Amid widespread concerns about the nation’s mortgage crisis, John McCain outlined Thursday a proposal to help “well-meaning, deserving homeowners who are facing foreclosure” and called for a Justice Department investigation into possible “criminal wrongdoing” by unscrupulous lenders.
The proposals marked a shift in tone from McCain’s admonition two weeks ago against adopting a mortgage plan that would be “a multibillion-dollar bailout for big banks and speculators.” That set the Arizona senator apart from his Democratic rivals in the presidential contest, Sens. Hillary Rodham Clinton of New York and Barack Obama of Illinois, who have both said there is a need for government intervention to fight the nation’s wave of home mortgage foreclosures and overall economic slowdown.
McCain, in a campaign stop at a windows business in Brooklyn, said, “There is nothing more important than keeping alive the American dream to own your home, and priority No. 1 is to keep well-meaning, deserving homeowners who are facing foreclosure in their homes.”
In advance of his plan to spell out more details about his economic proposals next week, McCain also cited rising gas prices and other hardships for small-business owners and their employees.
“Today our economy is weakening, and as I travel this country and meet and talk with people, I can see how things are getting tougher for many Americans,” he said before sitting down with half a dozen small-business owners to hear their concerns.
McCain’s aides said his home mortgage plan could help 200,000 to 400,000 people and cost $3 billion to $10 billion. That would be far less than the proposals offered by Clinton and Obama, but McCain aides said it would be bigger than the efforts envisioned by the Bush administration.
The plan would retire old loans that homeowners no longer can pay and replace them with less expensive, 30-year, fixed-rate mortgages that are federally guaranteed. McCain said families would gain “the opportunity to trade a burdensome mortgage for a manageable loan that reflects the market value of their home.”
In line with his concern about bailing out speculators, McCain’s proposal would apply only to homeowners who took out sub-prime mortgages after 2005 for homes that are their main residence. They would need to have proved they were credit-worthy at the time of the loan.
“The taxpayer gets something back for their guarantee of the mortgage; the lender gets something back for having taken a haircut . . . and the [homeowner] gives up something, which is some increase in the value of the house,” said Douglas Holtz-Eakin, a McCain economics advisor. “You’ve got to sacrifice to get some help.”
McCain offered tepid support for the bipartisan homeowners-relief measures moving through Congress, but Holtz-Eakin said McCain found many aspects of the legislation “disappointing.”
On Thursday, the Senate approved its effort to address the nation’s housing crisis, setting the stage for negotiations with the House.
Obama criticized McCain’s plan while campaigning in Gary, Ind. Although he called the proposal “better late than never,” Obama added: “Sen. McCain’s solution to the housing crisis seems a lot like the George Bush solution of sitting by and hoping it passes while families face foreclosure and watch the value of their homes erode.”
Clinton, in a prepared statement, chided McCain on Thursday for pivoting from the more laissez-faire approach to the housing crisis he outlined during an appearance in Santa Ana two weeks ago.
“Now he’s changed positions and is finally responding to a housing crisis that has been going on for months, but unfortunately his actions are only half-measures,” she said.
McCain unveiled his plan at Windows We Are Inc., located down the street from the Verrazano-Narrows Bridge.
He was introduced by New York Mayor Michael R. Bloomberg, who reminisced about McCain campaigning with him when he first ran for mayor, in 2001.
Bloomberg also recalled a visit several years ago to McCain’s retreat outside Sedona, Ariz. He joked that the home and surrounding property were “relatively small” to be called a ranch and recalled that McCain’s trademark ribs, which he grills himself, “were slightly on the well-done side.” But Bloomberg said he “loved them anyways.”
McCain, before leaving Brooklyn, also found time for a food adventure, stopping at a nearby pizzeria.
Times staff writer Sarah Wire in Washington contributed to this report.