McCain Mortgage Debate – Take Two

Like a nice pair of flip flops, Senator John McCain seems to be flipping and flopping back and forth on this mortgage crisis issue. What’s his latest position? Bail out or no bail out?

Two weeks ago, I posted on McCain’s claim that mortgage lenders should have a “similar response” as GM during the 9/11 crisis (when GM offered 0% financing on their autos to help the economy) and that the government should not be bailing out “speculators” (”0% Mortgages? Yeah right, McCain!“). As you can imagine, his “do nothing” mortgage crisis solution spurred a firestorm of criticism and debate.

McCain appears to have flipped his position, according to critics, by unveiling a new plan during a speech in Pittsburgh last Thursday. From The National Review:

He [McCain] proposed something he calls the HOME plan, under which distressed homeowners could apply to the government for help. If they qualify under the terms of the plan, their mortgage servicers would be required to write down and retire their current mortgage, and they would be given a new loan backed by the Federal Housing Administration.

McCain says this plan is focused on not helping the “speculators”, but rather, according to The LA Times, helping those that are “deserving”:

McCain . . . said, “There is nothing more important than keeping alive the American dream to own your home, and priority No. 1 is to keep well-meaning, deserving homeowners who are facing foreclosure in their homes.”

The LA Times also stated that McCain’s plan would help many homeowners while costing a lot less than other proposed plans:

McCain’s aides said his home mortgage plan could help 200,000 to 400,000 people and cost $3 billion to $10 billion. That would be far less than the proposals offered by Clinton and Obama, but McCain aides said it would be bigger than the efforts envisioned by the Bush administration.

The plan would retire old loans that homeowners no longer can pay and replace them with less expensive, 30-year, fixed-rate mortgages that are federally guaranteed. McCain said families would gain “the opportunity to trade a burdensome mortgage for a manageable loan that reflects the market value of their home.”

As expected, Senators Hillary Clinton and Barak Obama (and even the New York Times) were ready to chime in with criticism. According to CNN, they “say McCain’s housing crisis plan marks a last-minute shift in his policy.” The New York Times article stated, “In both tone and substance, Mr. McCain’s speech was a departure from the remarks he made last month in California.”

However, in McCain’s defense, some of the criticism is a little blown out of proportion. In his Santa Ana speech (which spurred this heated debate), McCain said (per the Chicago Tribune):

“In our effort to help deserving homeowners, no assistance should be given to speculators. Any assistance for borrowers should be focused solely on homeowners, not people who bought houses for speculative purposes, to rent or as second homes. Any assistance must be temporary and must not reward people who were irresponsible at the expense of those who weren’t.”

Nowhere does he say that nothing should be done, but just the opposite. He acknowledges their future effort and assistance. The McCain campaign is trying to get the facts out there, too. According to CNN:

. . . a document entitled “Myth vs. Fact: John McCain on Housing,” released by the McCain campaign on Friday, argues that federal spending to bail out struggling homeowners is not a shift and has been part of McCain’s strategy all along.

So, really the debate can go either way. Whether McCain flipped and flopped or not, the real question is if his HOME plan would work. Regardless, the housing crisis is a nasty tangled web of “ick”… add to it a presidential race and you’ve got one hell of a mess. Bottom line: there’s no easy way out.