McCain mortgage plan shifts costs to taxpayers

[maddezmom]

Source: CNN

McCain mortgage plan shifts costs to taxpayers
Under McCain's newly announced plan, the government would take the hit for writing down mortgage balances for at-risk borrowers.
October 8, 2008: 11:58 AM ET


NEW YORK (CNNMoney.com) -- Under a mortgage rescue plan announced at the debate Tuesday night by Senator John McCain, much of the burden of paying to keep troubled borrowers in their homes will shift to taxpayers.

McCain's original plan called for lenders to write down the value of these mortgages, and take those losses. McCain unveiled the new $300 billion plan in response to the first question of the debate.

He said, "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."

The government would convert failing mortgages into low-interest, FHA-insured loans.

"Millions of borrowers" would be eligible for the program, dubbed the American Homeownership Resurgence Plan, according to McCain economic advisor, Doug Holtz-Eakin.

To qualify, homeowners would have to be delinquent in their payments already, or be likely to fall behind in the near future. They would have to live in the home in question - no investment properties would be eligible - and have had demonstrated their credit-worthiness when they purchased the property by putting down a substantial down payment and by providing documentation of their income and assets - no liar loans.



Read more: http://money.cnn.com/2008/10/08/news/economy/McCain_mortgage_plan/?postversion=2008100811

---

McCain’s Bailout: A Bag of Old Tricks?

~snip~

Critics argue, however, that the plan is strikingly reminiscent of Treasury Department secretary Henry Paulson’s bailout plan, which was passed by the Senate and signed into law Friday. Specifically, the plan echoes Section 110 of the law.

“After McCain suspended his campaign two weeks ago and rushed back to Washington to knock some heads together to get a rescue plan approved, he sheepishly admitted that he hadn’t actually read the three-page Paulson plan all the way through,” Washington bureau chief Rex Nuttig told Market Watch. “And even though he voted for it, it sounds like he still hasn’t read it.”

Section 110 of the Emergency Economic Stabilization Act of 2008, titled “Assistance to Homeowners,” requires the Federal Housing Finance Agency, the FDIC and the Federal Reserve to “work with servicers to encourage loan modifications” in an effort to “minimize foreclosures.”

http://www.housingwire.com/2008/10/08/mccains-bailout-a-bag-of-old-tricks/

[sinkingfeeling]

1. Gee, maybe I should skip a couple of mortgage payments so I can get a 'better' rate and less

mortgage principle.

[TwilightGardener]

2. So--here's how to get this to pay off for you, if you meet the other criteria:

stop paying on your loan, so they'll cut your mortgage. Then, if the housing market rebounds in the next 5 or so years and you're still in your home, you'll still be paying that lower mortgage (thanks, fellow taxpayers!), but you'll have a house worth more than that. What a great way to dick around with the system and make some money!

[dipsydoodle]

That could've worked, instead of the bailout, if

the government has bought all primary mortgages excluding invertment properties. It wasn't his own idea - he stole it from Forbes.

[last1standing]

3. So all I have to do is stop paying my mortgage and I get a re-fi?

Also, what is a "substantial down payment"? Most of these failing mortgages are going under because homeowners didn't have down payments, and often the credit, to put down yet the banks pushed them through anyway. All of these people would be excluded from mcsame's plan.

I remember when we were looking at houses, the realtor and the bank kept pushing us to borrow way more than our means would allow. We knew enough to buy something we could afford, but many don't understand that these people didn't have their best interests in mind. They are the ones who need help.

[TwilightGardener]

4. Sounds like they're rewarding the richer side of the scale, doesn't it?

How many people really fit this criteria? Well, people who started off with lots of money and good credit, but simply made bad investments--that's all it sounds like to me. Sounds like a bailout of McMansionville.

[last1standing]

9. I don't mind helping those who had some money and then lost their jobs.

But the loss of a job, or failing finances doesn't sound like a precondition for a government bailout in mcsame's plan. From what I'm reading, all you need is a lapsed payment or two and a history of having cash. This doesn't even begin to resolve the real issues we face in the mortgage crisis.

[TwilightGardener]

14. Lots of people fall on hard times, I'm not opposed to helping out

those who are drowning with some adjustment on their mortgage terms, but using taxpayer money to reduce the PRINCIPAL to artificially manipulate house values? Uh, no.

