Rich Toscano is quoted in a New York Times story today about a possible $40 billion federal program to bail out delinquent borrowers and help them stave off foreclosure.

In the story, reporter David Streitfeld introduces an underwater homeowner. Todd Lawrence is an airline pilot in Connecticut who can afford his monthly payments on his traditional 30-year loan, but he owes more on his mortgage than he could sell his house for. There are millions like him in the country, and Lawrence thinks they should get a share of the relief:

If the banks, which frequently lent irresponsibly, and many homeowners, who often borrowed irresponsibly, are getting government assistance, Mr. Lawrence says he believes sober souls like himself are also due a break.

“Why am I being punished for having bought a house I could afford?” he asked. “I am beginning to think I would have rocks in my head if I keep paying my mortgage.”

It’s another fascinating byproduct of many of the homeowner-rescue plans going into effect. Lots of people who can otherwise afford their payments — but are upside-down — are going to want a piece of the bailout pie. How can the government stop people from falling behind on their payments on purpose so they qualify for help?

Of course, there are some factors that will keep people paying their mortgages, even if they owe way more than they could sell for: the thought the house might appreciate in value again, a moral obligation to pay back their debt, and an attachment to the house or the neighborhood.

But here’s Rich:

Against those considerations must be measured the burden of paying a $500,000 mortgage on a property now worth $350,000.

“From a purely economic standpoint, there’s not a whole lot to be gained from staying,” said Rich Toscano, a San Diego financial adviser whose popular blog,, predicted the collapse.

The story mentions another San Diegan, Jason Luker, whose business is buying homes and renting them out.

“If all of our neighbors are getting bailed out despite their own bad decisions, arrogance or ignorance, and we’re asked to keep playing by the rules for the sake of the greater good, I don’t want to participate,” Mr. Luker said.

Some of these same fairness issues came up in a recent story I wrote about what happens to a neighborhood’s property values if loans are modified.

I thought this was one of the most telling quotes from the story today, which has generated a slew of comments on the Times’ website:

“If the lunch truly is free, the demand for free lunches will be large,” said Paul McCulley, a managing director with the investment firm Pimco.

These issues will continue to impact our housing market here in San Diego and across the country. If you have thoughts on these or other topics, I’d love to hear from you. Send me an e-mail at


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