(Well... that's what the McCain campaign folks told the Press about what he proposed.)
Also, this just in:
McCain's Plan Calls for Government to Buy Mortgages (Update4)
By Alison Fitzgerald and Sharon L. Lynch
bloomberg.com
Oct. 8 (Bloomberg) -- Republican presidential candidate John McCain is proposing the government divert some money set aside for buying mortgage securities and instead purchase home loans.
The plan would help homeowners in danger of foreclosure refinance into more affordable mortgages and wouldn't require approval of the loan holder, McCain senior policy adviser Douglas Holtz-Eakin said on a conference call today. The direct cost of the plan would be about $300 billion, the campaign said yesterday.
``The initiative would rely on authorities that have been provided in recent months by the Congress,'' Holtz-Eakin said. ``It could help literally millions of people. We don't have a precise estimate.''
The plan is similar to one proposed last month by Massachusetts Democrat Barney Frank. Democrat Barack Obama's campaign also said today that McCain's proposal isn't new and that the financial rescue bill passed last week already allows the U.S. Treasury to buy and restructure mortgages.
Costly Plan?
``He threw out a proposal that appeared to give the Treasury authority it already has to restructure troubled mortgages,'' Obama's Economic Policy Director Jason Furman said in a statement today. ``But now that he's finally released the details of his plan, it turns out it's even more costly and out- of-touch than we ever imagined.''
McCain's proposal would use some of the $300 billion in funding for the Federal Housing Administration to insure new fixed-rate loans to distressed homeowners, and part of the $700 billion financial bailout. It would also use the government's new authority over Fannie Mae and Freddie Mac, the nation's largest mortgage buyers, which were taken over by federal authorities.
The refinancing program may be more expensive than McCain is forecasting and could worsen the foreclosure crisis by giving new loans to people who are already unable to pay, said Susan Wachter, a real estate professor at the University of Pennsylvania's Wharton School in Philadelphia and a former assistant HUD secretary under President Bill Clinton.
``Where are they coming up with $300 billion? Because I would be coming up with larger numbers,'' Wachter said in an interview. ``One concern that I would have straight off the bat is that, depending on the details, it might add to delinquencies.''
Frank's Idea
McCain, who disclosed the American Homeownership Resurgence Plan last night during his debate with Obama, is not the first to propose the federal government buy mortgages directly.
``We should consider giving the government the authority to purchase mortgages directly instead of simply mortgage-backed securities,'' Obama said at a Sept. 23 news conference.
On Sept. 29, Frank, chairman of the U.S. House Financial Services Committee, said the government should start buying foreclosed mortgages directly if the Treasury Department's financial rescue doesn't work.
Columbia University's R. Glenn Hubbard, dean of the Graduate School of Business, and Chris Mayer, senior vice dean and Paul Milstein professor of real estate, suggested the same in an Oct. 2 opinion piece in the Wall Street Journal.
``We proposed that the Bush administration and Congress allow all residential mortgages on primary residences to be refinanced into 30-year fixed-rate mortgages at 5.25 percent, matching the lowest mortgage rate in the past 30 years,'' Hubbard and Mayer wrote. ``These mortgages would be backed by houses and the verified ability to repay the debt by millions of Americans.''
Economic Proposals
Hubbard and Mayer didn't immediately return telephone messages seeking comment.
McCain and Obama are focusing on economic proposals as the U.S. economy is on the verge of a recession, credit markets have frozen and investors have pushed the Dow Jones Industrial Average down 30 percent so far this year.
U.S. foreclosure filings rose to a record in August as falling home prices made it harder to sell or refinance to pay off mortgages, RealtyTrac Inc. said. Owners of 303,879 properties, or one in 416 U.S. households, got a default notice, were warned of a pending auction or foreclosed.
Rising foreclosures have created a glut of unsold homes and driven prices down nationally for the first time since the Great Depression, according to the Chicago-based National Association of Realtors. Financial firms that buy and package home loans into securities have reported more than $590 billion in losses and asset writedowns.
Home Sales Fall
Existing U.S. home sales fell to a 10-year low in the second quarter and the median price for a single-family house dropped 7.6 percent, according to the Realtors' group.
Both homeowners who are already delinquent on their mortgages and those who owe more than their homes are worth would be eligible for the McCain refinancing, Holtz-Eakin said.
``Senator McCain thinks this is the best way for this to go forward,'' Holtz-Eakin said. ``The homeowner would stay in their home. Their financial situation would be relieved.''
The plan could begin quickly because all the authority required has been granted in previous congressional actions to stabilize the housing and financial markets, the campaign said. Congress may have to raise the debt limit to make it work.
``You're going to need a lot more money,'' said analyst Paul Miller of Friedman, Billings, Ramsey Group Inc. Miller was the top-ranked stock-picker in a June survey by Bloomberg News.
``I don't know how this would work,'' he said. ``Housing issues are so complex that it's very difficult for the politicians to get their hands around it.''
To contact the reporters on this story: Alison Fitzgerald in Washington at Aiftzgerald2@bloomberg.net; Sharon L. Lynch in New York at sllynch@bloomberg.net.
Last Updated: October 8, 2008 16:47 EDT |