[last1standing]

16. We agree that mcsame's plan is incredibly wrong and shortsighted.

It would lead to even larger drops in the housing market as values are set ever lower, but there are ways to actually help people without destroying the economy. One way to help would be to allow bankruptcy judges to reset the terms of mortgages for those in need. Another would be to set interest limits and outlaw usury. It would also help to make balloon loans, interest only credit, and possibly even ARMs illegal - retroactively. These laws wouldn't help everyone but they would prevent this kind of mess in future.

As for helping now, there really isn't all that much we can do other than allow judges to reset terms. Many people will lose homes they should never have been tricked into purchasing - that's a fact. We need to make sure there is housing for them and aid them in getting back on their feel. I'd even possibly support making foreclosures "credit neutral" for a limited time to prevent this from destroying the credit of millions of people.

[Lance_Boyle]

26. wouldn't that be an ex-post-facto law?

"It would also help to make balloon loans, interest only credit, and possibly even ARMs illegal - retroactively."

[last1standing]

28. You mean like making the telecoms immune from prosecution?

The congress has already destroyed the concept of ex-post facto so why not have it work in our favor - for once?

Edited to say that making these credit terms retroactively illegal wouldn't subject creditors to legal action, it would merely cause all of those loans to be adjusted to fit withing current law.

[Lance_Boyle]

29. incorrect

ex-post-facto laws are things that make something that was previously legal, illegal. This discussion was had around the time of the spying immunity debate - it's perfectly OK to make something legal that was once illegal, just not the other way around.

BTW - making this illegal, retroactively or otherwise, WOULD subject creditors to legal action. That's what "illegal" means.

[last1standing]

31. Ok, then let me be clear (since you obviously want to pick a fight)

By making these credit terms illegal, retroactively, we would be forcing unfair (and now illegal) mortgages to go to court to be renegotiated on a more level basis. You can pick at some technicality, or cry that I want to put all creditors in jail, or whatever you're trying to claim, but the end result would merely be changing credit terms to favor the homeowner more than the creditor.

Would you prefer I use a different word? Is that what this is about? Or do you just hate the idea that those in need would have a fair shake for once?

[Lance_Boyle]

34. You're the one who chose your words poorly, not me.

No need to get all angry at ME for pointing out that "illegal" means "illegal."

So - back to the topic at hand - you're saying you support McCain's plan? And you somehow think this is a "fair shake?" I think you mistake "fair shake" for "shakedown."

[last1standing]

37. Ahhh! I've discovered the problem. You're not reading what I wrote.

I never said I supported mcsame's plan. In fact, I said the exact opposite so you might not be understanding things there.

And I know what I typed and I support making usury tactics illegal, retroactively. Unless it's illegal we can't renegotiate terms for everyone caught in them. If you don't realize that then there's little else to say. :shrug:

[WriteDown]

32. Alas....

I have explained before but I'll try again. This is impossible. The majority of mortgages are what are called non-risk based. It works like this. Let's say you have a 7% interest rate, maybe 5.5% goes to the investor and 1.5% is kept by the servicer. So if a judge lowers a mortgage to 4% then the servicer would take a loss each month. Investors vary widely and even include foreign banks. Unless a bankruptcy judge wants to call the actual investors and somehow MAKE them take less, then this is impossible.

[last1standing]

39. Alas...

If a foreign bank is doing business in the US market it is subjected to US law. There is no ability to go to another country and expect that your home country's laws will take precedent.

As for the servicer taking a loss, that just simply would not be the case. First, 7% would rarely be considered usury and second, bankruptcy judges would most likely take the percentages off of BOTH the servicer AND the investor so that they both took an equal percentage hit. So both would make profit and yet the mortgage would go down.

Or did you already know that?

[WriteDown]

43. How would the bankruptcy judge take the percentage

off the investor. How would the judge even know the percentages? Are you suggesting the servicer and the investor have to be in court every single bankruptcy case where a home is involved? You do realize that they just receive notification by mail now. Have you ever been to divorce court? Ever see the disaster that results when the judge gives a party that cannot afford a property ownership. The person not living in the home is technically not responsible, but they are never actually removed from the mortgage. A good analogy would be this, you declare bankruptcy and a judge orders that 10K or your 20K loan is car loan is written off. Your car has a warranty through the dealership. Are the parts now discounted to the dealer?

