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Substance Debate: McCain's financial solution
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Fatmouse
Oct 8, 08 12:13
Post #1 of 22 (278 views)
Substance Debate: McCain's financial solution
Can't Post
This is probably touched on in one of the other threads but I can't get through 100+ posts to get through the rhetoric to the meat.
Anyway, if I heard correctly, McCain proposed for the federal government to essentially buy the properties of people who are underwater. The government would then re-value the property and sell it back to the owner for the new value (at a better interest rate I am assuming). So, if someone's $200,000 house is now worth $150,000, McCain would cancel the initial mortgage and then offer it back to the owner at the new $150,000 price tag.
Is that right? Does that make sense?
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"Also, of course the United States can't do everything. It does not follow that we should do nothing." AF
kfc_bob
Oct 8, 08 12:18
Post #2 of 22 (266 views)
Re: Substance Debate: McCain's financial solution [Fatmouse]
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The problem with this approach (and it has been suggested previously) is that it is a dis-incentive to keep paying your mortgage. If you want to lower your principle, stop making payments and the government will redo your mortgage at a lower level.
TriStrut
Oct 8, 08 12:21
Post #3 of 22 (258 views)
Re: Substance Debate: McCain's financial solution [Fatmouse]
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I think you're right, based on an AP article I read (
http://hosted.ap.org/...amp;TEMPLATE=DEFAULT
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A few additional points that will probably draw in some partisan arguments (although that is not my intention):
The recent bailout bill gave that authority to the Treasury Dept., although it doesn't require the Treasury to use that authority. So I don't know if I would call it "his plan" - although his intent does seem to be to require Treasury to do so instead of leaving it up to them.
In an earlier speech in late September Obama also called for something similar (although not as detailed as McCain's plan)
r7950
Oct 8, 08 12:24
Post #4 of 22 (249 views)
Re: Substance Debate: McCain's financial solution [Fatmouse]
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Define "make sense"
If it is to pander to voters to gather votes, then yes, it makes sense for the politician.
To me, no it does not, if you can't afford to pay your mortgage, then you face the consequences. We're a capitalist economy last I checked, perhaps we should start acting like one. It also ends up penalizing the people who are responsible with their finances since they don't get a reduction.
There are three kinds of people, those who can count, and those who can't.
blueraider_mike
Oct 8, 08 12:26
Post #5 of 22 (245 views)
Re: Substance Debate: McCain's financial solution [Fatmouse]
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It doesn't make sense, but he really said it. Ronald Reagan is rolling over in his grave - and I am pissed as well, not that anyone cares.
David in FL
Oct 8, 08 12:27
Post #6 of 22 (244 views)
Re: Substance Debate: McCain's financial solution [Fatmouse]
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IMHO, an absolutely ridiculous proposal! Yet another example of how liberal McCain really is and why he was never my choice as nominee.
The libs should love this.....but since it's a Republican proposal, they'll pretend fiscal conservatism for as long as it takes to attack it.
"Far better it is to dare mighty things, to win glorious triumphs, even though checkered by failure than to rank with those poor spirits who neither enjoy much nor suffer much, because they live in a grey twilight that knows not victory nor defeat."
Theodore Roosevelt
Rob C in FL
Oct 8, 08 12:33
Post #7 of 22 (229 views)
Re: Substance Debate: McCain's financial solution [blueraider_mike]
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"Ronald Reagan is rolling over in his grave - and I am pissed as well, not that anyone cares."
As I pointed out on another thread, for someone who portrays himself as the small-government candidate, McCain is pretty wishy-washy about economic freedoms. But what else should one expect from the officially sponsored big-government candidate--that is, the one whose campaign is being bankrolled by the government, and who tries to pretend that that is a good thing?
