In my discussions with Baby Boomers who have lost their jobs (and see no new jobs on the horizon) or those coming up on retirement, several trends are starting to emerge:

• Boomers are concerned about having a roof over their heads.  Those who are upside down on their mortgages are implementing strategies to safely reposition them selves into more affordable housing.  A popular approach is to accomplish a short sales on their existing home, claiming inadequate income and looming retirement as hardships.  The, while getting a government backed loan is difficult (for two years after a short sale), there are lenders out there who will still provide home loans if you have good credit.  Other Boomers are renting their homes out if they can achieve a break-even situation, then buying a new, more affordable dwelling after six months or so.  After that, if the rental runs into trouble, they can either do a short sale or let it go into foreclosure.  Sure, their credit will take a hit, but they already have an affordable roof over their heads.  Others who are hopelessly under water on their mortgages and lack good credit because their cards have been run up while they were trying to find a job or means to salvage their home, are doing deeds in lieu of foreclosure or just mailing in the keys.  To them, it is raw survival. 
• Most Baby Boomers I know are not fully retiring.  They can't afford to.  They need supplemental income.  Hence, they are searching for ideas for a home-based business, the most popular ones being Internet based.  Yet they also want a flexible schedule to be able to enjoy day-time activities, such as club meetings or golf.

Chances are that these trends are recognizable to you.  Just wanted to let you know that you are not alone out there, even though sometimes it feels like it.  Do what you have to, my friends, because no one is coming to save the Boomers who have been hardest hit by the recession.

        

Among other things, I am an active real estate broker in California.  Friends often ask me if I believe the real estate market plunge has bottomed out and a recovery is underway?  Unfortunately, "No."  It has a long ways to go, and this is good and bad news for Baby Boomers coming up on retirement.

According to the Mortgage Banker’s Association, the current delinquency rate for all mortgages is 14 percent.  Since government programs to assist homeowners facing foreclosure have been a major failure, one can expect most of these properties to become either foreclosures or short sales.  Combined with a continued high unemployment rates, this is bad news for recovery from the lingering recession.  And the situation is further compounded by actions taken by secondary market giants like FNMA and FHA, who remain intent on punishing those who walk away from underwater properties, do short sales or experience a foreclosure.  By excluding them from the pool of future buyers for 2-7 years, they are dramatically reducing the population of available buyers and prolonging the housing market slump.

So, the bad news for Baby Boomers is that if you live in the most affected states - California, Michigan, Nevada, Arizona and Florida - where coincidentally unemployment rates are also the highest, it will probably be difficult to sell your home for several years unless you heavily discount it.  The good news is that retiring Boomers from other areas have an unprecedented opportunity over the next few years to pick up attractive retirement homes in sunny states at amazing prices!  So regardless of which side the fence you fall, this is a call to action.

Even if you live in an area where homes are possibly experiencing sales activity, values will probably never climb back to what they were just a few years ago.  With many Boomers wishing to downsize for retirement, the time to be looking for a bargain is over the next year or so while there is a large inventory of low-priced homes flooding the market and interest rates are at record lows. And if you are upside-down on your mortgage in one of the states mentioned above, don't hold out hope that things will soon get better.  Explore your options, talk to an attorney or knowledgeable Realtor, and do what you must to stop throwing potential retirement funds down a black hole.

        

Either through retirement or because their job evaporated, Baby Boomers are becoming entrepreneurs and their medium of choice is the Internet.  Why?  Because less resources are necessary to get started and a worldwide audience awaits.  But don't be fooled - it still takes a lot of planning, hard work and expertise to be successful.

Starting an Internet-based operation offers Boomers the chance to take their "great idea" and turn it into a profitable business.  But don't expect overnight success.  It takes as much time and as much work to create a successful Internet business as it does to launch a "brick and mortar" equivalent.  Plus, one additional piece of expertise is required - an understanding of how Internet marketing works and what it takes to gain online visibility among a target audience.

I would say that 95 percent of all newly launched online businesses are doomed to failure.  People put up a canned Website and wait for the business orders to show up in their email.  Months go by and nothing happens.  They can't understand it and are at a loss about what to do next.

