SAN ANTONIO, Texas (Reuters) - Democratic presidential hopeful Barack Obama accused rival Hillary Clinton on Tuesday of rewarding the rich and hurting future mortgage seekers with her plan to end the U.S. housing crisis.
Clinton, a New York senator and former first lady, and Obama, a senator from Illinois, are highlighting their economic credentials to sway voters concerned about a possible recession and struggling to choose between two historic candidates.
Clinton, who would be the first woman president, honed in on the housing crisis in January, proposing the introduction of a 90-day moratorium on subprime foreclosures and an automatic rate freeze on subprime mortgages of at least five years.
Obama, seeking to counter criticism that his inspiring speeches emphasize style over substance, said Clinton’s plan to freeze the monthly rate on existing adjustable rate mortgages did not target “struggling homeowners” who need help the most.
“It will reward people who made this problem worse but it will also reward people who are wealthy and don’t need it,” Obama, who would be the first black president, told a small group gathered to discuss the economy in San Antonio.
“A blanket freeze like she’s proposed will drive rates through the roof on people who are trying to get new mortgages to buy or refinance a home,” he said.
“Experts say the value of homes will fall even more, and even more families could face foreclosure.”
Clinton spokesman Jay Carson said Obama’s comments proved he was out of touch with average Americans.
“Senator Clinton’s plan only helps subprime borrowers, a population that is disproportionately low-income,” Carson said in a statement. “When it comes to the housing crisis, Senator Obama sounds a lot more like President Bush than a Democratic candidate for President.”
Robert Losey, an associate professor of finance and real estate at American University, said a five-year moratorium in the subprime sector could result in higher rates for other borrowers if banks and other mortgage providers cut back on their lending out of fear of further government intervention.
“People who would want mortgages would be fighting from a smaller pool of funds and the natural result is a higher rate,” he told Reuters.
Clinton has also proposed creating a $30 billion “Emergency Housing Crisis Fund” for U.S. states to help families unable to make mortgage payments.
Obama has proposed a $10 billion foreclosure fund.
John McCain, an Arizona senator who is all but certain to win the Republican nomination to contest the presidential election in November, supports housing subsidies for low-income families, but skipped a Senate vote this month on an economic package designed to stimulate the faltering economy.
Between 10 million and 15 million American homeowners may soon find their homes are worth less than the amount of their loans, according to a leading housing market economist.
Nouriel Roubine, an economics professor at New York University, told the Reuters Housing Summit in New York on Tuesday that many such borrowers may decide to abandon their properties and cut their losses on bad investments.
The U.S. subprime mortgage crisis was sparked by an easing of underwriting standards in the home loan industry and a drop in housing prices.
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