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Rob Cunningham
http://www.humanactioncourse.info
Old and Haggard
Oct 8, 08 12:33
Post #8 of 22 (229 views)
Re: Substance Debate: McCain's financial solution [Fatmouse]
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Here's what would make more sense. Assert that all mortgages are either good (mortgagee can pay the bills) or not. Put in place a system whereby those mortgages in the latter category can be re-examined by a federal agency. Said examination will determine if the mortgagee can qualify (really qualify, as in show income and ability pay) for a mortgage at reasonable terms
for the full amount of the original mortgage
. Arrange refinancing at those reasonable terms, either through private lenders or through the federal agency. If mortgagee cannot qualify, then go through bankruptcy as usual, house goes back on the market.
This way, it will be known what the underlying value of those MBSs are, people who can afford their mortgage can keep their homes via refinancing (that is not currently available), those who can't will go back to renting where they belong, housing prices get back to some level of equilibrium. It doesn't matter if homeowners are underwater. Taxpayer funds are used to keep people who can afford it in their homes, not to purchase MBSs of dubious worth. Nobody gets a bailout.
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Ken Lehner
"reread klenher [sic] and pretty much skip the rest." - desert dude 5/25/2008
dreaming~big
Oct 8, 08 12:35
Post #9 of 22 (221 views)
Re: Substance Debate: McCain's financial solution [Old and Haggard]
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more socialism. whatever happened to
caveat emptor
?
Old and Haggard
Oct 8, 08 12:38
Post #10 of 22 (210 views)
Re: Substance Debate: McCain's financial solution [dreaming~big]
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more socialism. whatever happened to
caveat emptor
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Do you understand what happens to all of us if a lot of those mortgages go into default?
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Ken Lehner
"reread klenher [sic] and pretty much skip the rest." - desert dude 5/25/2008
dreaming~big
Oct 8, 08 12:39
Post #11 of 22 (204 views)
Re: Substance Debate: McCain's financial solution [Old and Haggard]
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tell us, o wise one. :) [wasn't that bernanke's schtick?]
IAMike
Oct 8, 08 12:45
Post #12 of 22 (188 views)
Re: Substance Debate: McCain's financial solution [Old and Haggard]
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Isn't BoA working on program like this? I thought I read that they were going to look at every mortgage that Countrywide did from like 2004 to 2008 and fix all of them. Something like capping the payments at 34% of documented income. They'd do it either via a reduction in the principal of the loan or by reducing the interest rate.
dave_w
Oct 8, 08 12:47
Post #13 of 22 (183 views)
Re: Substance Debate: McCain's financial solution [Old and Haggard]
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Here's what would make more sense. Assert that all mortgages are either good (mortgagee can pay the bills) or not. Put in place a system whereby those mortgages in the latter category can be re-examined by a federal agency. Said examination will determine if the mortgagee can qualify (really qualify, as in show income and ability pay) for a mortgage at reasonable terms
for the full amount of the original mortgage
. Arrange refinancing at those reasonable terms, either through private lenders or through the federal agency. If mortgagee cannot qualify, then go through bankruptcy as usual, house goes back on the market.
You may want to rethink that proposal, if for no other reason than because I agree with it. :) Pretty much what I've felt should happen all along, just put into one cogent paragraph.
ps. There was a push for banks to basically do this themselves, rather than watch their loans default. I wonder how effective it might have been if aggressively pursued.
"It's all about self-esteem"
dreaming~big
Oct 8, 08 12:47
Post #14 of 22 (183 views)
Re: Substance Debate: McCain's financial solution [IAMike]
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no prob with the banks renegotiating the terms of a *private* two-party contract. unfortunately, uncle sam isn't a party to any of those contracts.
MJuric
Oct 8, 08 12:53
Post #15 of 22 (170 views)
Re: Substance Debate: McCain's financial solution [Old and Haggard]
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I've been wondering why something similar hasn't been done a LONG time ago. What's the point of driving all these folks into bankruptcy if they can afford the house with a 50 year fixed APR loan?
