This is a particularly grave situation that is exacerbated by the fact that many retirement funds took major hits after the fall of Lehman Brothers, as well as the credit crunch and the subprime mortgage meltdown. Retirement fund managers who heavily invested in mortgage-backed securities suffered major losses after 2008, and thus many retirees have seen their 401(k) and IRA plans decimated along with the value of their properties and their ability to pay for their mortgages. Since 2007, more than 1.5 homeowners within retirement age entered foreclosure proceedings. 

In the late 20th century, financial planners in America often used the term “nest egg” when advising their retirement-age clients about real estate opportunities. Home ownership has long been touted as the most significant factor of the American Dream, and millions of retirees dutifully stuck to this tenet. When 401(k) plans and other retirement investment portfolios were decimated by the bursting of the Dot-Com bubble, many retirees decided to either draw equity from their primary residences, or to invest in real estate.

Retirees were likely candidates for subprime mortgages due to their non-performing retirement accounts, and many applied for cash-out refinance loans that featured adjustable rates or balloon payments that would soon come due. Most retirees who signed up for these subprime products did so because they believed the value of their primary residences would continue to appreciate. That has not been the case, however, and the AARP is concerned that the foreclosure trend among retirees is bound to continue, potentially leaving millions of older Americans without a home.