Thursday, April 10, 2008

McCain's Housing Muddle   [Stephen Spruiell]

I was on hand for McCain's big economic speech today. What a disappointment. I shared David's dismay upon learning of McCain's "Democrat-lite" approach to bailing out borrowers and lenders. Here's how his team explained his plan in a fact sheet it sent around earlier:

Eligibility: Holders of a sub-prime mortgage taken after 2005 who live in their home (primary residence only); can prove creditworthiness at the time of the original loan; are either delinquent, in arrears on payments, facing a reset or otherwise demonstrate that they will be unable to continue to meet their mortgage obligations; and can meet the terms of a new 30 year fixed-rate mortgage on the existing home.

So even a borrower who fully understood the terms of his adjustable-rate mortgage (i.e. not someone who was "preyed upon" by an unscrupulous lender) would qualify for a bailout.

How It Works: Individuals pick up a form at any Post Office and applies for a HOME loan. The FHA HOME Office certifies that the individual is qualified, and contacts the individual's mortgage servicer. The mortgage servicer writes down and retires the existing loan...

Really? Just like that? I'm sure that the mortgage servicer would be happy to do this when the alternative is certain foreclosure. But if I'm reading this right, under McCain's plan, the government would simply rewrite the mortgage contract whether the mortgage holder likes it or not.

... which is replaced by an FHA guaranteed HOME loan from a lender.

So the taxpayer is on the hook if the borrower defaults on the new loan.

Campaigning elsewhere, Hillary Clinton said:

Just two weeks ago, Senator McCain said he’d rather do nothing than something about the housing crisis... Today, it looks like he’s proposing a warmed-over, half-hearted version of the very plan he criticized...

What can I say? When she's right, she's right.

04/10 06:21 PMShare