Presidential profiles—McCain

Mortgage Banking, Sept, 2008 by Walter White

Trying to anticipate the housing agenda of the next administration is certainly not the stuff of science. Instead, it is an exercise that starts with an examination of records, current market conditions and historical perspective. At best, you can catch a glimpse of a candidate's overall governing philosophy and form an educated guess as to how it will play out in terms of actual housing policy.

* So using that approach, the following can be said about GOP presidential candidate Sen. John Sidney McCain III (R-Arizona). If elected, McCain would be expected to pursue a housing agenda that limits the government's role to helping those most in need, and that leverages tax credits and tax cuts to spur stabilization in the housing markets. He also would likely pursue the development of economic policies to create jobs in the housing and other small business sectors.

* This article lays out the likely outlines of the Republican Party platform on housing to be voted on at the 39th Republican National Convention being held Sept. 1-4, 2008, in Minneapolis-St. Paul, Minnesota. It also provides an inside perspective on the housing policy direction of a McCain administration. The convention will be in full swing just as this magazine gets off the press.

In preparing this article, I spoke at length with Doug Holtz-Eakin, McCain's chief economic adviser, about the just-passed major housing legislation as well as the current housing market and the importance it will play in stabilizing our economy.

The GOP platform

"This [the Housing and Economic Recovery Act of 2008] is not the bill he [McCain] would have drafted on his own. But it's time for action," Holtz-Eakin said in a Washington Post front-page article published on July 27, 2008.

Holtz-Eakin was a senior fellow at the Peterson Institute for International Economics, Washington, D.C., from 2007 to March 2008. He was the director of the Congressional Budget Office (2003-2005). He also served for 18 months as chief economist in the President's Council of Economic Advisers under President George W. Bush (2001-2002), and for two years as senior staff economist in President George H.W. Bush's Council of Economic Advisers (1989-1990). Holtz-Eakin currently serves as policy director for McCain's 2008 bid for president of the United States.

"Senator McCain supported the Housing and Economic Recovery Act of 2008 to get the country through this turbulent time in the housing markets," said Holtz-Eakin before the Senate vote on July 26, 2008.

"But his focus will be on keeping taxes low on our families, entrepreneurs and small businesses; making the tax code simpler and fairer by eliminating the alternative minimum tax that the middle class was never intended to pay; and to improve the ability of our nation's companies to compete by reducing our corporate tax rate," Holtz-Eakin explained in an interview with Mortgage Banking in July.

Holtz-Eakin was quick to add that McCain had long advocated for a stronger regulator for the government-sponsored enterprises (GSEs). He also noted that McCain believes the role of the Federal Housing Administration (FHA) should be seen as a subprime insurance product for first-time homebuyers who are unable to otherwise achieve homeownership.

Major industry groups, such as the Mortgage Bankers Association (MBA), are assessing the direction that a possible McCain administration could take by reviewing his past actions and record in the Senate.

"We expect a housing platform to be established at the Republican National Convention that tempers compassion for homebuyers caught in this housing crisis with a long-term view of FHA's appropriate role in the marketplace. We expect Senator McCain to pursue a role for FHA consistent with his belief that it should focus on borrowers who cannot find credit in the private markets," says MBA Chairman Kieran Quinn, CMB.

The housing agenda

McCain said in an April 2008 stump housing speech in Brooklyn, New York, that "lenders who initiate loans should be held accountable for the quality and performance of those loans, and strict standards should be required in the lending process. We must have greater transparency in the lending process so that every borrower knows exactly what he is agreeing to, and where every lender is required to meet the highest standards of ethical behavior.

"Policies should move toward ensuring that homeowners provide a responsible down payment of equity at the initial purchase of a home. I therefore oppose reducing the down-payment requirement for FHA mortgages and believe that, as conditions allow, the 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. When conditions return to normal, the GSEs should never insure loans when the homeowner clearly does not have skin in the game," said McCain.

Implementing the new housing bill

A McCain administration would oversee the implementation of the most significant housing legislation enacted in a generation, which was recently signed into law by President Bush. That legislation provides for: