Taxpayers: Furious over homeowner bailouts

[Onkel Neal]

http://money.cnn.com/2008/12/05/real_estate/bail_outs_fair_or_foul/index.htm

Consider the hypothetical case of one warehouse manager named John and his colleague Mary. The two make about the same salary and are both married with two young kids and stay-at-home spouses.

A few years ago both bought homes, John's a modest three bedroom, two bath. He put 20% down and financed $240,000 with a 30-year, fixed-rate loan at 7%. His payment is $1,596 a month.

Mary went for an opulent five bedroom, four bath, 3,500 square foot McMansion that cost $500,000. She put just 5% down and financed the rest with an option ARM, making the minimum monthly payments of just $1,725. But that caused her mortgage balance to balloon, and now Mary has to start paying down her loan's principal, which has reached $550,000. That means a monthly mortgage payment of $3,659, which she can't afford.

Luckily for Mary, her lender has reduced her interest rate to 3% for five years, deferred payment on $50,000 of the balance and extended the length of the loan to 40 years, all with the help of one of the new, government-backed rescue programs. That reduced her monthly mortgage bill to $1,790 - not much more than what John is paying for his more modest home.

Mary is essentially able to hang on to her palatial home with the help of some of John's tax dollars - and as important as that is for the larger economy, it's hard to argue that it's fair.

This is messed up.