An ad released Thursday, October 9, by Sen. Barack Obama's campaign, titled "Tested," takes aim at Sen. John McCain's mortgage plan. "McCain would shift the burden from lenders to taxpayers, guaranteeing a loss of taxpayer money," the ad's narrator says. "Who wins? The same lenders that caused the crisis in the first place."
Get the facts!
The ad refers to a plan McCain announced during a debate Tuesday night in Nashville, Tennessee. "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 payments and stay in their homes," McCain said.
On his Web site, McCain calls it "an American Homeownership Resurgence Plan." Under his plan, the government would buy up some troubled mortgages at their full value - meaning the lenders would not take a loss. The government would then renegotiate those mortgages, so that eligible homeowners would be paying rates based on their homes' current, reduced value.
McCain previously supported renegotiating mortgages with lenders, who would take losses. His economic adviser, Douglas Holtz-Eakin, told reporters Wednesday that McCain now believes having the government pay the entire value of the loans is "the only way" to begin stabilizing the housing market "in a timely fashion."
Obama, in his ad, highlights this quote from a CNNMoney.com story: "Much of the burden of paying to keep troubled borrowers in their homes will shift to taxpayers." The McCain campaign acknowledged that point, both on a conference call with Holtz-Eakin on the day after the debate and in a follow-up interview with CNN's Les Christie, writer of the CNNMoney.com story.
The McCain campaign says the plan would cost about $300 billion. "Funds provided by Congress in (the) recent financial market stabilization bill can be used for this purpose; indeed by stabilizing mortgages it will likely be possible to avoid some purposes previously assumed needed in that bill," the campaign Web site says.
McCain's plan puts him at odds with a bill adopted by Congress in July that required lenders to write down mortgage balances to 90 percent of a home's current market value in order to qualify for refinancing insured by the Federal Housing Administration. Neither McCain nor Obama voted on that bill.
While the Obama ad refers to "lenders that caused the crisis in the first place," Obama himself has been using slightly different language on the stump, referring to lenders who "helped create this mess in the first place." But the substance of Obama's attack has not changed.
True. The McCain campaign acknowledges the plan would shift the burden to taxpayers.