Last night, I was in a blogger chat with other folks and when I heard that J-Mac proposed 350 billion in additional funds for a bailout, I, like many of our brethern lost my head and called him a socialist. Anyway, as Hannity says, “let not your heart be troubled”:
Marc Ambinder in the Atlantic notes how the 300 billion or so is already incorporated into the bill that was passed last week. J-Mac is not asking for additional funds:
On a conference call with reporters, McCain policy chief Douglas Holtz-Eakin spelled out how McCain would pay for his plan for the government to buy troubled mortgages and replace when with more favorable fixed-rate mortgages at minimal direct cost to the homeowners. The government could use some of the $700 billion authorized for the bailout and tap other accounts, although the campaign estimates that, owing to negative equity — the government can’t magically turn bad mortgages into good ones without taking a hit — would be $300 billion. The McCain team hopes that by buying mortgages directly, the government wouldn’t have to buy as many distressed assets from big banks, thus reducing the net cost. McCain claims this idea as his own, although the bailout/rescue bill already gives the government the authority to deal directly with homeowners, and Obama has suggested that the government do the same — although McCain’s certainly being more aggressive here.
Second, let’s look at the Hope for Homegrowers plan in crap sandwich 2.0:
HOPE for Homeowners (H4H) is a program designed to assist borrowers at risk of default or foreclosure in refinancing to an affordable 30-year fixed rate FHA loan. The program is effective October 1, 2008 and will conclude on September 30, 2011. …
The loan amount may not exceed a nationwide maximum of $550,440.
The new mortgage will be no more than 90% of the new appraised value including any financed UFMIP with the lender essentially writing down the current mortgage to that amount.
Upfront MIP is 3% and the monthly MIP is 1.5%
The holders of existing mortgage liens must waive all prepayment penalties and late payment fees.
The existing first mortgage must accept the proceeds of the H4H loan as full settlement of all outstanding indebtedness.
Existing subordinate lenders must release their outstanding mortgage liens.
So, the mechanism for what John McCain said last night exists. It is still wrong that we are buying out bad mortgages, but at least he isn’t adding to it