[last1standing]

45. That is a complete misrepresentation of what I posted.

You have changed my position of renegotiating the interest terms on a loan to "a judge orders that 10K or 20K loan is car loan is written off". I have repeatedly said that I'm against lowering the actual principle terms of home loans.

As for the judge knowing the percentages, do you think the credit companies are going to hide the terms? Do you not think the judicial arm of the United States government should be able to demand that ALL pertinent documents be revealed? And what the Hell does divorce court even have to do with anything? It's a complete apples and oranges comparison.

Stop trying to confuse and misrepresent the issues and my comments. If you have a valid reason for not agreeing with me that's fine, but at least be honest about it.

[WriteDown]

47. No, you misread...

I was analogizing a car loan and dealership. You could say a judge reduces the interest rate of a car loan. Same difference. You are not dealing with credit companies, you are dealing with servicers. They can demand it, but you are talking about millions of new dollars in legal expenses for servicers and investors then. I was using the divorce court to illustrate how COMPLICATED all court cases are. You are talking about years of time in court per case. Maybe even decades.

I am not trying to confuse you, but you do not sound to knowledgeable about the the specifics.

[last1standing]

48. It's you who does not understand the specifics here.

You meander worse than mcsame at a town hall meeting. If you aren't able to come up with a valid post that defends your position then we will just have to disagree. I'm not about to fall for your obvious distortions on what is involved here.

[WriteDown]

49. Yes....

I am the one with an understanding of pass-thru rates and bankruptcy laws and I am the one lacking in specifics. :eyes: I suppose if your electric company declares bankruptcy then a judge can just order that they provide you with less electricity each month. Maybe just 12 hours a day or something of that order.

[last1standing]

51. That was a truly stupid response.

And now I'm done with you. If you can't come up with something better than snide misrepresentations of my opinion then there's nothing left to discuss.

[WriteDown]

52. No surprise....

If you lack knowledge on a subject, do not try to get by on generalizations. Try learning about it. I worked in the mortgage industry for a long time, it is far more complicated than you can fathom. I will leave you with one last example. You are a baker and have 5 customers, each who love different types of biscuits. Each type of biscuit requires a different type of sugar. Each customer buys 100$ of biscuits a week and the sugar cost 80$ a week per biscuit-type. All 5 of your customers declare bankruptcy and a judge says you must lower your biscuit price to 70$ a week. What happens to your sugar supplier?

[dipsydoodle]

5. It works like his for example

Say a house has a current mortgage of $200000 and its current worth is only $100000. Reset at $100000 at an intelligent interest rate and the government keeps half of the equity. When sold, unless the equity split is redressed by the mortagee along the way, split the proceeds 50/50. That's just a made up example. It works and has been done in certain instances in the UK for 20 years or so.

[TwilightGardener]

7. Sorry, if you bought a house and it dropped precipitously in value, then

you're just an idiot. At some point, people have to suck up the consequences of their bad investments. Buying a house is not really any different than any other kind of investment--there is a risk, which is why you try to buy low and sell high, just as in stocks. I bought low, for my area--a very old fixer-upper, in stable but boring Nebraska, and spent shitloads of money fixing it up. I'm not bailing out people who bought nicer, newer homes with granite countertops in housing-bubble places like Las Vegas and Tampa and California.

[stillcool]

11. It's always 'their' fault, isn't it?

For Immediate Release
Office of the Press Secretary
June 18, 2002
President Reiterates Goal on Homeownership


Remarks by the President on Homeownership
Department of Housing and Urban Development
Washington, D.C.
******

The goal is, everybody who wants to own a home has got a shot at doing so. The problem is we have what we call a homeownership gap in America. Three-quarters of Anglos own their homes, and yet less than 50 percent of African Americans and Hispanics own homes. That ownership gap signals that something might be wrong in the land of plenty. And we need to do something about it.

