McCain on Housing
|
With the Republican National Convention going full steam, and the housing industry still very much in the news, let’s take a look at what a McCain administration might offer in the way of a housing policy.
Though he has famously refused to “play election-year politics” with the housing crisis, McCain has said more about housing policy than previous recent Republican presidential candidates. For instance, on his website he makes a case for helping people avoid foreclosure and outlines a program along the lines of the one eventually passed by Congress.
McCain supported the housing bill signed into law by President Bush, though he has made it abundantly clear that he doesn’t want to use government money to bail out speculators or others who “failed to perform due diligence in assessing credit risk.” He has repeatedly said that if elected he would call a meeting of mortgage market leaders to extract pledges from them that they would help credit-worthy borrowers stay in their homes. And he has made clear his disgust for people who made millions off the backs of unsuspecting borrowers.
McCain believes that the country’s mortgage delivery system needs an overhaul to promote greater transparency and accountability. He told television anchor Diane Sawyer that consumers need to be presented with an easy-to-understand “one-page” document with big letters at the bottom that say “I understand this document.” Lenders who don’t do that, he has said, should be subject to penalties. No matter who is elected President, it seems, the mortgage brokerage industry is in for major changes.
Separating himself from his competitor, McCain has been particularly critical of the role played by Fannie Mae and Freddie Mac. He has criticized the pay drawn by top executives, the $170 million he says they have spent on lobbyists in the last decade, and their lobbying efforts. He stepped up his attack on the GSEs after the new housing law made explicit what had always been an implicit government financial backstop. If any taxpayer money winds up going to these institutions, he said, their management and board should immediately be replaced, salaries cut, and lobbying ceased.
The McCain camp has even floated a proposal that Fannie Mae and Freddie Mac be nationalized. He would shrink their size and eventually sell pieces of them to private institutions.
During the debate over the housing bill, McCain made it clear that he opposed reducing down payment requirements for FHA mortgages. He said in a speech last spring given in Orange County, Calif., that as conditions allow the FHA down payment requirement should be raised. “So many homeowners have found themselves owing more than their home is worth, because many never had much equity in the house to begin with.”
As a matter of political philosophy, McCain believes that government assistance should be limited to “preventing systemic risk that would endanger the entire financial system and the economy.” He has said that financial institutions should be encouraged to raise their capital reserves, and he would do that by getting rid of regulatory, accounting, and tax barriers to raising capital.
No matter who is elected president, the housing industry is likely to face a new round of regulatory and legislative proposals designed to prevent another housing meltdown, reform the mortgage lending business, and create a sounder banking system.