Great credit, but she can't get a mortgage

Despite strong financial histories, many older Americans find it difficult to refinance due to lower mortality risks and lower retirement incomes.< /p>

At the end of 2019, Molly Stuart's contract ended at the community college where she worked. “Normally I would just find a new job, but then Covid came along,” she said. So she hit unemployment for a while, then retired.

In 2021, hoping to give herself some financial respite, she tried to refinance the three-bedroom ranch house she had purchased 18 years earlier on an acre of land in Sacramento County, California.

"I am a very good risk," said Ms Stuart, 60, a lawyer. She had a 30-year work history and a credit score above 800. Her remaining mortgage was $102,000, but she estimated the house was worth around $500,000. She had already paid off the mortgage on another house in Sacramento, which she was renting.

But her mortgage company denied her request. "I didn't qualify for a refinance because I didn't have enough income," she said. "It was extremely frustrating."

But not uncommon. Seniors have higher credit scores than any other age cohort, but recent studies have shown that they are much more likely to be rejected for most types of mortgages. This creates obstacles for older Americans hoping to renovate or upgrade their homes, or to extract equity in their homes as a buffer against medical expenses, widowhood or other crises.

A large portion of seniors' wealth is tied to real estate. Among homeowners aged 65 to 74, home equity accounted for about 47% of their net worth in 2019, according to federal data; among those over 75, it was 55%. Among black homeowners over 62, it made up nearly three-quarters of their net worth.

But a home isn't a financial asset, Lori noted Trawinski, director of finance and employment at the AARP Public Policy Institute in Washington. "It only becomes a financial asset if you take out a loan or sell it."

Getting this loan may be more difficult than homeowners expected.< p class="css-at9mc1 evys1bk0">In February, Natee Amornsiripanitch, an economist at the Federal Reserve Bank of Philadelphia, published an analysis of more than 9 million mortgage applications collected through the Home Mortgage Disclosure Act of 2018 to 2020. He found that rejection rates increased steadily with age, accelerating particularly for applicants over 70.

By focusing on refinance applications, it reported a rejection rate of 17.5% for all ages. But for those in their 60s, it was over 19%, and among those over 70, it was over 20% - statistically significant differences.

More , older applicants paid slightly higher interest rates when they took out refinances or new mortgages.

The study methodology controlled credit ratings and property types, as well as economic and demographic factors, said Alicia Munnell, director of Boston College's Center for Retirement Research, which republished Dr. Amornsiripanitch's work. “He looks at the well-off and the less well-off. Age is always a factor.

The federal Equal Credit Opportunity Act has long prohibited discrimination based on age, as well as race, color, religion, national origin, gender, marital status. status and receipt of public assistance income. Lenders are permitted to inquire about an applicant's age, but this information can only be legally used in limited circumstances.

Dr. Amornsi...