McCain Proposes 0 Percent Mortgage Rates?
So we have all heard some different solutions to the current mortgage crisis. At a campaign rally yesterday in Orange County California McCain came up with something that is pretty unique. 0 percent mortgages. You didn't misread that. If that is what McCain is really thinking we can be sure he is not talking to people in the mortgage industry. Here is a link to his speech
Here is the relevant part of his speech.
We should also convene a meeting of the nation's top mortgage lenders. Working together, they should pledge to provide maximum support and help to their cash-strapped, but credit worthy customers. They should pledge to do everything possible to keep families in their homes and businesses growing. Recall that immediately after September 11, 2001 General Motors stepped in to provide 0 percent financing as part of keeping the economy growing. We need a similar response by the mortgage lenders. They've been asking the government to help them out. I'm now calling upon them to help their customers, and their nation out. It's time to help American families.
The difference between General Motors and Mortgage Lenders is that General Motors is selling cars. So if they offer 0 percent interest they still make money on the car. Lenders on the other hand do not generally build the homes they are giving out loans for. So while 0 percent mortgages sounds pretty appealing to most potential borrowers (heck it sounds pretty appealing to me), I assume the lenders are not in love with the concept since they would quickly go out of business. Or I guess more accurately, taking away their primary source of income would cause lenders to go out of business faster than they currently are.
We can only assume that after this speech that his advisors pulled McCain aside and told him that 0 percent mortgages are not actually possible.