Republican presidential candidate Sen. John McCain (R-Ariz.) announced on Tuesday evening a plan for the federal government to buy troubled mortgages and refinance them at lower interest rates for homeowners.
McCain proposed the Homeownership Resurgence Plan during the presidential debate, which gives the federal government power to purchase $300 billion worth of troubled mortgages.
Eligible homeowners must already be in default—or close to being in default—to qualify for refinancing. They must also currently live in the home, and demonstrate an ability to pay, in the form of credit rating and proof of income, at the time of purchase.
The government would purchase such failed mortgages and convert them into Federal Housing Administration (FHA)-insured loans. Under the initiative, homeowners would be able to renegotiate their mortgage rates to around 5 percent.
Sen. McCain said in Tuesday night’s debate, “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.”
McCain’s proposal would essentially shift the risk of loss to the U.S. government—and ultimately, taxpayers—by having the FHA buy the mortgage loans from the lenders.
The Obama Campaign responded in a statement: “John McCain wants the government to massively overpay for mortgages in a plan that would guarantee taxpayers lose money, and put them at risk of losing even more if home values don’t recover.”
McCain proposed the Homeownership Resurgence Plan during the presidential debate, which gives the federal government power to purchase $300 billion worth of troubled mortgages.
Eligible homeowners must already be in default—or close to being in default—to qualify for refinancing. They must also currently live in the home, and demonstrate an ability to pay, in the form of credit rating and proof of income, at the time of purchase.
The government would purchase such failed mortgages and convert them into Federal Housing Administration (FHA)-insured loans. Under the initiative, homeowners would be able to renegotiate their mortgage rates to around 5 percent.
Sen. McCain said in Tuesday night’s debate, “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.”
Analyzing the Plan
Under Sen. McCain’s proposal, a mortgage would be refinanced down to 100 percent of the home’s current value. Homeowners will make payments based on the terms of the new mortgage contract, which is guaranteed by the U.S. government.
Hope for Homeowners, a housing rescue bill passed in July, calls for mortgage lenders to write down mortgages to 90 percent of current home values. In that plan, lenders would take the loss between the current home value and its original mortgage balance.McCain’s proposal would essentially shift the risk of loss to the U.S. government—and ultimately, taxpayers—by having the FHA buy the mortgage loans from the lenders.
The Obama Campaign responded in a statement: “John McCain wants the government to massively overpay for mortgages in a plan that would guarantee taxpayers lose money, and put them at risk of losing even more if home values don’t recover.”