Here is some advice for new Baby Boomer entrepreneurs:

• Before spending any money, do your homework first and give your "great idea" a sanity check by subjecting it to the rigors of a business plan.  For those who do not understand how a business plan screens ideas for feasibility, click here  for a free guide.
• If you have not mastered the technical aspects of gaining Internet visibility, hire an expert to help you.  Otherwise, your Website will not show up within the first three pages of Google, Yahoo or MSN Bing when someone searches for your product or service.  For all practical purposes, the only people who will even know your site exists are those to whom you directly communicate your site address.  Otherwise, your business will remain invisible on the Internet.
• Being successful with an Internet business requires continuous work.  Your site must be frequently updated and constantly promoted via a variety of online avenues.  This requires money, time and effort.  Again, if you are not an Internet guru, hire one to relieve yourself of this burden so that you can focus on running your business.

A word of caution.  There are countless schemes appearing that offer Boomers turnkey solutions to running their own Internet business.  They contain gushing endorsements from other Boomers who have enjoyed overnight success and become wealthy while working part-time.  Do yourself a favor and thoroughly check these out before giving money to anyone.  Many of them are multi-level marketing schemes.  Others fail to disclose that you will be entering a saturated market or that members actually compete against one another on the Internet.  Usually, just googling the outfit will turn up any negative feedback from dissatisfied customers.  Checking them out with the Better Business Bureau is also a good idea.  If it sounds too good to be true, it usually is. 

The key to Internet business success is to leverage the wisdom and experience you gained during your own career.  Don't rush into something.  Take your time and thoroughly evaluate opportunities.  And be committed once you make the decision to proceed.  Expect it to take time and hard work.  Set out benchmarks to gauge your progress.  Celebrate your successes and adapt accordingly when you discover that something isn't working.  If your "great idea" is solid, eventually you will enjoy the fruits of your labor. 

Managing your own Internet-based business your home office is an exciting way for Baby Boomer entrepreneurs to supplement their income and remain engaged in the business world.  It can be a part-time or full-time endeavor - you set your own pace.  Ultimately, you may even create an online enterprise that can be profitably sold when you feel ready to fully retire or explore other opportunities.

        

As the Memorial Day weekend and the unofficial kick-off of summer approaches, my thoughts turn to those - past and present - who serve our country in uniform.  In reality, there is only a small percentage of American citizens who have served in the military, and an even small percentage that have experienced combat.  Many have paid with their lives and I hope everyone takes a few moments this weekend to at least acknowledge that some gave the ultimate sacrifice so that we could drink beer and eat hot dogs at our barbecues.

Like many Baby Boomers, I just have to close my eyes to remember a very long year in Vietnam.  After a while, Vietnam was all there was; the "world" (i.e., the life we left in the U.S.) seemed like a dream.  I think any of us would have given everything just to have one day with our loved ones again.  A year can go by very slowly.  At the end, I'm not sure how sane any of us were.  I know coming home was like Christmas and Thanksgiving all rolled into one.  But when I got back, it didn't seem right either.  It took awhile to adjust.  I had changed in many ways.

Today, I think of all the young men and women serving their third or fourth tour in the Iraq or Afghanistan.  Do you think they have changed?  I guarantee you they see the world through a different lens than you do. 

In these wars without end and likely no pay-off, we no longer equally share the burden.  Unlike WWII where everybody served and sacrificed, Vietnam was full of deferments for students, the rich and the politically connected.  Now, we have an "all volunteer" military, which really means that it is mostly comprised of blue-collar kids who see the military as their path to get a leg up in world.  The rest of us hardly know there are wars going on.  When was the last time you really gave thought to what it must be like for these young people everyday in the deserts of Iraq or Afghanistan?  Have you had to sacrifice ANYTHING during the last eight years to keep these wars going?!

The military brass and politicians love our "all volunteer" force.  They don't have to put up with questions from the ranks as they did in Vietnam.  It allows them to do things that they could not otherwise get away with, such as playing world cop and launching optional wars to gain rights to oil fields.  After all, it's not their sons and daughters who are fighting and dying.  Remember that what really forced an end to the Vietnam war was an overwhelming outcry from the streets.  Hear the silence out there now?

But it's not just pushing the burden off on the poor within our society that worries me.  What bothers me is that we are actually creating two classes of citizens.  The majority have not had to give up anything over the past eight years.  The minority - blue collar kids - have sacrificed over and over again.  What happens when they get tired and disillusioned?  Will some perhaps use their hard-earned combat skills against the government they feel has abused their service?

There is a solution to this splintered society we are creating.  I support a required National Service for all young men and women during the first two years after graduating from high school.  No exceptions.  It can be military, Peace Corps, or another sanctioned service.  Everyone gives something back to the country, and in doing so shares a common experience that creates a bond among themselves and among generations.  It provides young people with a sense of dedication, loyalty, pride and commitment while they mature into adults.  They will carry away an understanding of what it means to be an American and that personal involvement is necessary to keep our liberties alive.  

