At least it seems that way from this recent rhetoric on the matter. Here is the McCain plan:
McCain's proposal would devote nearly half the $700 billion from the recent financial rescue package to buying troubled mortgages directly, rather than indirectly aiding the nation's financial markets. The government would buy distressed home loans at their face value, said campaign spokesman Brian Rogers. Then it would pay the difference between a mortgage's original value and its renegotiated, lower value.
It seems sound because it actually attacks the root of the problem instead of buying bad loan instruments from banks. If house prices go up then it fixes the bad debt and keeps more people from going upside down on their home. McCain's plan hinges on whether or not the majority of the housing foreclosures have been flushed out of the market or not. I think most of the really bad stuff is out of the market so his plan needs to be seriously vetted. Here is the Obama campaign's boneheaded response.
The plan would cause the 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," Obama economic adviser Jason Furman said in a statement. "The biggest beneficiaries of this plan will be the same financial institutions that got us into this mess, some of whom even committed fraud."
I think someone needs to tell Jason Furman that home values will eventually recover no matter what happens. Demand will just have to be higher then supply for equity to start to build in peoples homes again. Some areas might not recover for years but to say that home values might not recover in 30 years of the life of the loan flies in the face of history. I mean land is one of the few things you can't make more of.
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