We are here in Washington, D.C. to address problems. So I've set this goal for the country. We want 5.5 million more homeowners by 2010 -- million more minority homeowners by 2010. (Applause.) Five-and-a-half million families by 2010 will own a home. That is our goal. It is a realistic goal. But it's going to mean we're going to have to work hard to achieve the goal, all of us. And by all of us, I mean not only the federal government, but the private sector, as well.

And so I want to, one, encourage you to do everything you can to work in a realistic, smart way to get this done. I repeat, we're here for a reason. And part of the reason is to make this dream extend everywhere.

I'm going to do my part by setting the goal, by reminding people of the goal, by heralding the goal, and by calling people into action, both the federal level, state level, local level, and in the private sector. (Applause.)

And so what are the barriers that we can deal with here in Washington? Well, probably the single barrier to first-time homeownership is high down payments. People take a look at the down payment, they say that's too high, I'm not buying. They may have the desire to buy, but they don't have the wherewithal to handle the down payment. We can deal with that. And so I've asked Congress to fully fund an American Dream down payment fund which will help a low-income family to qualify to buy, to buy. (Applause.)

We believe when this fund is fully funded and properly administered, which it will be under the Bush administration, that over 40,000 families a year -- 40,000 families a year -- will be able to realize the dream we want them to be able to realize, and that's owning their own home. (Applause.)

The second barrier to ownership is the lack of affordable housing. There are neighborhoods in America where you just can't find a house that's affordable to purchase, and we need to deal with that problem. The best way to do so, I think, is to set up a single family affordable housing tax credit to the tune of $2.4 billion over the next five years to encourage affordable single family housing in inner-city America. (Applause.)

The third problem is the fact that the rules are too complex. People get discouraged by the fine print on the contracts. They take a look and say, well, I'm not so sure I want to sign this. There's too many words. (Laughter.) There's too many pitfalls. So one of the things that the Secretary is going to do is he's going to simplify the closing documents and all the documents that have to deal with homeownership.

It is essential that we make it easier for people to buy a home, not harder. And in order to do so, we've got to educate folks. Some of us take homeownership for granted, but there are people -- obviously, the home purchase is a significant, significant decision by our fellow Americans. We've got people who have newly arrived to our country, don't know the customs. We've got people in certain neighborhoods that just aren't really sure what it means to buy a home. And it seems like to us that it makes sense to have a outreach program, an education program that explains the whys and wherefores of buying a house, to make it easier for people to not only understand the legal implications and ramifications, but to make it easier to understand how to get a good loan.

There's some people out there that can fall prey to unscrupulous lenders, and we have an obligation to educate and to use our resource base to help people understand how to purchase a home and what -- where the good opportunities might exist for home purchasing.

Finally, we want to make sure the Section 8 homeownership program is fully implemented. This is a program that provides vouchers for first-time home buyers which they can use for down payments and/or mortgage payments. (Applause.)

So this is an ambitious start here at the federal level. And, again, I repeat, you all need to help us every way you can. But the private sector needs to help, too. They need to help, too. Of course, it's in their interest. If you're a realtor, it's in your interest that somebody be interested in buying a home. If you're a homebuilder, it's in your interest that somebody be interested in buying a home.

And so, therefore, I've called -- yesterday, I called upon the private sector to help us and help the home buyers. We need more capital in the private markets for first-time, low-income buyers. And I'm proud to report that Fannie Mae has heard the call and, as I understand, it's about $440 billion over a period of time. They've used their influence to create that much capital available for the type of home buyer we're talking about here. It's in their charter; it now needs to be implemented. Freddie Mac is interested in helping. I appreciate both of those agencies providing the underpinnings of good capital.
Thank you all for coming by
http://www.whitehouse.gov/news/releases/2002/06/20020618-1.html

[TwilightGardener]

12. I'm not getting the gist of your post.

[stillcool]

24. You bought low, and any one else..

who didn't are stupid fucks that deserve to lose everything right? Has nothing to do with people like my niece who had just gotten married in 2003 and bought her first house, under the impression that her investment would not lose value. Not only that she was such a fool she opened her own business. She's done, but I'm sure she'll find her way out. To show a little compassion and understanding doesn't cost you or anyone else one damn dime.

[polpilot]

27. Common good & compassion are so missing today.

[TwilightGardener]

33. We can't bail everyone out of bad circumstances--you do understand that, right?

Read my other posts, I'm not against people having a chance to stay in their homes through adjusting interest or repayment schedules--because the goal there is not to kick people out on the street. But this re-valuing shit is more about protecting investments, and that's just bullshit. I am adamantly opposed to giving anyone shitloads of taxpayer money to pay down their principals because they don't understand real estate, or just got greedy and bought too much house--so now they suddenly have a nicer house than I do, for the same price that I pay for my crappier one that I had to fix up all those weekends? Uh-uh. And yeah, I bought low (for my standards), because that's how you get value out of your investments--and because I didn't want to stretch the budget for a mortgage, and I wanted to make sure that either me or my husband would be able to swing the mortgage on one income should something bad happen. Sorry not everyone thinks that way, but maybe they should.

[Lance_Boyle]

38. don your flamesuit, wienerdoggie

Suggesting that people who lived beyond their means should own the consequences is apparently a right-wing freeper thing. You can only be a good liberal if you support the government buying houses for everyone who took out a mortgage loan they couldn't repay. Be sure to throw in some scorn for those of us who bought within our means and are resentful of the idea of subsidizing the irresponsibility of others - we're part of the "I've got mine, screw you" crowd, apparently. Around here, it pays to be part of the "I want mine, make someone else buy it for me" crowd.

[TwilightGardener]

41. Well, I don't even know that flame protection is necessary for this case, because

I would bet most people here agree with me on cutting homeowners some slack to let them stay in their homes (something the RW doesn't allow)--it affects entire communities, and all of our home values, if lots of houses are standing vacant from foreclosure, and it's heartless to toss little kids and old people out into the street. But I don't see much support for the government (us) actually paying for other people's home devaluations through our taxes, when many of us homeowners were careful to AVOID taking a big hit--that's a line I won't cross, because while I think adjustments should be made so that people can stay in their homes, I still believe they have to (eventually) pay back what they bought the house for--is that too heartless for some here, the idea of making people pay back their own debts, rather than ME and YOU paying back their debts (while still paying on ours)? There's a difference between helping desperate people keep their homes so their lives aren't dirsupted or ruined, and cushioning the blow from a bad deal with taxpayer money.

[stillcool]

44. I thought I made that clear..

she is not expecting one damn dime from you or anyone else. What I take offense at is you in effect calling my niece stupid, and deserving of her now frightening financial position. She bought the most reasonably priced home, that she could afford, in the area she has lived in for her entire life. Oh yeah...her husband did all the renovations needed before they could move in. So what, does that make them on a par with you now, not quite as 'less than'? I really hope that you don't lose any value on your home. That would truly be unfair.

[TwilightGardener]

46. You are trying to make this into a personal thing, and it's not. I don't

give a good god damn about whether your niece is brilliant, stupid, or somewhere in between, or what her personal circumstances are. I am talking about the stupidity of buying way-overvalued houses--that's what the bubble was all about, and some people bought into it, banks, investors, and homeowners alike. And now we're all paying--almost all of us might experience some value loss, no matter where we live--houses are sitting on the market, new houses might not get built, etc. We all do stupid things in life with money, it's not a crime, but it's also not a crime to say so--acknowledging a big mistake is the first step to learning from it. But I won't apologize for being resentful of any scheme that takes my money to pay for someone else's bad investment (the same way I do resent the bailout, although it may have been necessary).

[stillcool]

50. well gosh...for many of us..

it is a personal thing. Really personal. I'm sure it is very personal to you as well, that you might be adversely affected monetarily by the housing boom and collapse. I wish you all the best. Far more than you apparently care to wish others.

[Lance_Boyle]

42. maybe not an idiot, but still

your point is valid. Take new car financing for example. You secure a loan to buy a new car, and the loan is for the full value of the new car. So you sign on the dotted line and drive the car off the lot. The car is now worth SUBSTANTIALLY less than the loan amount, through no fault of the borrower - that's just the nature of asset depreciation in cars. But this plan seems to be saying "whoa! that car is now worth much less than you agreed to pay for it - let's re-write that loan using the value of the car after it left the lot, and the dealer can just eat the loss." Except McCain now wants the taxpayers to make up the difference to the dealer, so really we all take the hit, except for the buyer, who gets a fresh-off-the-lot new car for the price of a used car. I think you and I and most other people of sense can be forgiven for thinking that this gift to the car-buyer at taxpayers' expense is full of shit.

