GOP Candidates Like Bush’s Plans for Mortgage Crisis

The GOP candidates present something more of a unified front about how to deal with the foreclosure crisis than the Democrats. The candidates remaining usually offer cautious support for the Bush Administration’s efforts when asked how they propose to address the issue. And they all call for limited government involvement — if any.

The current administration’s foreclosure measures mostly revolve around the Hope Now plan. It is a coalition of mortgage industry players — responsible for 62 percent of outstanding mortgages — who have voluntarily agreed to work with borrowers to avoid foreclosure.

“The borrower and the lender have to sit down together, and it has to happen on a large scale,” Senator John McCain said in a comment echoing Hope Now’s agenda. He is “cautiously optimistic“ that the current effort will work, but thinks government intervention may be necessary if it doesn’t.

His most visible proposal is a simplification of mortgages. He thinks they should be a clear, concise, one page document with a large print declaration to be signed by the borrower that states: “I understand this document.”

Some of his other ideas include raising the licensing standards for mortgage brokers, and forcing credit rating agencies — who gave good ratings for securities that included subprime mortgages — to make their ratings based on “objective information.”

Mike Huckabee has also said his administration would act along the lines of the Bush Administration in regards to the mortgage crisis. Without going into details, he said, “The federal government needs to immediately begin a second round of negotiations with subprime lenders with an eye toward expansion of the ‘Hope Now’ program.”

But in an interview with Bloomberg news, the former governor also espoused his belief that government intervention is currently toeing the acceptable line. “I wouldn’t push it any further and I sure wouldn’t spend one dime of taxpayer money because if that happens, I think every American says, I’ll go out and buy a Ferrari even though I can’t pay for it.”

A block in Cleavland devastated by foreclosures. Image from the New York Times.
Hope Now reported (PDF) last week that it helped 869,000 homeowners in the second half of 2007. But the majority of help came in the form of repayment plans, which “will not provide stability to the borrower, investors, or the market,” Sheila Bair, chairman of Federal Deposit Insurance Corporation, testified to Congress.

She called for an across the board (rather than loan-by-loan approach) five-year interest rate freeze for all homeowners who have generally kept up on their mortgage payments. “In today’s market, this modification generally will exceed the net present value of allowing the loan to go into foreclosure,” Bair said.

Mccain says he wishes there where enough resources to go case-by-case and decide who gets an interest rate freeze. “But, my god,” he exclaimed in an editorial meeting with New Hampshire newspapers, “we’re talking about hundreds of thousands, if not millions. How long would that take? Meanwhile, people are suffering very badly.”

Ron Paul has been concentrating on what he sees as the cause of the wave of foreclosures. “The root of this crisis, as with past financial and economic crises, results from federal government intervention into the economy, not to anything endemic to the market, nor to the actions of market participants,” he declared in a statement.

Addressing the idea of foreclosure moratoriums, a point of contention in the Democratic debate, Huckabee said it would create “a chilling effect on the lending industry, because who’s going to want to lend money if they don’t have the capacity to get their asset back if there’s a default on the loan.”

Huckabee also doesn’t support new predatory lending laws, and he stresses that he doesn’t “want to bail out the institutions that made these risky loans and their investors, they should suffer the consequences.”

But McCain pointed out to the New Hampshire editorial boards that some of those investors are localities and counties in Florida and a city in Norway.