McCain outlines plan to ease U.S. housing crisis

Republican presidential candidate Sen. John McCain (R-AZ) (C) appears at a Vets for Freedom rally on Capitol Hill in Washington, April 8, 2008. (REUTERS/Jonathan Ernst)

NEW YORK (Reuters) - Republican presidential candidate John McCain outlined plans on Thursday to ease the burden on struggling American homeowners, drawing fire from Democratic rivals who accused him of a half-hearted effort.

McCain, an Arizona senator who has clinched his party's presidential nomination for the November election, proposed a system that would allow homeowners with a high-interest, adjustable rate mortgage loan taken after 2005 to trade for a safer, 30-year loan.

"It offers every deserving American family or homeowner the opportunity to trade a burdensome mortgage for a manageable loan that reflects the market value of their home," McCain said in a speech on the economy in Brooklyn.

"My plan follows the sound economic principle that when markets decline dramatically, debts must be restructured."

His campaign estimated the cost of McCain's plan at $3 billion to $10 billion.

Political pressure is building for a dramatic government intervention to prop up a housing market that has pushed the U.S. economy to the brink of recession, if not into one, threatening global growth.

McCain rejected criticism from Democrats Barack Obama and Hillary Clinton over what they called his soft approach to the U.S. economy.

"I know the economy better than Senator Clinton and Senator Obama do," McCain told ABC's "The View," citing his years in the U.S. Congress.

The two Democratic presidential rivals took time out from their own battle to pounce on McCain's proposals. Obama said McCain's plans were much like President George W. Bush's -- "sitting by and hoping it passes while families face foreclosure and watch the value of their homes erode."

"I'm glad he's finally decided to offer a plan. Better late than never," the Illinois senator said in Gary, Indiana. "But don't expect any real answers. Don't expect it to actually help struggling families."

Obama has proposed a $10 billion Foreclosure Prevention Fund that he says would help struggling homeowners sell a home beyond their means, get emergency pre-foreclosure counseling or modify their loans to avoid foreclosure or bankruptcy.

The McCain campaign said he is against a government bailout.

"Unlike Senator Obama, John McCain doesn't believe that writing checks with other people's money is the solution to every problem," said McCain spokesman Tucker Bounds.

Clinton in a statement called McCain's plan "a warmed-over, half-hearted version" of a plan he had criticized.

"So now he's changed positions and is finally responding to a housing crisis that has been going on for months, but unfortunately his actions are only half-measures," the New York senator said.

McCain's camp said his program would result in homeowners having a 30-year mortgage and an equity stake in their home, while the new lender would receive a federal guarantee of the mortgage.

His comments come a day after Bush proposed expanding a program to help homeowners meet mortgage payments while Democratic lawmakers pressed ahead with a broader plan, setting the stage for a political showdown over how best to aid the housing market.

OIL RESERVE, JOB SUPPORT

McCain, a Vietnam War veteran who has focused his candidacy largely on his support for the war in Iraq, also called for a task force to look into "potential criminal wrongdoing" in the mortgage lending and securitization industry.

To address rising energy prices, McCain said the United States should stop filling the Strategic Petroleum Reserve to weaken demand for oil and urged Americans to cut back on their energy use.

He also pushed for a program that would use taxes to help people who are unemployed.

"I propose that we build a new system so that as women and men work, their taxes help to build up a buffer account against lost earnings," he said.

(Additional reporting by Caren Bohan and Claudia Parsons; Writing by Steve Holland; Editing by David Wiessler)

(To read more about the U.S. political campaign, visit Reuters "Tales from the Trail: 2008" online at http://blogs.reuters.com/trail08/)