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, 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.


What’s your opinion? Leave your comments below or send a letter to the editor.

Show Comments Hide Comments


Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
Thank you for subscribing to Morning Headlines.
Back to top
Real estate news and analysis that gives you the inside track. Subscribe to Inman Select for 50% off.SUBSCRIBE NOW×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription