McCain's new HOME plan (loans, insurance, small business, foreclosure)

[Anu2]

Below is an article from CNN.com on McCain's new HOME plan. I'm a little concerned with what he's come up with. I'm curious what everyone else thinks about this...

McCain takes on economy: Mortgages, jobs, gas
Presumptive Republican nominee for president would allow some troubled homeowners to get more affordable loans.

By Jeanne Sahadi, CNNMoney.com senior writer
Last Updated: April 10, 2008: 1:26 PM EDT


NEW YORK (CNNMoney.com) -- Sen. John McCain on Thursday offered his most detailed ideas to date for easing the strains of the economic downturn and the mortgage crisis.

The presumptive Republican presidential nominee's speech touched on jobs, gas prices and the need to make loans more affordable for homeowners. He addressed a small business roundtable in Brooklyn, N.Y.

McCain introduced what he is calling his "HOME Plan," which blends elements of mortgage rescue proposals by the Bush administration, the Office of Thrift Supervision, House Financial Services Chairman Barney Frank, D-Mass., and Senate Banking Chairman Chris Dodd, D-Conn. (Here's a look at each of those proposals.)

"It offers every deserving American family or homeowner the opportunity to trade a burdensome mortgage for a manageable loan that reflects the market value of their home," McCain said. "People decide if they need help, they apply for assistance and, if approved, the government under my HOME Program supports them in getting a new mortgage that they can afford."

To qualify for McCain's HOME Plan, a borrower's home would have to be a primary residence. In addition, the government would verify that the owner told the truth about his financial situation when he applied for the original mortgage and was able to make a down payment when getting his original loan, according to a campaign adviser.

Lenders would voluntarily write down the loans based on the home's current market value and give the borrower at least a 10% equity stake. If the borrower later sells the home at a price higher than the refinanced loan, the lender and the federal government each would receive a portion of the sales price. They would be entitled to as much as one third of the loan's reduction in principal.

So under McCain's plan, if a borrower owes $150,000 on a home worth only $100,000, the lender would have to reduce the loan to $90,000. The $60,000 difference in principal would be split three ways: The lender and federal government would get as much as $20,000 each, depending on how much the home sells for when the borrower moves, and the owner would get the rest.
The new mortgage would be a 30-year fixed rate loan, and the government would back 80% of the new loan.

McCain said he opposes funds to purchase homes in foreclosure and tax breaks for homebuilders - both features of a Senate proposal passed Thursday.

McCain also called for the creation of a Department of Justice task force to investigate mortgage crimes involving lending and securitizing home loans.

"If there were individuals or firms that defrauded innocent homeowners or forged loan application documents, then the punishments of the market are not enough, and they must answer for their conduct in a court of law," he said.

Focus on jobs, gas prices

McCain proposed a revamp of unemployment benefits. Rather than have a fixed amount of time during which workers can collect unemployment benefits - currently up to 26 weeks - McCain recommended that the taxes workers pay into the unemployment insurance system be set aside in their own account "a buffer ... against lost earnings."

To help keep the price of gas down, he pledged to stop adding to the country's Strategic Petroleum Reserve - which the Bush administration has been adding to in order to prevent a disruption in the oil supply. By suspending the stockpiling of oil, McCain believes it would lessen worldwide demand for oil and push down the price.

First Published: April 10, 2008: 12:21 PM EDT

[sean98125]

Cripes, let the market sort it out. Taxpayers shouldn't be left holding the bag for people who didn't do their homework before buying a home.

[70Ford]

I think, in the end, we will privatize the profits, and socialize the losses.

That's pretty much what we always do. Doesn't matter who is in charge.

Personally, I say we set the CEO's of any coorporation that had a part in this on a slow moving train moving across the U.S. - and throw tomatoes at them. Lots of tomatoes. It would be a tomato-gasm. Think of all those tomatoes that would be used. It would touch off a new bubble in spoiled acidic fruits. The market would go wild. Gold would drop to $1 an ounce as all investors streamed into the market of red, juicy vegetables with dollar bills held high.

"BUY!" "GET THOSE VITAMIN C PACKED JUICY THINGS!" "OMG, OMG, OMG!"

Bernanke woould be saved. The Fed would add 1000 basis points in July alone. George W.s approval rating would shoot to 98 percent. Only the tomato intollerant would disagree.

"Waste of perfectly good farm crops!" the old geezers would mumble, as they spat tabacco juice into the weeds. "Why, in my time, we'd a' used parsnips!"

[HappyTexan]

Well then we should hope housing values hit rock bottom so we can all "apply for help" and get new loans reflecting the "true value" of our homes.

Can't wait !

[CouponJack]

How is buying a home any different than buying a car w/a loan?

So, when my car depreciates right off the lot, can I refuse to pay?

This is silly. Its a market cycle and needs to be sorted out on its own.

Resi RE will come back, it always does. In this case its going to be a little longer and more severe than cycles in the past. Oh well, too bad. You have to take the good w/the bad.

I don't remember seeing anyone "bailout" first time homebuyers who were "shutout" of purchasing homes from 03-07 or so because of inflated prices...

What a joke

[HappyTexan]

But they want the good times to come back now so consumers can start spending again.

Remember this is the "I want it NOW" generation

[Buckhead_Broker]

Originally Posted by sean98125

Cripes, let the market sort it out. Taxpayers shouldn't be left holding the bag for people who didn't do their homework before buying a home.

Buy this man a beer! Hell, buy him a bunch of beer. And some food too! He's one of the few who "gets it".

[Anu2]

I wish the government had "saved" me when a bunch of my tech stocks became worthless after the tech bust in 2000. I had all my money in mutual funds and my stock broker convinced me to move everything into tech stocks. So, it was all his fault that I lost thousands and thousands of dollars, right? He took advantage of me just like the "predatory lenders" did with all of the "poor, unassuming people who were simply trying to live the American dream." The more I think about the bailout plan--especially this new one by McCain, the more annoyed I get.

[HappyTexan]

Hey..I'm waiting for the "401K bailout plan"

Gimme back my money I lost due to the subprime mess and what it did to the equity markets.

[Waterboy526]

Originally Posted by Buckhead_Broker

Buy this man a beer! Hell, buy him a bunch of beer. And some food too! He's one of the few who "gets it".

I would but have you seen the prices on beer lately!? I wanted to buy a 12-pack of Sam Adams Light the other day and it was $17 2 Years ago I was buying the same beer for $12.