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Paul Kiesel
Paul Kiesel
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Obama and McCain: The Presidential Candidates on the Mortgage Crisis

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Here are Barack Obama’s and John McCain’s plans for dealing with the mortgage crisis (according to each candidate’s respective website):

Barack Obama wants to create a fund to help people refinance their mortgages and provide comprehensive support to innocent homeowners. The fund will be partially paid for by Sen. Obama’s increased penalties on lenders who act irresponsibly and commit fraud.

On top of this, Sen. Obama will create a 10 percent universal mortgage credit to provide homeowners who do not itemize tax relief. This credit will provide an average of $500 to 10 million homeowners, the majority of whom earn less than $50,000 per year.

After seeing what took place in the subprime mortgage industry, Sen. Obama introduced comprehensive legislation over a year ago to fight mortgage fraud and protect consumers against abusive lending practices. Sen. Obama’s STOP FRAUD Act provides the first federal definition of mortgage fraud, increases funding for federal and state law enforcement programs, creates new criminal penalties for mortgage professionals found guilty of fraud, and requires industry insiders to report suspicious activity.

Sen. Obama will also create a Homeowner Obligation Made Explicit (HOME) score, which will provide potential borrowers with a simplified, standardized borrower metric (similar to APR) for home mortgages. The HOME score will allow individuals to easily compare various mortgage products and understand the full cost of the loan.

John McCain, after saying for months that he didn’t want the government to intervene in the housing crisis, has recently come up with a housing relief plan called HOME Plan. Under his HOME Plan, every deserving American family or homeowner will be afforded the opportunity to trade a burdensome mortgage for a manageable loan that reflects their home’s market value.

In order to be eligible, holders of a non-conventional mortgage taken after 2005 who live in their home (primary residence only); can prove creditworthiness at the time of the original loan; are either delinquent, in arrears on payments, facing a reset or otherwise demonstrate that they will be unable to continue to meet their mortgage obligations; and can meet the terms of a new 30-year fixed-rate mortgage on the existing home.

John McCain has also recently called for the formation of a task force within the Justice Department to combat mortgage fraud, but this has already been in the works for sometime. Sen. McCain’s proposal suggests that the task force’s primary duty will be to aggressively investigate potential criminal wrongdoing in the mortgage industry and bring to justice any who violated the law. The DOJ Task Force will offer assistance to State Attorneys General who are investigating abusive lending practices. (The FBI has also increased their efforts two, if not, three fold over the last 90 days.)