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Thelending institutionsaretaking advantage of senior citizens by squeezingtheir cash flowandpenalizingtheir kids by overchargingthem.
Adults over 65 years old account for more than 17% oftheU.S. population, or closeto58 million.They enjoy a higher level of credit score at an average of 750 as comparedtomillennials (age of about 26to41) averaging a 687 scoreandGen X (age 42toabout 57) averaging 706.
TheFICO score disparity indicates that seniors represent less riskandhavethedisciplineandfinancial responsibility of payingtheir bills on timeandmanagingtheir debt effectively – a 740 or above represents very goodandexceptional.
Over 63% of people over 65 have managed to pay off their mortgage. (iStock)
When it comestohome mortgages,their delinquency rate averages about 1.5% as comparedtomillennialsandGenX’s average of 2.4%. Baby boomersandthe65-plus represent a much more stableandsteady mindset with a more reliable employment track record (average employment duration of 10 years as comparedtotwo yearsandnine months for millennials.
MANY OLDER AMERICANS HAVING DIFFICULTY MANAGING DEBT, AARP SURVEY INDICATES
On average,they have less debt as comparedtoother age groupsandhave managedtoreduce that debt by 7.5% in less than a decade or so. Althoughtheseniors represent slightly over 17% of Americansthey hold closeto10% of outstanding mortgages intheUS.
Over 63% of people over 65 have managedtopay offtheir mortgage.Tomake matters worse, when seniors pay offtheir mortgages,they also lose any tax benefits from mortgage interest payments on any incomethey have!
Banks have strict lending qualifications, but penalizing seniors with higher interest rates is an unacceptable policy. (iStock)
Overall,the65-plusarea much better betandrepresent less risk thantheother age groups thataresubjectto”atwill” employmentandarealways a few weeks away from losingtheir so-called steady (W2) income. But that is notthewaythemortgage industry viewsthem.
Thefact is that “research shows that borrowers face higher rejection rates asthey age.”AccordingtoPhiladelphia Fed economist Natee Amornsiripanitch, “Overall,theresults suggest that older individuals systematically face higher barrierstomortgage access.” In simple words, seniorsarediscriminated against despite key indicators oftheir low-risk status.
MOST SENIORS IN AMERICAN CAN’T AFFORD NURSING HOMES OR ASSISTED LIVING, STUDY FINDS
Although a good number of seniors have savings, IRA accountsandhomes with value over 100% of whattheir mortgage is,theyareeither not abletoget a loan or havetopay a considerably higher ratetoget a loan. This situation defies logic. If seniorsareat higher risk becausethey don’t have a steady W2, why shouldthey be forcedtopay a higher monthly paymentandsuffer higher financial pressure?
If banks keep turning them away, seniors are left with one option that eats away at their home value. (iStock)
Bankshave strict lending qualifications, but penalizing seniors with higher interest rates is an unacceptable policy. Congress should preventbanksfrom continuingthese discriminatory lending practices that squeezethemiddle classandeatyounger generations’inheritance.Theadditional interest payments madetothebanksaredirectly taken from what parents can leavetheir kids.
I understand that seniors can’t be given a free pass for financial services based on “good deeds” alone, but something needstochange. Even if older adults can’t be given discounted loan rates,they should at least receivethesame treatment asyounger people taking onthesame financial burdens.
Ifbankskeep turningthem away, seniorsareleft with one option that eats away attheir home valueandwidensthewealth gap. Reverse mortgagesaretouted as a solution for seniors’ financial woes butthey never resolve systemic issues. If anything,they jeopardizethevalue of an older adult’s most precious asset.
Overall, the 65-plus are a much better bet and represent less financial risk than other age groups. (iStock)
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Atthebenefit ofthemortgage industry, wearediminishing senior wealth. Seniorsandyounger generations who plantoinheritthese properties both receivetheshort end ofthestick.
Addressing this crisis requires decisive action on multiple fronts. First, regulatory bodies liketheFDIC must amend regulationstomandate equitable lending practices, aligning loan allocation with demographic proportionstomitigate discriminatory practices.
Second,toensure that this happens, seniorsandtheir supporters must leveragetheir collective voting powertopressure Congress into enacting legislation that holdsbanksaccountable for rectifying this systemic injusticeandpreserving economic security.
Additional interest payments made to the banks are directly taken from what parents can leave their kids. (iStock)
Implementingthese reforms promises substantial economic contributions, a sustained increase in consumer spending,andlower dependence on government support programs.Today seniorsarepaying for over $1 trillion of mortgage value – every 1% of adjustment in unreasonable rate impositionswilldeliver closeto$10 billiontotheeconomy.
It’s timetoredesigntheflawed, ageist financial systemtoupholdtheprinciples of economic justice for all.
CLICK HERE TO READ MORE FROM SID MOHASSEB
Sid Mohasseb is a best-selling author, serial entrepreneur and investor, university professor, and a former KPMG managing director in charge of strategic innovation.
