McCain camp: Mortgage proposal would help millions

Millions of distressed homeowners would get relief under the plan Sen. John McCain (R-Ariz.) unveiled Wednesday during the second presidential debate, a top McCain adviser told reporters.

Senior McCain policy adviser Doug Holtz-Eakin called the plan a “near-term stimulus to the overall economy,” and said it could help stabilize an economy increasingly seen as either in or on the verge of a recession.

{mosads}He also emphasized that the plan, which McCain said would cost around $300 billion, would put a focus on helping real homeowners, which would eventually help financiers on Wall Street.

In a conference call with reporters, Holtz-Eakin said that under the proposal, titled the American Homeownership Resurgence Plan, McCain would direct the Treasury Department to buy distressed mortgages from lenders and renegotiate them to help homeowners.

Holtz-Eakin said that the plan could include millions of homeowners and said that they would not have to be in the “throes of disclosure” to be eligible. Funds from the $700 billion bailout package and last summer’s $300 billion housing bill could be used, he said.

If successful, the plan could offset the need for the full $700 billion bailout. “This might relieve the need to purchase direct securities,” Holtz-Eakin said.

The McCain plan appears to differ from the housing bill approved by Congress in that lenders would not have to take a loss in order to take part in the program. The bill approved by Congress required lenders to take a loss by marking down the principal on mortgages they hold.

Asked why McCain did not offer the plan in the midst of negotiations over the bailout package, Holtz-Eakin emphasized that the authority for Treasury to purchase the mortgages is in that bill. He also said that bailout bill had to go through Congress, and suggested McCain was focused on getting a consensus from lawmakers on that bill.

As economic woes and the financial crisis on Wall Street have intensified, Sen. Barack Obama (D-Ill.) has strengthened in both national and battleground state polls. McCain’s proposal seems designed as a play to take the initiative on the economy, which is seen as the biggest issue in the election.

McCain introduced the proposal in the debate, stating, “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 and let people be able to make those — be able to make those payments and stay in their homes.

 “Is it expensive? Yes. But we all know, my friends, until we stabilize home values in America, we're never going to start turning around and creating jobs and fixing our economy. And we've got to give some trust and confidence back to America.”