A row of new homes at a housing development in Hayward, Calif.
The Basics
•Force banks to directly adjust rates of failing mortgages?
•Support stricter down-payment rules?
•Ease bankruptcy rules?
McCain
•Troubled mortgages should be bought and replaced with fixed-rate, FHA-guaranteed ones
•Down payments for FHA mortgages should be increased as conditions allow
•Favors the current bankruptcy code, which prevents courts from adjusting mortgages
Obama
•Would give banks incentives to buy or refinance existing mortgages
•Would instead increase penalties on shady brokers and lenders
•Wants to alter the bankruptcy rule so judges can modify and reduce people's mortgages
The Big Question:
To stabilize housing values, should the government buy troubled mortgages at a home's original cost?
MCCAIN
YES: It is important that those families who have worked hard enough to finance home ownership not have that dream crushed under the weight of the wrong mortgage. For those that cannot make payments, mortgages must be restructured to put losses on the books and put homeowners in manageable mortgages. My Resurgence Plan would purchase mortgages directly from homeowners and mortgage servicers and replace them with manageable mortgages that will keep families in their homes. The new mortgage would be an FHA-guaranteed fixed-rate mortgage at terms manageable for the homeowner.
OBAMA
NO: I strongly disagree with John McCain's proposal to buy mortgages at their full face value, which would provide a $300 billion windfall to banks that lent irresponsibly, while ensuring that taxpayers lose money. I support aggressive action to help struggling homeowners refinance their mortgages and stay in their homes. I was an early supporter of legislation passed this summer that encourages borrowers and mortgage lenders to write down the principal on troubled mortgages. I pushed to include in the recent financial-market legislation authority for the government to buy up troubled mortgages.