But I doubt anyone will dwell on this over the Memorial Day weekend.  Most will just remain blissfully content in their own little bubble worlds. I, for one, will hoist a cold one to salute those souls who make our revelry possible.  I wish they could be here to share it with us.  They deserve it; they have earned the right.

        

The major joy of retiring for Baby Boomers is not the anticipation of sitting around and watching TV for the rest of our lives.  No, most Boomers will still be involved in something. For example, many will start home businesses, perform volunteer work, enjoy recreational activities or even work part-time.  The main thing retiring Boomers look forward to is finally having control over how they spend their time each and every day.

For Boomers who have worked all their adult lives, this is a great luxury.  After "retirement," they can sleep pass 6 AM if they want.  They can meet friends for coffee at 10 AM, then take a walk along the beach and spend the afternoon reading a good book if they want.  Or, they may work out of their home office for a few hours on an Internet-based business they started, then knock off early for afternoon golf.  If you have been employed for 30 or more years, then you know how wonderful it is to have complete control over how you spend your time every day.

That's why retirement is so important to Boomers - we simply want to enjoy the luxury of controlling how we spend our remaining years.  And for that freedom, most Boomers are willing to accept a down-sized retirement if necessary. 

Our BabyBoomerlifeboat.com website shows Boomers that comfortable retirement is still possible despite being hurt by the "Great Recession."  It just requires learning how to stretch your remaining dollars and revamping your retirement plan to be compatible with today's economic realities.  For most Boomers, this is a small price to pay for the freedom of gaining complete control of our lives and making the most of every day.

        

Fannie Mae has just issued new guidelines for the length of time you have to wait after a short sale or deed-in-lieu-of-foreclosure before you can get a new loan.  Basically, the amount of time has decreased, which makes these options more attractive to Boomers who are struggling with an upside-down mortgage.  Here's the details:

• A "short sale" occurs when the lender(s) agree to take less than full loan payoff, allowing you to sell at a market value which is less than the loan amount.  Under the new Fannie Mae guidelines, you now only have to wait two years(was three-plus years, depending on circumstances) before acquiring a new loan is possible.  But you must come in with 20 percent down.  If you wait four years, a 90% loan-to-value purchase is possible.  A seven year wait is required to enjoy a low (3% down) loan.
• A "deed in lieu of foreclosure" is when the lender agrees to accept keys (i.e., your deed) back and forego foreclosure.  Yea, good luck on this one!  But if you can pull it off, you now only have to wait two years until getting a new loan under the same guidelines described above.

Generally speaking, this is good news for Boomers, especially since lenders are now expediting the short sale process.  If you are hopelessly upside-down on your mortgage, it now makes sense to try a short sale IF you can get a waiver for all loan balances for the property.  Then, after renting for two years while maintaining a good credit record, you can purchase a retirement home.  And don't worry, there are still going to be good real estate bargains two years from now.

Short selling is a much better solution for Boomers than "walking away" from your home or letting it go into foreclosure.  Just be sure to talk to an experienced Realtor and bounce everything off a tax attorney before proceeding.

I don't know of any lenders accepting a "deed in lieu of foreclosure," and I am an active Broker with good information sources.  So don't get your hopes on this one.

        

Perhaps you caught the Sixty Minutes segment on "Mortgages: Walking Away" last night.  If you didn't, click here  to view it!  It's all the buzz today, like letting a dirty little secret out of the closet.  The head of the FHA is outraged, as are lenders, at Americans taking the situation into their own hands.  This despite the fact that the banks we bailed out with taxpayer money walk away from their financial obligations all the time!  Yet, they are appalled at homeowners who do it and gripe that their mighty fury is unfortunately legally limited in non-recourse states.

Speaking for the Baby Boomer generation, I say "F#*k You!"  What the segment failed to point out is that these lenders offer no alternative to those underwater on their mortgage.  Their united answer is "Keep paying even though the value of your home has decreased by 50 percent or more or we'll foreclose!"  More and more, the answer is "OK, suit yourself."

All the lenders (who more than helped to create the situation and had no problem accepting aid when it was their ass in the fire) have to do to halt the growing trend of strategic foreclosures is to accept that we are in a new reality and they must be realistic.  If lenders agreed to accept properties at their current market and recast mortgages accordingly, the "walk away" stampede would be stopped in its tracks.  And this is so much better financially for lenders than going through foreclosure, fixing up a property and then eventually selling it at a price that is probably going to wind up being less than if they have simply revalued the property months ago. But no, their message continues to be "Do as I say, not as I do."