[last1standing]

8. That's fine but your comment doesn't address any of my concerns about predatory lending.

Those who were victims of predatory lending are the ones who will not benefit from mcsame's scheme. He only supports providing help for those who had "substantial down payments" to put down on the home to begin with. Most of those in trouble now didn't have that kind of cash but were pushed into loans any finance major would know they couldn't afford.

But mcsame leaves them out in the cold - literally.

[dipsydoodle]

40. I wasn't supporting Mccain's proposal

which as I'd said he stole from Forbes - he then abbreviated it. Forbes said ALL mortages - I assumed that exclude only investment ones. Victims of predatory lending wouldv'e been protected under the scheme one of their guys suggested.

[Vinca]

6. Shouldn't a plan like this drive his base nuts?

Maybe I should say nuttier.

[Oregone]

10. Why exactly is this a bad plan?

Other than the fact that Republicans will hate it?

Isn't he saying the government will purchase loans, then move them to better terms to keep people in their homes? I mean, what the hell else are we supposed to do right now? Thats really the question.

[TwilightGardener]

13. "Better terms" would be renegotiating the interest terms, or re-payment terms, or

some other type of help for people about to be foreclosed upon who were victims of predatory lending. I don't think giving you my tax money, so that the nice big house with a three-car garage that you bought on the high side is now just as cheap and affordable for you as if you had bought a smaller house with a one-car garage in a crappier neighborhood, is very fair.

[Oregone]

19. Life isn't fair

Sustaining the housing market to is vital to solving this mess, as that is the source for the faulty mortgage backed securities. As Soros was saying, this isn't about morality. It is about keeping the system from being completely broken.

Renegotiating the interest terms, or re-payment terms, is quite a bit easier when the government is the owner of the loans (and the government should stand to potentially make the money back via interest if the loan is paid in full-term). As far as the principle, you know, Im not sure. Obama is in favor of this. All I can say, life is not fair and these are extreme times calling for extreme measures. A lot of that principle people are paying on is fradulant, pumped up by realtors, accessors working for/with the banks, and the banks looking to loan. The bubble was virtual shit money that just perhaps ordinary people shouldn't be stuck paying the rest of your life.

Your counter argument is that of those right-wingers who point out the welfare-queens. "Oh, look at those people! Thats why we need to get rid of welfare. Its not fair when we work so hard and they game the system!".

Well, the system gamed a lot of homeowners, and a lot of people are upside down, paying on values that should have never been offered, appraised at, or loaned upon. And they were all told the entire time it was on the up-and-up.

You are using an extreme example of someone who bought something huge, assuming they will get help when someone who lived the "proper" way won't. But this could help anyone and everyone (If done properly, which McCain will not do).

The basic idea of the government buying loans (at a discount to principle value ONLY, being that the loan is high risk) and setting the terms/rate/principle is not a bad idea. If done properly, the government can break even, save the housing market, and keep a lot of people in there homes.

[Scully]

23. Better terms....

You know, I don't post much. I've been around here since early 2003, and rarely do I chime in because often my thoughts are posed much more elegantly by other posters. This time, this issue - I can't keep quiet. It strikes a chord with me because I just purchased my first home back in April, after many years of saving, much research on property values, and attaining an income level I felt was sufficient for the amount of house I wished to purchase. While I am wholeheartedly in favor of penalty-free refinancing, a complete overhaul of interest terms, and reductions in payment terms for those who are truly victims of predatory lending, I grate at the possibility of a reduction in mortgage principal- a reduction which, as a previous poster pointed out, would allow incredible profits to the home "owner" once the market rises, at the expense of the taxpayers.

Rather than reducing mortgage principal in conjunction with the interest and payment reductions, I think a far better solution would be allowing these specific refinanced homes to be willed to next-of-kin with the mortgage payments, equity, etc. intact- in essence allowing next-of-kin to assume the mortgage. That way, you keep people in their homes at reasonable payments, but the whole of the amount borrowed will eventually be paid back either via the assumption of payment or the sale of the home. This addresses the arguments that the home will never be paid for in one lifetime at lower payments. Yes, it causes banks to eat interest that they would otherwise be getting, but they would in the other plan as well- at least this way they eventually get the principal loaned back.

