McCain plan to buy mortgages under fire

Obama campaign trashes idea in TV spot

By Inman News, Thursday, October 9, 2008.

The Obama campaign pounced Thursday on Sen. John McCain's proposal to wipe out $300 billion in negative equity and save homeowners from foreclosure by buying up mortgages directly from mortgage servicers.

Unlike the $300 billion "Hope for Homeowners" expansion of FHA loan guarantees that kicked off this month, the McCain Resurgence Plan wouldn't require lenders to write down the principal of loans it refinanced.

McCain would shift the burden from lenders to taxpayers, guaranteeing a loss of taxpayer money," the Obama campaign said in a television ad attacking the plan. "Who wins? The same lenders that caused the crisis in the first place."

Some critics of the Hope for Homeowners plan have said that it will help only a fraction of the borrowers envisioned by Congress. Many lenders wont participate, critics say, because they won't agree to write down loans to be refinanced.

McCain, R-Ariz., rolled out his proposal during Tuesday's debate with Sen. Barack Obama, D-Ill. According to a summary of the plan posted on the McCain campaign's Web site, it would wipe out homeowners' negative equity by buying the mortgage on their principal residence and replacing it with an affordable FHA-guaranteed fixed-rate mortgage. Only borrowers who could prove they were creditworthy when they took out their original loan and provided a down payment would be eligible, the McCain campaign said. Anyone who falsified documents would be disqualified.

The program could be funded from the $700 billion debt authorization Congress approved to allow the Treasury Department to buy up toxic assets from banks, the McCain campaign said, and could be implemented quickly.

Other critics of the McCain plan said it might provide an incentive for some borrowers to default on their loans in order to unload their negative equity on the government.

Stan Humphries, vice president of data and analytics for Zillow.com, estimates that at the end of June, about 11.7 million single-family homes were "underwater," with negative equity totalling about $676 billion.

Writing on the company's blog, Humphries said the McCain plan would benefit homeowners who bought in at the height of the real estate bubble most, and place the full burden of relief on taxpayers.

Under the Paulson plan, the government would buy and hold mortgage-backed securities and whole mortgages, and those assets would "likely regain their value over the long-term, thus ultimately providing some benefit to taxpayers," Humpries said.

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Submitted by Ruth Chausse on October 10, 2008 - 8:43am.

I have been a Realtor since the fall of 1999.
My practice is in a small town in Oregon. (Hood River)
We have not been as badly affected by the downturn in the market as many other areas but have certainly seen a slow down.

In the Discussion Draft of the EES Act of 2008 under Title I -Troubled Assets Relief Program section 109 "Foreclosure Mitigation Efforts" it states
(c) Consent to Reasonable Loan Modification Requests
Upon any request arising under existing investments contracts, the Secretary shall consent, where appropriate, and considering net value to the taxpayer, to reasonable requests for loss mitigation measures, including term extensions , rate reductions, principal write downs, increases in the proportions of loans within a trust or other structure allowed to be modified, or removal of other limitations on modifications.
This caught my eye and putting two and two together I realized that John McCain did not come up with a NEW buy down idea, but that a form of or notion/ idea (principal write down) was already thought of and in the plan.
Granted the Draft that I read is not the end product, but I found it annoying that McCain tried to make it look like this idea when clearly it is not.
He is just giving people false hope. And is selfish on his part to delude these people in their darkest hours.
No body is going to give these homeowners a get out of jail free card especially on the backs of the tax payer. I know, being in trenches, that these people knew full well what they were getting into and the idea that they were hood winked is just false. I have money in a SEP right now that is probably losing $1,000's of dollars by the day. Should the tax payers pay me back because I chose to put my money there?
I mean really??? I feel bad for people in trouble
I have clients that are upside down too. But to re-adjust the sales price to today’s prices and then give them a break on the interest rate too, so they can stay in a home they probably could not have afforded in the first place is not fair to the rest of us working our asses off to keep ourselves out of trouble. Plus who is going to determine what it is they can afford. If a payment of $2,000.00 is too much and they can only afford $900.00 do they get the reduction in principal to an amount that has a payment of this?
It's crazy.....and what is even crazier is that people will believe it.

Sincerely,
Ruth Chausse