McCain mortgage plan shifts costs to taxpayers

Here is more about the proposal I mentioned in the Prez Debate 2 thread. I'm not really sure what I think if this. On one hand it offers some help to the homowners who are struggling with their mortgages. But on the other hand, it is a new huge cost to taxpayers --- $300 billion.

It sounds like the help for the homeowners is already there in the original "Hope for Homeowners" bill passed in the summer, but in that bill, it's the BANKS who take the hit for writing down the loans. I don't see how this offers any more help to homeowners than they already had in the original bill, but I do see how it shifts the COSTS to TAXPAYERS instead of the BANKS who made the bad loans.

I need to hear more about this to really understand it, but at first glance it seems completely boneheaded. It doesn't sound like people are getting any new benefit from this, but it sounds like banks are getting let off the hook and taxpayers are picking up the bill. This is more about helping the banks than helping the homeowners, it looks like to me. The original bill was unpopular enough when the banks were taking the hit, and the government was just insuring the new renegotiated loans --- how popular do you think it will be now that WE are paying for it instead of the banks?

Here is the article:

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McCain mortgage plan shifts costs to taxpayers - Oct. 8, 2008


McCain mortgage plan shifts costs to taxpayers

Under McCain's newly announced plan, the government would take the hit for writing down mortgage balances for at-risk borrowers.

By Les Christie, CNNMoney..com staff writer
Last Updated: October 8, 2008: 12:50 PM ET

NEW YORK (CNNMoney.com) -- Under a mortgage rescue plan announced at the debate Tuesday night by Senator John McCain, much of the burden of paying to keep troubled borrowers in their homes will shift to taxpayers.

McCain's original plan called for lenders to write down the value of these mortgages, and take those losses. McCain unveiled the new $300 billion plan in response to the first question of the debate.

He said, "I would order the Secretary of Treasury to immediately buy up the bad home loan mortgages in America and renegotiate at the new value of those homes, at the diminished values of those homes, and let people make those - be able to make those payments and stay in their homes."

The government would convert failing mortgages into low-interest, FHA-insured loans.

"Millions of borrowers" would be eligible for the program, dubbed the American Homeownership Resurgence Plan, according to McCain economic advisor, Doug Holtz-Eakin.

To qualify, homeowners would have to be delinquent in their payments already, or be likely to fall behind in the near future. They would have to live in the home in question - no investment properties would be eligible - and have had demonstrated their credit-worthiness when they purchased the property by putting down a substantial down payment and by providing documentation of their income and assets - no liar loans.

Holtz-Eakin said on a conference call Wednesday that the McCain plan could be put into place quickly because the groundwork and the authority for it has already been provided by last week's $700 billion bailout bill, the Hope for Homeowners program authorized by the housing rescue bill passed in July, and the government takeover of mortgage giants Fannie Mae and Freddie Mac.

This proposal is strikingly different from both McCain's original idea, and from the housing rescue bill adopted by Congress in July.

Congress struggled for months to pass the Hope for Homeowners rescue plan for mortgage borrowers. To make it palatable to both conservative Republicans and ordinary taxpayers, Hope for Homeowners requires that lenders write down mortgage balances to 90% of a home's current market value to qualify for a FHA-insured refinancing. The lenders would then take the loss on the difference between the current value and the mortgage balance.

"[McCain's] original plan relied on lenders taking the hit," said Holtz-Eakin. "This bypasses that step."

Instead, taxpayers pay for it, under the funding already provided by the $700 billion bailout bill.

That could prove to be very unpopular with homeowners who did not take on too much debt and so would not be eligible for help, as well as ordinary Americans who objected to the Hope for Homeowners plan as a bail out for delinquent borrowers and irresponsible lenders

to me this sounds like 1 step closer to socialism. i like how these dumb polititions like throwing away our money without our permission

if mccain wins, it's a good time to buy real estate because he's offering a price protection plan! maybe he can cash in on the reduced value of his ten homes