John McCain launched a new plan today to purchase mortgages directly from struggling homeowners, using $300 billion of the $700 billion provided in Congress’s financial rescue package.
McCain first mentioned the plan in last night’s presidential debate, and today the Arizona senator’s campaign rolled it out in full, detailing it in an e-mail to supporters and on a conference call with the media.
Under the plan, McCain would direct his Treasury secretary to implement the plan, buying up individual mortgages and replacing them with fixed-rate mortgages insured by the Federal Housing Administration (FHA) at a rate of around five percent, his campaign says.
McCain economic adviser Doug Holtz-Eakin outlined how the process would work on a conference call with reporters today.
“A homeowner would initiate the process by calling a mortgage broker or other originator and basically saying, ‘I’d like to refinance my home.’ They would start the underwriting process, verify incomes,” Holtz-Eakin said. “This is an opportunity as well to make sure the program has in it appropriate checks to make sure that government money is not being given to folks who are not primary homeowners, who don’t have adequate income, or otherwise, in the initial purchase of their home didn’t provide valid information.”
Those mortgages would be bought by the Treasury, and the FHA would issue guaranteed, thirty-year, fixed-rate mortgages in their stead, according to Holtz-Eakin.
Homeowners would have to meet two qualifications to enroll in the plan. They would have to live in the home as a primary residence, and they would have to prove their creditworthiness at the time of the original loan.