Finally, the day is almost here. I hope everyone is going to get out and vote tomorrow. I’d like to take this opportunity to highlight what each candidate has said about how he will handle the mortgage crisis. The next president will make decisions that greatly impact the mortgage industry, which will in turn affect the economy. Weigh both sides and consider their stances carefully when you enter the voting booth tomorrow.
ILLINOIS DEMOCRATIC SEN. BARACK OBAMA:
Obama called for the Treasury to require financial institutions receiving help from the financial rescue package passed in October to put a 90-day moratorium on foreclosures for homeowners “acting in good faith.”
He has called for a change to the bankruptcy law that would let bankruptcy judges reduce mortgage principals for bankruptcy filers. Proponents say such a change would encourage lenders to modify more loans for troubled borrowers rather than risk the loan being rewritten by a judge. Opponents say the change could cause a rise in interest rates because mortgage investors would price in the risk of new loan terms.
Obama has also called for the creation of a fund to help state and local governments ward off foreclosures. And he wants to boost penalties and law enforcement to fight mortgage fraud.
He supported the government’s takeover of mortgage giants Fannie Mae and Freddie Mac in September as a stop-gap measure. But he has called for reform of the agencies so that ultimately their public functions will be completely disentangled from their private ones.
More broadly, Obama has proposed giving a tax credit to homeowners who don’t itemize deductions and don’t get a tax break for the mortgage interest they pay.
ARIZONA REPUBLICAN SEN. JOHN MCCAIN:
In March, McCain said, “government assistance to the banking system should be based solely on preventing systemic risk.” At the time, he called on lenders to do more for borrowers.
“They’ve been asking the government to help them out,” McCain said. “I’m now calling upon them to help their customers, and their nation out. It’s time to help American families.”
In October, McCain said $300 billion of the $700 billion federal financial rescue program should be used to buy loans of troubled borrowers and then write them down to affordable levels.
The McCain plan would put the full impact of any losses on the Treasury and none on the lender since the government would simply buy the loans from the lender as is, even if a borrower’s mortgage debt exceeded his home’s worth.
McCain has also called for reform of mortgage giants Fannie Mae and Freddie Mac — two government-sponsored enterprises that the government effectively took over in September. Ultimately, he’d like to see them fully privatized, but in the near-term he wants stronger oversight of the agencies and has supported the government takeover.
He has also proposed creating a task force to assist state attorneys general investigating abusive lending practices and wants more transparency in the lending process.
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