(AFP) – Oct 7, 2008
NASHVILLE, Tennessee (AFP) — The US government would snap up 300 billion dollars of bad home loans, Republican John McCain vowed Tuesday unveiling a new plan to help struggling homeowners if he is elected president.
"People are no longer able to afford their mortgage payments," said McCain as he laid out what he billed as an original proposal for addressing the grassroots impact of the Wall Street credit crisis.
"As president of the United States, I would order the secretary of the treasury to immediately buy up the bad home loan mortgages in America and renegotiate at the new value of those homes, at the diminished value of those homes," he said.
Doing so would enable struggling homeowners to meet their mortgage payments and stay in their homes, he told the second of three presidential debates with Democratic rival Barack Obama.
"Is it expensive? Yes," he said. "But we all know, my friends, that until we stabilize home values in America, we're never going to start turning around and creating jobs and fixing our economy.
"We've got to give some trust and confidence back to America. I know how to do that, my friends, and it's my proposal. It's not Senator Obama's proposal. It's not President Bush's proposal. I know how to get America working again."
In a statement issued minutes after McCain spoke, his campaign said the "McCain Resurgence Plan" -- as it branded the proposal -- would purchase mortgages directly from homeowners and mortgage servicers, and replace them with fixed-rate mortgages.
Such mortgages would enable families to stay in their homes, it said.
"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," it said.
"The direct cost of this plan would be roughly 300 billion dollars because the purchase of mortgages would relieve homeowners of 'negative equity' in some homes," it said.
The McCain plan would be available to mortgage holders who are living in the house as a primary residence, and who can prove their creditworthiness at the time of the original loan.
It suggested that the funds laid out in the 700-billion dollar Wall Street bailout plan approved by Congress on Friday could be used for this plan.
"Indeed by stabilizing mortgages it will likely be possible to avoid some purposes previously assumed needed in that bill," the McCain campaign said.
Global markets have gone into freefall triggered by the banks' over-exposure to the US subprime mortgage crisis which has saddled financial institutions with mountains of toxic loans.
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