Some of my Realtor friends believe it's terrible to walk away from your home. They point out that short sales are a better answer than having a foreclosure on your credit record.  Maybe, maybe not.  Don't forget, lenders can still come after you in recourse states and any home owner that has a second (home equity) loan is sure to hear from bill collectors and the IRS.

It's sad, but more and more people outside the bubble world of Washington, D.C. - or the lofty bonus atmosphere where lending executives dwell - are doing the math and taking control of the situation themselves.  "Walking away" from a hopelessly upside-down home or declaring bankruptcy is fast becoming a smart economic decision for Boomers hard hit by the recession who just don't have the time or money to sit out a long-term recovery.  There is now even a Website  to help those who decide that continuing to throw good money after bad just doesn't make sense.

Perhaps if this trend becomes large enough, the government will be forced to "forgive" foreclosures.  Otherwise, a sizable portion of the country will be excluded from becoming future buyers, which would only exacerbate the downward spiral in real estate values.

Apparently, no one is going to bail out under water homeowners and especially the Boomer generation.  You do what you have to do and then move on.  We're on our own.

        

Baby Boomer homeowners who are “upside down” in their mortgages face tough choices.  Their home equity evaporated when the recession hit, and now they owe more on the property than it is worth.  Perhaps they have lost their jobs too. Probably their savings have been reduced.  They look around the neighborhood and see that properties similar to theirs are selling at two-thirds or even less of their mortgage amount.  What action should they take?  What are their alternatives?

 

This is not an unusual situation.  The percentage of Baby Boomer homeowners who are upside down on their mortgages varies by area, but is as high as fifty percent in some locations.  Moreover, millions of homeowners have lost their jobs or suffered a medical setback that aggravates the effects of the recession.

 

So what choices do upside-down Baby Boomer homeowners have?  Quite a few as it turns out and all have consequences.  For those who find themselves in this position, here are the major alternatives:

 

1. Do nothing.  If you can afford it or if your loan balance is really low, continue to make your house payments and hope the real estate market bounces back.  Just be sure to research the expected appreciation (or further decline) in home values within your local community.  Some areas in California, Nevada, Arizona and Florida, for example, may take up to ten years or more to recover home values to pre-recession levels.  But if you love your home and have the financial means (or a low loan balance), this may not a problem.

 

2. Rent your home out.  If it can’t be sold, then perhaps your local rental market will support leasing your home out for the immediate future, allowing you to rent another home somewhere else that is more affordable.  If you can get rental payments on your current dwelling that cover the principal, interest, insurance and taxes, this makes sense.  You may even be able to reap a profit from renting your home out.  Meanwhile, this tactic buys time to last out the recession and see what happens to the housing market.  After a year or so, with demonstrated rental income under a written contract, you can even apply for a loan to buy a new home at today’s discounted value and perhaps in a less expensive area.

 

3. Get a loan modification.  In some cases where there are validated extenuating circumstances (job loss, illness, etc.), lenders may offer to refinance or recast your loan to reduce payments.  The government encourages this through special programs, but it is voluntary for lenders to participate.  It hasn’t been that successful, depending on the lender’s policies and preferences.  If you want to try this, you are better off working with an experienced attorney rather than approaching the lender yourself.

 

4. Walk away.  “Strategic defaults” are becoming more common as the recession lingers.  Some economists even say a “deed in lieu of” or simply mailing your house keys to the lender makes the most sense for those that are in dire financial straits or whose property is hopelessly upside down with little prospect of ever recovering its former market value. Why throw good money after bad?  Just treat your home as a bad investment and take the same action big business and banks do – give it back to the lender!  But realize that this action will negatively impact your credit and prevent you from obtaining a new home loan for up to seven years.

 

5. Let your home go into foreclosure.  Actually this is a good choice for some situations.  If you have lost your job and are experiencing financial difficulties, some experts advise stopping making house payments and let your property be foreclosed.  In many cases, it can take one-to-two years for the lender(s) to actually complete the foreclosure process because they already have a huge inventory of troubled properties they are dealing with.  Meanwhile, you live rent-free and can save up money to get back on your feet.  Lenders also prefer to have the homeowner living in the property during this time so that it is maintained.  Your credit score, however, is hit hard by this action and it will be 5-7 years before you can get another home loan.  But if you don’t have the money, who cares?!  And maybe Congress or one of the major lending agencies (FHA, etc.) will institute new policies down the road that “forgive” foreclosures sooner so that the housing market can expedite recovery.

