McCain Wants to Buy Up Bad Mortgages

Republican presidential candidate John McCain proposed during Tuesday night’s debate using $300 billion of the $700 billion of the financial bailout money to buy up bad home mortgages, instead of rescuing the financial markets.

“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 values of those homes and let people be able to make those payments and stay in their homes,” he said.

Democratic nominee Barack Obama last month sounded a similar theme, proposing that the government consider taking such a step.

But McCain’s approach was far more unequivocal.

A background paper provided by the McCain campaign said the plan “could be implemented quickly as a result of the authorities provided in the stabilization bill, the recent housing bill, and the U.S. government’s conservatorship of Fannie Mae and Freddie Mac.”

It was unclear, either from McCain’s remarks or from the backup materials provided by the campaign, how such a massive plan would be administered. Though McCain, a budget hawk and critic of rising federal spending, did concede one point. “Is it expensive? Yes,” he said.

Source: The Associated Press, Jim Kuhnhenn

Home Prices Fall to 2005 Levels

U.S. home prices fell 5.5 percent in July compared with the same month a year ago and are about equal to where they were in Oct. 2005, according to the Federal Housing Finance Agency.

Prices were down 0.6 percent from June on a seasonally adjusted basis, according to the agency.

James Lockhart, director of the agency, urged Fannie Mae and Freddie Mac to loosen lending standards to encourage more sales.

“I expect any changes to reflect both safe and sound business strategy and attentiveness to the (companies’) mission,” Lockhart said Tuesday in testimony prepared for a Senate Banking Committee hearing. He also said that modifying loans for troubled borrowers should be a “high priority.”

But some observers think availability of mortgages is only part of the problem. “The crash of other financial assets has made folks rather uncomfortable,” said Keith Gumbinger, a senior vice president with HSH Associates financial publisher. “It’s not about keeping Fannie and Freddie afloat any more.”

Source: The Associated Press, Alan Zibel (09/23