A reader writes:
Punishing renters? I've lost $150,000 in down payment, principal repayment, and improvements on this old house bought six years ago and I'm probably $100,000 underwater. After losing half our income, we spent 10 months calling BofA, faxing BofA, talking to different BofA people and departments weekly, starting repayment plans, stopping repayment plans. Trust me, homeowners have been punished.
The house needs new paint ($7000), new shingles ($10,000), and I think I used Chinese drywall in the bathroom remodel ($??!). I pay $6,000 in property taxes for a 1,000 sq ft house - five to ten times what my neighbors pay. My credit is ruined, my partnership is stressed, my hair is turning gray, I'm sometimes sleepless, and it feels like there's a boot on my neck. I might lose the first house I ever owned, and my grandmother helped me buy it (probably the reason I fight on). Trust me, homeowners have been punished.
To understand the rationale behind helping home owners avoid foreclosure you have to expand the analogy beyond the two brothers. If one brother loses his house, it doesn't just hurt him -- foreclosures drive down real estate prices throughout the area, decrease property tax and other use/excise tax receipts that help fund the renters' schools, roads, and fire/police departments, and drive up the price of credit as banks shift the cost of foreclosures and REOs to their credit card and auto loan customers. While there are certainly good arguments about how much to bail out people who are upside-down on real estate, it's not as simple as renters subsidizing owners.