 

6. Do a short sale.  In this case, the lender(s) must agree to accept a lesser pay-off on the outstanding loan(s) on your property.  In essence, they acknowledge that the current market value of your home is less than the amount of the loan(s) and decide to get what they can out of the deal.  Lenders are becoming more amenable to short sales because it turns out to be less costly than foreclosing.  And some lenders are instituting policies of responding with acceptable sale prices within 10 days of inquiry to expedite what has been a lengthy short sale process.  Moreover, home lending agency policies are now recognizing the need to get short-sale homeowners back into the housing market sooner, so after two years former homeowners can now apply again for home loans.  But your credit score will take a hit, with the magnitude dependent upon how you handle home payments during the short sale process.  And if you have a second mortgage or home equity loan, be sure to get a written release for the balance.  Otherwise, the second lender can get a deficiency judgment or sell the loan balance to a collection agency who will hound you for years!   In any case, you will owe taxes on that portion of the home equity loan not used to directly upgrade or repair your home.

 

7. Declare bankruptcy.  If things have really piled on and you are in a financial mess, declaring bankruptcy is probably the best way to go.  Just remember, you have to prove your inability to regain solvency without a new financial start.  But bankruptcy is a much better alternative than attempting to stay afloat on an upside-down home or doing a short sale where bill collectors (and perhaps the IRS) may still pursue you afterwards.

 

Note that the federal government has instituted mortgage relief laws so that you don’t get hit with a huge tax burden if your home goes into foreclosure or experiences a short sale.  Many states have done the same for state taxes.  However, these only apply to the first mortgage.  Seconds and home equity loans present a trickier tax situation that can result in a nasty surprise once a foreclosure or short sale transaction is completed.

 

Each alternative requires careful research and evaluation before taking action.  Boomers are encouraged to explore their options with knowledgeable real estate agents, mortgage lenders, CPAs or attorneys before doing anything.  Confirm feasible options for your unique situation and possible ramifications.  It is recommended, however, that you do not approach your lender(s) first, as this may set off unforeseen consequences.

 

Finally, upside-down homeowners pursuing any alternative experience stress and emotional pressure.  It is advisable to take a long-term perspective and formulate a “life plan” to implement after the current unpleasant situation is resolved.  Getting through difficult times is easier if you have something to look forward to.

        

I have noticed a surge in Boomer online activity during the past months.  Boomers are finding it difficult (if not impossible) to get a new job after being laid off, downsized or simply having their employer close up shop.  Some might go into a stupor, bemoaning their situation and languishing in self pity at their prospects.  Not Boomers!

I am pleased to see that our generation is exploring new avenues to not only survive but make meaningful contributions to other Boomers and society.  Sharing vital information, offering services and in general lending a helping hand are typical of the Boomer Websites springing up on the Internet.  Just visit  www.BabyBoomerLifeboat.com to see the wealth of sites available to help Boomers with almost any situation.

Our generation are survivors.  We don't lie down and give up.  We use our experience, professional knowledge and initiative to come up with new game plans.  We re active, engaged people.  And we are re-defining the meaning of "retirement."

        

For Baby Boomers who are upside-down on their home mortgage(s) and trying to decide what to do, one question is "How does a short sale or foreclosure affect my credit score?"  This article just came out today and gives you a pretty good idea:

How Delinquencies Impair Credit Scores

Fair Isaac, which developed FICO scores, used a comparison between two people to explain how mortgage delinquencies affect credit scores.

Fair Isaac derived these numbers from a theoretical calculation based on hypothetical borrowers – one with an initial score of 680 and one with an initial score of 780. FICO scores range from 300 to 850.

The hypothetical person behind the 680 score had six credit accounts, while the person with the 780 score had 10. The consumer with the 780 score had no missed payments other than the mortgage; the 680 example had two late payments before they failed to pay the mortgage.

After a mortgage delinquency, the two scores would look like this:

• After 30-day delinquency, 680 score drops to 620 to 640; 780 score declines to 670 to 690.

• After 90-day delinquency, 680 score falls to 595 to 610; 780 score goes to 645 to 665.

• After foreclosure, short sale, or deed-in-lieu, 680 goes to 575 to 595 and 780 drops to 620 to 640.

• After bankruptcy, 680 drops to 530 to 550; 780 declines to 540 to 560.

Source: CNN, Les Christie (04/22/2010)

Could be worse!  But now you know.