McCain Opens Up

NEW YORK (CNNMoney.com) -- Sen. John McCain on Thursday offered his most detailed ideas to date for easing the strains of the economic downturn and the mortgage crisis.

The presumptive Republican presidential nominee's speech touched on jobs, gas prices and the need to make loans more affordable for homeowners. He addressed a small business roundtable in Brooklyn, N.Y.
McCain introduced what he is calling his "HOME Plan," which blends elements of mortgage rescue proposals by the Bush administration, the Office of Thrift Supervision, House Financial Services Chairman Barney Frank, D-Mass., and Senate Banking Chairman Chris Dodd, D-Conn.

"It offers every deserving American family or homeowner the opportunity to trade a burdensome mortgage for a manageable loan that reflects the market value of their home," McCain said. "People decide if they need help, they apply for assistance and, if approved, the government under my HOME Program supports them in getting a new mortgage that they can afford."
To qualify for McCain's HOME Plan, a borrower's home would have to be a primary residence. In addition, the government would verify that the owner told the truth about his financial situation when he applied for the original mortgage and was able to make a down payment when getting his original loan, according to a campaign adviser.
Lenders would voluntarily write down the loans based on the home's current market value and give the borrower at least a 10% equity stake. If the borrower later sells the home at a price higher than the refinanced loan, the lender and the federal government each would receive a portion of the sales price. They would be entitled to as much as one third of the loan's reduction in principal.

So under McCain's plan, if a borrower owes $150,000 on a home worth only $100,000, the lender would have to reduce the loan to $90,000. The $60,000 difference in principal would be split three ways: The lender and federal government would get as much as $20,000 each, depending on how much the home sells for when the borrower moves, and the owner would get the rest.
The new mortgage would be a 30-year fixed rate loan, and the government would back 80% of the new loan.
McCain said he opposes funds to purchase homes in foreclosure and tax breaks for homebuilders - both features of a Senate proposal passed Thursday.
McCain also called for the creation of a Department of Justice task force to investigate mortgage crimes involving lending and securitizing home loans.
"If there were individuals or firms that defrauded innocent homeowners or forged loan application documents, then the punishments of the market are not enough, and they must answer for their conduct in a court of law," he said.

Focus on jobs, gas prices
McCain proposed a revamp of unemployment benefits. Rather than have a fixed amount of time during which workers can collect unemployment benefits - currently up to 26 weeks - McCain recommended that the taxes workers pay into the unemployment insurance system be set aside in their own account "a buffer ... against lost earnings."
To help keep the price of gas down, he pledged to stop adding to the country's Strategic Petroleum Reserve - which the Bush administration has been adding to in order to prevent a disruption in the oil supply. By suspending the stockpiling of oil, McCain believes it would lessen worldwide demand for oil and push down the price.