Foreclosed Home

I’d like to know when exactly, on what day in particular as the housing market crashed down around us, that everyone decided the real estate investor was the villain?

In the big game of blame, the pundits and the politicians all claim that it was those nasty lenders and those nasty “speculators” (yup, had to give investors a new nickname to make them seem even more evil) were scheming, conniving and colluding to pump up the housing market until it inevitably burst.

Yesterday, President Obama made it clear: “The plan I’m announcing focuses on rescuing families who have played by the rules and acted responsibly.” Of course he didn’t exactly explain what the “rules” were or are in buying and selling a home. He did, however, go on to say, “It will not help speculators who took risky bets on a rising market and bought homes not to live in but to sell.”

There we go again with those sinister “speculators.” In order to keep them out of any assistance, the Obama plan does not apply to any second homes, only primary residences. A second home would, of course, be an investment property, and the owner would therefore be a speculator, i.e., an irresponsible homeowner.

Okay, enough. Yes, I’ve been to Miami and reported on the investors who followed developers around like an army of ants, buying up multiple properties with the intent of immediately flipping them for a profit. They did it in many of the boom states, and they were definitely a good part of the air in the bubble. Were they wrong to invest in an appreciating commodity? Were they irresponsible to take advantage of a good investment? Your call.

But there are also thousands and thousands of Americans who, over the last several years and decades, bought an investment property to supplement their incomes. Some may have bought a property in Florida, thinking they would rent it out first and then move into it for retirement. Others purchased properties in their own home towns, renting them first with an eye toward giving them to a grown child, starting out. My parents did that. They were responsible landlords and had responsible tenants.

Guess what? These homes have lost value just like every other home in America, and many of these owners are in trouble on their mortgages as well, as rental rates fall and mortgages adjust. Let’s say one of these owners loses his or her job and can no longer afford the loan. They can’t sell the property because the home value may now be less than the loan value, and they can’t refinance for the same reason. If it were their primary residence, the Obama plan would bail them out, but because it’s a second home, an investment property, these owners will go right to the foreclosure line, lose the home, the investment and their credit rating.

Mr. Obama, it is not wrong, irresponsible or even negligent to purchase an investment property. Not every American can afford a home; we’ve learned that the hard way. There is no shame in renting. But a rental home is not always an apartment in a building owned by a large developer. It is often a single family home or a condo, owned by another American who purchased an investment property, legally, responsibly and ethically. Why exactly are we penalizing these homeowners? You might consider the fact that when these properties go into foreclosures, the responsible renters are out on the street as well.

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