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Sen. John McCain (R., Ariz.) has from time to time in his campaign for the White House proposed populist plans -- beginning with his gas-tax holiday in the spring. On Wednesday, his campaign unveiled its most recent populist iteration: the
McCain Resurgence Plan
, also known as the Homeowner Resurgence Plan.
The plan would offer assistance to struggling homeowners, leading to a resurgence in homeownership. It would use up to $300 billion of the money already allocated in the present $700 billion rescue plan authorized by Congress last week.
McCain's Web site briefly describes the working of the plan:
"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."
The plan would be available to homeowners under two circumstances: 1) the home is a primary residence, and 2) they can provide proof of credit worthiness at time of mortgage origination.
would oversee the new fixed-rate mortgages.
The McCain campaign hopes that this support for the
would stem the tide in housing prices, which have declined precipitously. The campaign Web site states:
"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's unclear if refinancing loans for credit-worthy individuals would help stabilize Wall Street banks. Credit default swaps were utilized to ensure the worst of the bond tranches, including people with bad credit and poor employment prospects. Those marginal homeowners would remain unaffected by the plan.
Moreover, some sources have suggested the number of effected homeowners would be relatively small. The McCain campaign hopes the plan would help millions of homeowners, but
, a conservative publication, suggests the plan would help only about 400,000.
Another question hounds McCain's plan -- how much does he pay lenders for the mortgage? It appears that he intends the government to purchase the mortgages at face value, which means that banks and mortgage lenders would get full face value and suffer no pain. The taxpayer would be on the hook for the bad decisions made by lending institutions.
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