McCain’s debate night bombshell

October 8, 2008

Town-Hall Debate October 7th, 2008Did you see the debate last night?

During one of the questions about the economy and the financial crisis, McCain dropped a bombshell!

When Tom Brokaw asked about what needs to be done to help the housing market, McCain suggested that Government should buy back all these defaulted loans and then give these people new loans at the current market value of the home. Hmmmm. Will this work? I think not. Why?

Well, let’s see how this would work…

  1. Joe Homeowner has a house that he bought for $500,000 with a loan from Fly-By-Night Subprime Lending, Inc.
  2. The house is now worth $400,000
  3. Joe, like everyone else, has lost a lot of equity in his home
  4. Unlike other Americans who are responsible and ARE paying their mortgage, Joe qualifies for the Government to buy back his subprime mortgage, because he’s NOT paying his mortgage.
  5. The Feds buy his mortgage for $500,000 and immediately give him a new mortgage at $400,000, which he may or may not be able to afford
  6. So now Joe is happy, but only until he can’t make his payments again…
  7. Good ole’ taxpayers absorb a $100,000 loss
  8. Multiply by millions of upside-down loans.

So let me ask one simple question - Does this make sense to you??  I suspect there will be a lot of responsible homeowners who are diligently paying their mortgage who will be awfully pissed off that they won’t be getting THEIR mortgage bought by Uncle Sam and reset to current market value.

Don’t get me wrong - I am not against McCain, and this isn’t about one presidential candidate or another.  I’m simply saying that this plan does not make sense.  However, I haven’t heard either candidate or anyone in congress or the treasury or the federal reserve or the private sector suggest something that might actually work to solve this mortgage mess.  Although today, Barack Obama rejected McCain’s plan, and his economic adviser said that McCain’s plan would cause the U.S. Government “to massively overpay for mortgages in a plan that would guarantee taxpayers lose money, and put them at risk of losing even more if home values don’t recover. The biggest beneficiaries of this plan will be the same financial institutions that got us into this mess, some of whom even committed fraud.”

Let’s hope that someone is smart enough to figure out how to use that $700,000,000,000 to get the housing market back on track.

In the meantime, I’m proceeding under the assumption that for the forseeable future, people will need to do a short sale and get their lender to take the loss.  So if you know of someone who is underwater and stuggling to keep up with their higher payments as their loan resets to a higher interest rate, tell them you know a foreclosure consultant who can help.  I’d be delighted to talk to them.

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Written by Bart Marchioni, Certified Foreclosure & Short Sale Specialist · Filed Under Consumer, Industry, Lenders, Mortgages, Real estate | 4 Comments