the elderly typically have less time to repay. And many are "just not going to have enough income to qualify for a new plan," says Brian Korte, a foreclosure lawyer in West Palm Beach, Florida.
Al and Saundra Karp bought their three-bedroom home in North Miami Beach, Florida, for $77,000 in 1980. Over the years, they refinanced, partly to pay down credit-card debt, and their mortgage swelled to $288,000.
Al, 86, 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 $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. And they've failed to persuade the bank to modify their mortgage and lower the $1,900 monthly payments.
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."