While watching last night’s debate, my wife and I were discussing McCain’s plan to pay off mortgages (at full value) of homeowners facing foreclosure and refinancing them with an FHA loan at the house’s appraised market value.
I thought I had heard that the owner would be responsible for paying back whatever negative equity was covered by the refinancing. So if the government paid off a $300,000 loan balance and refinanced at $200,000, then at some point (time of sale?) the homeowner would have to pay back some / all of the $100,000 difference.
Today, I tried to dig around for cites to support / dispute my memory, and couldn’t find anything. Am I misremembering? Or maybe I’m getting McCain’s plan confused with some of the “housing rescue” proposals going around during the bailout debate a few weeks ago?
I found this page on McCain’s web site laying out some details, but not much about what happens to that difference. It does say that it would cost $300B due to the covering of the negative equity, but maybe that’s just the initial layout, with money coming back in the future from these rescued homes. Or maybe it is a straight-up bailout, with the difference coming from federal coffers and never getting paid back.
It’s also possible that those details haven’t been hashed out.
Does anyone know where I can find the straight dope?
Note: I am trying to just get the facts about the plan, that’s why I posted in GQ. I’m not looking for whether or not it’s a good plan or not (personally, I don’t think it is), it’s likely threads on that can be found in GD or the Pit.