McCain's Home Resurgent Plan

[crazybabyborg]

Homeownership Resurgence Plan

John McCain will direct his Treasury Secretary to implement an American Homeownership Resurgence Plan (McCain Resurgence Plan) to keep families in their homes, avoid foreclosures, save failing neighborhoods, stabilize the housing market and attack the roots of our financial crisis. America’s families are bearing a heavy burden from falling housing prices, mortgage delinquencies, foreclosures, and a weak economy. It is important that those families who have worked hard enough to finance homeownership not have that dream crushed under the weight of the wrong mortgage. The existing debts are too large compared to the value of housing. For those that cannot make payments, mortgages must be re-structured to put losses on the books and put homeowners in manageable mortgages.

The McCain Resurgence Plan would purchase mortgages directly from homeowners and mortgage servicers, and replace them with manageable, fixed-rate mortgages that will keep families in their homes. By purchasing the existing, failing mortgages the McCain resurgence plan will eliminate uncertainty over defaults, support the value of mortgage-backed derivatives and alleviate risks that are freezing financial markets.

The McCain resurgence plan would be available to mortgage holders that:
Live in the home (primary residence only)

Can prove their creditworthiness at the time of the original loan (no falsifications and provided a down payment).
The new mortgage would be an FHA-guaranteed fixed-rate mortgage at terms manageable for the homeowner. The direct cost of this plan would be roughly $300 billion because the purchase of mortgages would relieve homeowners of “negative equity” in some homes. Funds provided by Congress in recent financial market stabilization bill can be used for this purpose; indeed by stabilizing mortgages it will likely be possible to avoid some purposes previously assumed needed in that bill.
The plan could be implemented quickly as a result of the authorities provided in the stabilization bill, the recent housing bill, and the U.S. government's conservatorship of Fannie Mae and Freddie Mac. It may be necessary for Congress to raise the overall borrowing limit.

[caesu]

Obama targets McCain plan, says he's erratic

Posted: 02:24 PM ET

DAYTON, Ohio (CNN) – Barack Obama called John McCain’s plan for the government to buy back bad mortgages “risky” because it leaves already burdened taxpayers with the bill.

“We have to act to fix our broken economy and restore the credit markets. But taxpayers shouldn’t be asked to pick up the tab for the very folks who helped to create this crisis,” he told an 8,000 plus crowd in a Dayton minor league baseball stadium. “It’s a plan that would guarantee that American taxpayers lose by handing over $300 billion to underwrite the kind of greed and irresponsibility on Wall Street that got us into this mess.”

Obama also got a little personal; seizing on the fact that the McCain campaign originally indicated Tuesday he supported purchasing mortgages of strapped homeowners at a discount. But by Wednesday his proposal had changed and instead called for the government to buy the mortgages at face value even if they were worth more than the home itself.

Related: Obama: McCain's mortgage plan shows 'erratic' leadership

“This is the kind of erratic behavior we’ve been seeing out of Senator McCain, you remember the first day of this crisis he came out and said the economy was fundamentally sound, then two hours later he said we were in a crisis,” Obama said. “I don’t think we can afford that kind of erratic and uncertain leadership in these uncertain times. We need steady leadership in the White House. We need a President we can trust in times of crisis.”

Obama said McCain would be encouraging lenders to “keep up their bad behavior” because they would not be punished for poor business decisions. Obama also said McCain’s proposal “wasn’t particularly new” as he himself had encouraged buybacks as a way to keep people in their homes and the Treasury secretary was given the power to renegotiate mortgages in the congressional bailout package.

Ohio boasts an unemployment rate of over 7%, and Obama said he has been “fighting” to extend unemployment benefits for those seeking work while McCain has done “nothing.”

The Dayton rally and “jobs” themed bus tour marked the beginning of a concerted personal push by Obama in Ohio. While he has visited the state eleven times since the end of the primary season, he has recently left the state to surrogates, including his running mate Senator Joe Biden. Thursday and Friday, Obama will cover the southwestern and central portions of the state.

http://politicalticker.blogs.cnn.com/2008/10/09/obama-targets-mccain-plan-says-hes-erratic/#more-23671

[nonesuche]

why am I not surprised that Obama once again states McCain doesn't know what he's doing. This is a full blown crisis now, not once have I heard Obama give specific details around what HE plans to do beyond cutting expenses in a very generic fashion. What Obama is proposing in new spending would greatly eclipse any cuts.

[crazybabyborg]

Yeah, it's true that originally, McCain's plan did have language to the effect that the banks that made the loans would be at least be partly culpable, and later the sentence was removed. I was doing some hunting on the plan yesterday and noticed the change.

Here's the thing: The government carving out part of the bailout specifically to buy endangered mortgages and dealing with the individuals with those loans, still meets some sound economic objectives. The upside is that 1) It keeps people in their homes and able to pay the new mortgage  2) It keeps more foreclosed homes from flooding an already glutted housing market. That market has so tipped the balance in supply of homes for sale for almost no demand that all of our homes are continuing to loose value.   3) The American people know where 300 Billion of the 700 Billion taken, is going and they know that it is at least going for sound economic help. Yes, if the plan stands as is, we will pay more for the mortgages than we will finance, BUT we're forgetting a really important piece here. How much does your bank make on your mortgage? HMM? We can re-finance a mortgage for less and STILL make a good return on our money. For example:

Let's say your loan amount is $200,000, and interest is 6.5%. Again, can you believe that over the life of the loan you'll pay a total of approximately $456,000. (30 year loan)
That's right!
You paid $200,000 towards the house and $256,000.00 in interest.

Tell me where else in this bailout we have the assurance of a return like that? AND, because the house is revalued at a more accurate price, it helps to establish all housing prices. If a default should occur, the government, or "We, The People" stand a real shot at a resale. I like the odds of this much better than I like giving autonomy to the Sec of Treasury with "Trust Me" on his lips. Even though we would pay too much at the beginning, we do get something immediately in that it helps stop the bleed. We also get an investment with proven returns, and there's nothing else in the bailout that does that.

PS: JMO: I believe that the reason McCain removed the line about bank culpability is because of the weakness in the banking industry right now. He's not elected, and I believe he felt it might be reckless to present a plan that could add to that. If he were elected, I believe that he would look for a way to require the banks to bear some of the burden and that's why the line was there in the first place. That's just my opinion!