Blue Mass Group

Reality-based commentary on politics.

McCain’s $300M Mortgage Buy-Out Gimmick — DOA?

By

I know TARP is brand-new and is hundreds of pages longer than the original 3-page idea presented by the Bush Administration, but still, you’d have thunk that someone might have vetted the idea. But then, McCain’s campaign is now clearly so panicked that no one probably thought through this question or felt that they had time to ask a lawyer to research its legality before launch.

But then, I’ve given up any hope that the McCain campaign is capable of feeling any sense of embarassment.  

Please share widely!
fb-share-icon
Tweet
0

Comments

  1. that they could seek an amendment to the law.  But why bother?  I mean, McCain’s thing is obviously a campaign stunt.  It has no hope of working.  No one outside the McCain campaign is taking it seriously, right?

  2. I didn’t see anything on his website. I’m sure he has one, but I cannot find it.

    <

    p>The Atlantic blogger just mentions the economic stimulus plan. How is some undefined injention of $50-75 going to accomplish anything?

    <

    p>And, David can you please explain the difference between McCain’s plan.

    <

    p>

    The McCain 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 McCain resurgence plan will eliminate uncertainty over defaults, support the value of mortgage-backed derivatives and alleviate risks that are freezing financial markets.

    The McCain resurgence plan would be available to mortgage holders that:

       * Live in the home (primary residence only)

       * Can prove their creditworthiness at the time of the original loan (no falsifications and provided a down payment).

    The new mortgage would be an FHA-guaranteed fixed-rate mortgage at terms manageable for the homeowner.

    <

    p>And this, which you called “an interesting, and much more sophisticated, approach to keeping people in their homes”:

    <

    p>

    With regard to assisting homeowners, purchasing the bad mortgage securities from financial institutions will do nothing to help those homeowners because it does nothing to alter the cash flows expected of them. Congress will be a far better steward of public funds by offering distressed homeowners what amounts to a refinancing, coupled with a partial surrender of future appreciation.

    In practice, the homeowner would default on the existing mortgage, but the government would purchase the foreclosed property at an amount near existing foreclosure recovery rates (presently about 50% of mortgage face value). The government would then sell that home back to the owner with a zero-equity mortgage, allowing individuals to keep their homes. Importantly, there would be an additional, marketable lien placed on the property itself in the form of what might be called a “Property Appreciation Receipt” (PAR), which would be provided to the original mortgage lender. Though it would accrue no interest, it would provide a claim to the original lender on any appreciation in the value of the home up to the difference between the foreclosure proceeds and the original mortgage amount. Note that the PAR would only become relevant at the point that the government was fully repaid.

    <

    p>I am NOT trying to do a gotcha. I was about to agree with you that McCain’s plan sounded like a 12th-hour gimmick, but then I found your earlier comment, and I began to wonder if this isn’t a plan that’s had some vetting. They seem to have a lot of similarities.

Archives