Obama rips McCain’s “ill-advised” mortgage plan

Sen. Obama went on the offensive today ripping into Sen. McCain’s mortgage buy-out plan in which the US Treasury would begin buying up bad mortgages and dealing with the homeowners directly.

Story from Yahoo News:

DAYTON, Ohio – Democrat Barack Obama told a campaign audience Thursday that Republican John McCain’s mortgage buyout plan would cost taxpayers billions of dollars and reward bad behavior by lenders.

Speaking in Dayton as he started a two-day bus tour of hotly contested Ohio, Obama said McCain’s plan would force the government to absorb the full cost of renegotiating mortgages to prevent borrowers from losing their homes. Lenders should share some of the costs, he said.

The Democratic presidential candidate’s campaign also criticized McCain’s mortgage plan in a new 30-second ad to air nationally on cable TV, a relatively inexpensive way of drawing media attention to an issue.

Obama took another jab at McCain, whose family owns several houses, when he renewed his call to change bankruptcy laws to help hard-pressed borrowers keep their homes.

“Right now, the law lets bankruptcy judges write down your mortgage if you own six or seven homes,” he said, “but not if you have only one.”

“That might help Sen. McCain sleep easier at night, but it won’t do anything for folks like you,” Obama told thousands at a baseball stadium.

Obama said McCain’s mortgage plan “punishes taxpayers, rewards banks, and won’t solve our housing crisis.”

He said it would “guarantee that American taxpayers lose by handing over $300 billion to underwrite the kind of greed and irresponsibility on Wall Street that got us into this mess.”

McCain’s campaign, meanwhile, has changed its mortgage plan. When the campaign distributed its description of the plan, it said the government would buy failed mortgages at discounted rates. Conservatives had pushed for that language because many of the homes are not worth the amount mortgaged.

But on Wednesday, the campaign deleted that line, which would mean the government would pay the full value of the mortgage.

McCain spokesman Brian Rogers said the policy didn’t change, but an edit was made to remove “excess and confusing language.”

The move would make the plan more costly than the $300 million initially cited to pay additional funds to financial institutions.

McCain has said his plan would be expensive. But he says it is necessary to get thousands of bad mortgages off the books and to stop the fall in home values and credit availability.

Obama had proposed a similar plan, report from the NY Sun on Sept. 23rd from an Obama press conference:

Now, there are a number of ways we can accomplish this. For example, we should consider giving the government the authority to purchase mortgages directly instead of simply purchasing mortgage- backed securities. In the past, such an approach has allowed taxpayers to profit as the housing market recovered. This is not simply a question of looking out for homeowners; it’s doubtful that the economy as a whole can recover without the restoration of our housing sector, including a rebound in the home values that have suffered dramatically in recent months.

This mortgage mess is more and more convoluted, it’s difficult to keep their plans straight.