Senator McCain sent an email out to supporters describing in more detail the Homeownership Resurgence Plan he alluded to during this week's Presidential debate. The plan sounds reasonable. As I understand it, rather than taxpayers footing the bill for failed mortgages, the government would purchase failing, bloated mortgages that are about to be foreclosed. The mortgages would then be rewritten on more affordable terms, and the homeowners would continue to make their mortgage payments under the new terms -- payments that are more affordable and would keep the homeowners in their house and off the street.
For example, rather than losing their home because the current mortgage is for more than the value of the home and the payments are out of reach, the mortgage might be rewritten for less and the payments made more affordable. Instead of paying on a $300,000 mortgage for a home valued at, say, $210,000, the Homeownership Resurgence Plan might rewrite that mortgage at $240,000, greatly reducing the principle and interest and putting the monthly payment within reach, while only absorbing twenty percent of the debt instead of the whole mortgage.
To me, a taxpayer in his first home, who did not purchase outside of his means and doesn't really want to foot the bill to save those who did, this plan still sounds like the best option I have heard so far. The taxpayers get hit for some of the debt, but not the whole bill, while homeowners are given a second chance to keep their home. The market doesn't become swamped with recently foreclosed homes, putting the government into the real estate business, and the homeless population doesn't see a sudden huge increase. I could endorse such a plan as this, as I understand it.
What I would like to see is two additional things: first, the Community Reinvestment Act must be scrapped. You can assign blame to whatever party you choose, but Presidents from both parties have had their hands in the shaping of this act, originally signed into law by President Carter (Democrat from Georgia) in 1977. The law was bad then and has never become better. It virtually forced lending institutions to make loans to people who were financially unable or historically unwilling to repay their debt. That's not Capitalism, and it is not the makings of a free market Republic. First and foremost, this act must be immediately repealed, and must included legislation preventing Congress from passing the same act under another name.
Second, legislation and a plan must be implemented preventing double-dipping in the Homeownership Resurgence Plan. Those who take advantage of the plan must be held accountable for their new mortgage as should be expected of any borrower. There should be limitations put upon the beneficiaries of this plan that prevent refinancing of the new mortgages and bankruptcy discharges. This must be a one shot deal: either you make it under the new mortgage, or you don't. Those who show that they aren't willing to do their part to ensure that they keep their home should not expect nor be allowed to take advantage of the system a third time.
Senator McCain's letter follows below. [What, if anything, has the other party's candidate proposed?]
I'd love you know what you think. Your comments?
Joe
My Friends,
Millions of Americans on Main Street are feeling the effects of our current economic crisis largely brought on by corruption and greed at Fannie Mae, Freddie Mac and Wall Street. Our next president must come into office with a plan to address the very root the failing housing market.
Last night, during my debate with Senator Obama, I announced my plan to fix the root of our problem and I'd like to share a little more with you today.
If elected president, I will direct my Treasury Secretary to implement an American Homeownership Resurgence Plan to keep families in their homes, avoid foreclosures, save failing neighborhoods, stabilize the housing market and attack the roots of our financial crisis.
America's families are bearing a heavy burden from falling housing prices, mortgage delinquencies, foreclosures, and a weak economy. It is important that those families who have worked hard enough to finance homeownership not have that dream crushed under the weight of the wrong mortgage.
For those that cannot make inflated payments or their mortgage exceeds the value of their home, mortgages must be re-structured to put losses on the books and put homeowners in manageable mortgages.
This Resurgence Plan would purchase mortgages directly from homeowners and mortgage servicers, and replace them with manageable, fixed-rate mortgages that will keep families in their homes.
By purchasing the existing, failing mortgages the resurgence plan will eliminate uncertainty over defaults, support the value of mortgage-backed derivatives and alleviate risks that are freezing financial markets.
I am ready to lead our country out of this financial crisis and I am ready to work with anyone and everyone who will help. Together, I know we can work together to find solutions for these challenging times. Please do your part today and spread the word about my new plan by forwarding this email on to your neighbors, friends, family and coworkers. Thank you for your time and support.
Sincerely,
John McCain
P.S. Homeownership represents the very core of our American economic system. This is not the time for politics. We must move aggressively to provide relief and stability for all Americans.
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