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By Michael Abramowitz
http://voices.washingtonpost.com/the-trail/2008/10/08/mccain_adviser_offers_details.htmlIn a conference call with reporters this morning, Holtz-Eakin offered a few more details of the so-called American Homeownership Resurgence Plan, unveiled at the Tuesday night debate, in which a homeowner having difficulty making payments or facing foreclosure would be eligible for an FHA-insured mortgage. He said that some of the money for the new program, which could cost $300 billion, could come from the new $700 billion authority granted the Treasury Secretary to buy distressed assets; he also said some of the funds could also come from existing authority in the Federal Housing Administration.
Sorry, not enough details, John. Does anybody believe that $300 billion is enough to cover all of the 'underwater' mortgages in the country? And why didn't he get this mandated in to the bailout bill?
One sure bet, the right-wing Republican base is livid about this.
When his turn came, McCain said he'd protect home values by ordering the Treasury secretary to "immediately buy up the bad home loan mortgages in America" and renegotiate the terms so people could stay in their homes.
"I know how to do that, my friends," McCain said. "And it's my proposal, it's not Sen. Obama's proposal, it's not President Bush's proposal."
The problem, of course, is that it is President Bush's proposal. At least, it's Treasury Secretary Henry Paulson's proposal. It's the heart of the $700 billion plan.
According to Section 110 of the law, the government is going to buy up "troubled assets," including residential mortgages, and then do everything it can to "minimize foreclosures" by modifying the terms of the loans by reducing interest rates, reducing the principal or "other similar modifications."
After McCain suspended his campaign two weeks ago and rushed back to Washington to knock some heads together to get a rescue plan approved, he sheepishly admitted that he hadn't actually read the three-page Paulson plan all the way through. And even though he voted for it, it sounds like he still hasn't read it.
--Rex Nutting, Washington bureau chief
Link
My bet is that Paulson will use the authority to buy bundled mortgage securities and collaterial debt obligations )where the bundles were re-bundled) since they are the big buck items and he is a short timer. Only after they are unbundled could this work for an individual's mortgage. McCain made his plan sound like any persons 'having problems paying their mortgages' would get relief.
The devil is in the details. And in the discretion that the Treasury Secretary.
IMHO, this was a pure populist pander that McCain has no intention of following through on.
He flatlined- neither positive nor negative on a surprizing number of his proposals.
I agree Paulson will go for the securities themselves rather than the underlying mortgages. His priority is to unclog the credit markets immediately. These securities are useless as collatoral because everyone is skeptical about their value. Buying the underlying mortgages would indirectly bolster the strength of these securities, but that could take months if not years to restore the securities to the liquid status they had prior to the crisis.
BTW- It is my understanding that most of the mortgage backed securities are in instruments broadly described as CDOs, though there are more precise terms for the multiple variations. CDO's are the tranched (divided risk group) bundles. It is where you reallocate the risk by saying allocating the bundle into N number of securities. If there are any defaults, they come out of the lowest tranche securities first. That way the highest tranches easily get AAA rating while the middles get B's and the lowest "Toxic Waste" get the lowest. But the lowest get allocated the highest interest in exchange for the risk. Because these are difficult to sell, there are actually CDOs of CDOs, using the same mechanism of spliting or tranching into multiple groups, reallocating the risk/ rewards. These are called CDO2's (squared). There are even COD3's.
In the debate last night when McCain was trying to blame the FannieMae/FreddieMac failure on Obama he also placed the blame on the "people who took out mortgages they couldn't afford" then he spouts 'his plan' to help plummeting real estate values by allowing people renegotiate their upside-down mortgages. Yeh, right, he would support something like this when pigs take flight.
John McCain is a lying, pandering, political whore, who has been reduced to making stupid, idiotic claims. After Obama wins this election, I have a wonderful fantasy of McCain/Palin both standing on street corners 'sellin' it' for $20. bucks a pop.