Maybe that's a naive plan- I'm not an expert on home-buying nor on inheritance laws, so maybe this couldn't work, or there are other issues I'm not considering. I just know that, while I want to help my fellow human beings out, reducing mortgage principal creates inequities that I am just not comfortable with.

[Oregone]

35. Regarding a reduction in mortgage principal

If a person spent every day of their life being told by the media and environment that "buying any house is a good idea", that "the "value will never go down", and that "home buying is the best investment"...

If a the realtors then spent all their time collectively ensuring values would always sky rocketed to ensure their commissions increased...

If banks then made sure their appraisals always came in at the buying price (mine was exactly on the mark) to ensure the loan went through, they convinced people they could afford loans of massive amounts, and they used high risk lending to increase profits, knowing the loans were insured by "swaps"...

Don't you think some people entered contracts to pay on principal that was FAR higher than the real value of the home? So the unregulated markets produced an environment that made people 1) convinced it was worth paying that much and 2) convinced they could pay that much.

The principal that people are paying on...well its based on a value that doesn't exist and never really did exist (as are the swaps which are failing).

You know...hell, you buy something at Walmart that goes on sale the next day, you can take the product in and get the rest of the money back....

Yes, they made an agreement, but if people are going to lose their homes, what the hell are you going to do? People are stuck paying on principal, and the interest on it, which doesn't exist and should never have existed. Look, maybe the government could do this and buy up a share in the homes they actually save, such that they may reap a profit upon the home sale in the future (or, simply the share could be bought back at the original value by the owner).

It might seem wrong and strange. There is a lot more out there that is backwards right now, like the way we are bailing out whole companies. I just often think of Soro's quote, which puts it into perspective:

"Saving the system trumps moral hazard. In the end you do whatever it takes to save the system"

[TwilightGardener]

36. That's an interesting idea, actually. I don't know enough to say it would work,

but it's worth thinking through.

[last1standing]

18. Mcsame's plan would benefit only those who already had money.

It excludes everyone who was tricked into more than they could afford by predatory lenders. The details state that only those with a substantial down payment, good credit, and able to show that they could "afford" the home when they bought it would be covered. How does this help those who really need support?

[Oregone]

20. Gotcha. The devil is in the details...

Although I would qualify for it, I probably don't need it, right? :)

I do not disagree with the overall concept though fundamentally if done correctly, because they could offer incredible terms.

Too bad I couldn't get loan from the government originally at 2-3% interest (what they lend the money originally to the banks at!).

Somehow it always seems wrong that poor people pay so much more for homes than rich people, due to amortized loans...hell, it costs $176K to borrow $125 K, making a $125 K home to a poor person cost $300 K. Thats a tangent though

[Zuiderelle]

15. And what the hell would that do to help people who are ABOUT to default on their mortgages.?

What a truly idiotic "plan."

[Faith No More]

17. Wait a minute, wasn't this already a part of the $700 billion bailout???

I think that this old shit is trying to pull something. From what I understand, there was already wording in the bailout agreement just passed to do exactly what McCain was talking about. This isn't part of his damn plan at all. He is stealing this and calling it his. Check it out.

[David__77]

21. What about those of us who stayed out of the market, waiting for prices to drop?

The only thing good is that this would not necessarily do anything to promote higher housing prices. But what about those who used their homes as an ATM? People with second mortgages and lines of credit? Would they be rewarded for their caprice?

[David__77]

22. Dupe oops...

[truthisfreedom]

25. Out. Of. His. Friggin'. Mind. His base will go berzerk if he adds more taxpayer-paid bailout

to this ever-widening debacle.

Hey John, can I get a free bailout too?

[BootinUp]

30. This is an attempt to borrow some votes on political credit

but the political institutions are over leveraged me thinks.

[ozymandius]

53. Oh. Dear. God. Make. The. Stupid. Stop.

Trying to bribe people with their own money again. Fucking typical. I really wish he would have his lips surgically sealed.