Also, to be clear, there was a benefit to the homeowner. Your home is not foreclosed upon after one missed mortgage payment. Depending on the state, it can take more than a year to make it to foreclosure – a year for which the homeowner has the benefit of living in a home for which he or she is not paying.

And there is “credit” for equity in some sense. The income is only imputed to the extent that there is more debt relieved than was paid.

It is rare in my policy arguments that I am arguing against the little guy. But I am tired of the government pitching in to bail out people who made poor choices. I know some of these homeowners. They are not folks like my parents who have worked for years to pay off a modest home. They are largely folks who jumped at unrealistic interest rates, who could not afford a traditional mortgage for a relatively expensive home and who jumped into a deal that seemed too good to be true without thinking about the consequences. Why should the lenders – or taxpayers – bear that burden?

Also, to be clear, there was a benefit to the homeowner. Your home is not foreclosed upon after one missed mortgage payment. Depending on the state, it can take more than a year to make it to foreclosure – a year for which the homeowner has the benefit of living in a home for which he or she is not paying.

And there is “credit” for equity in some sense. The income is only imputed to the extent that there is more debt relieved than was paid.

It is rare in my policy arguments that I am arguing against the little guy. But I am tired of the government pitching in to bail out people who made poor choices. I know some of these homeowners. They are not folks like my parents who have worked for years to pay off a modest home. They are largely folks who jumped at unrealistic interest rates, who could not afford a traditional mortgage for a relatively expensive home and who jumped into a deal that seemed too good to be true without thinking about the consequences. Why should the lenders – or taxpayers – bear that burden?

Taxing as “income” money that was never received and exists only as the forgiveness of a debt that the debtor had virtually no hope of ever paying makes little sense, and often creates a situation in which debtors can’t even afford to have their debts forgiven–given the superior enforcement options of the IRS, many debtors are better off owing $100,000 that they will never be able to pay to the original mortgage lender than owing $15,000 to the IRS and losing what little resources they have to attempt to support themselves and get back on their feet.

I know, from writing about residential real estate, that mortgage loan officers were really pushing interest-only loans before the housing slowdown. Many of them told me they considered them the product of the future in the mortgage-lending business.

Personally, I couldn’t believe that so many people were taking out these loans. I know the rationale behind them, and they probably do work for some people who are actually saving the money that they’re not spending on their mortgage payments, but they seem like a terrible product for most buyers.