In times past the banks would have said "See ya later, we'll get the cash out of the house" and moved on. That's no longer an option so why not move the other way?
~Matt
kfc_bob
Oct 8, 08 12:53
Post #16 of 22 (168 views)
Re: Substance Debate: McCain's financial solution [IAMike]
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Yes (to the BoA question), but they are working on assets they already own, and are under threat of a lawsuit (or have lost one) due to predatory lending from Countrywide.
The McCain plan is actually very similar to the bailout, and suffers from a similar problem: how do you value something that no one will buy? In essence the government is buying these mortgages from the banks in the form of these toxic bundled investment packages. Since no one is buying them there is a great deal of difficulty setting a fair price. Too low and the banks won't have enough cash to get the credit market rolling, too high and the taxpayer is ripped off.
Wish I had a link for this, but there is another alternative being floated where the government essentially buys shares of the banks, giving them the cash to get solvent quickly, getting the credit markets rolling, without having to do the painful legwork of figuring out the value of a lot of complex financial vehicles for which there is no market.
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ike
Oct 8, 08 12:53
Post #17 of 22 (166 views)
Re: Substance Debate: McCain's financial solution [Fatmouse]
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It also creates a huge problem valuing all those houses. Not only is it a nightmare to figure out given the volatility in housing prices, but there are huge incentives to cheat on the system. In your example, if you can get the appraiser to say your house is really only worth $130k, you just got another $20k free from the govt.
Another problem is determining what is "underwater." If the home equity is below the outstanding principal on the mortgage, but the owner has a good job, is the house "underwater"? If the answer is "yes" you're just giving away money to people who can afford to repay the mortage. If the answer is "no," you're giving them an incentive to quit their job, so that the govt has to give them $50k for the house.
dreaming~big
Oct 8, 08 12:58
Post #18 of 22 (155 views)
Re: Substance Debate: McCain's financial solution [ike]
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precisely. the disincentive is that normal working folks who routinely balance their budget ~~ dare we say the Joe Sixpacks of the country ~~ are getting disadvantaged in favor of the careless buyer who exercises poor fiscal judgment and inept personal accountability. poor public policy, at a minimum.
Old and Haggard
Oct 8, 08 12:58
Post #19 of 22 (155 views)
Re: Substance Debate: McCain's financial solution [dreaming~big]
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no prob with the banks renegotiating the terms of a *private* two-party contract. unfortunately, uncle sam isn't a party to any of those contracts.
Bankruptcy judges have the power to break contracts. Except for mortgages (makes you wonder who paid for that exemption, eh?). And it's not even a matter of renegotiating contracts in this case: the mortgage is paid off in full as in any refinancing.
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Ken Lehner
"reread klenher [sic] and pretty much skip the rest." - desert dude 5/25/2008
dreaming~big
Oct 8, 08 13:03
Post #20 of 22 (142 views)
Re: Substance Debate: McCain's financial solution [Old and Haggard]
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agreed. my only disagreement with your *federal agency* proposal is a preference that uncle sam keep his snoot out of my *stuff* whenever possible. that includes my house, my gun, my kids, my health care, blah blah. what's the state with the motto "don't tread on me?" :)
Tridiot
Oct 8, 08 17:50
Post #21 of 22 (65 views)
Re: Substance Debate: McCain's financial solution [David in FL]
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It was actually put forward by Hillary, so it'll be interesting to see how this is handled on both sides. (I guess Obama can say it was dumb when Hillary proposed it and it's dumber now that McCain has brought it back out)
Mito Chondria
Oct 8, 08 17:54
Post #22 of 22 (63 views)
Re: Substance Debate: McCain's financial solution [Fatmouse]
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McCain is an idiot and has no clue about economics. In one interview he said that if it were according to him Interest rates could always be "zero" percent. And now this.
This guy should be disqualified from even being the nominee. But you can thank the media and the voters that supported him in the Primaries for that.
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