Homeowners, stocks are in the same boat

One of the premises of the new mortgage bailout proposal outlined by President Obama is to assist homeowners who took out prudent mortgages with a substantial down payment but whose home values have declined so much that they have little or no equity left. While home values have declined that doesn't mean they will be in a perpetual state of decline five, ten or fifteen years from now. How is the decline or loss of equity in a home any different from the same scenario with equity investments? Anyone who has money invested has seen their accounts shrink a minimum of 35 percent, with further declines a real possibility. How are investors being bailed out?

Homeownership, we have been told since we were in diapers, was the best investment anyone could make. We were also educated on the fact that over time the returns on equities would outperform any other type of investment. Sadly, both arguments have not proven out. If a homeowner qualified for a mortgage, with a "substantial" down payment he was making an investment that unfortunately today has not proven to be a prudent one... Today! What might that housing investment look like five years from now? What might an investment portfolio look like five years from now?

The argument seems to be that we need to "rescue" homeowners with little or no equity so that they can build value in order to go deeper into debt when they borrow against that equity. No value today doesn't mean no value tomorrow. Are these homeowners in these houses to live in them or to eventually use them as a cash cow to sink further into debt?

Steve Sarich

Grayslake