MICHELE NORRIS, host:
Trouble in the housing market is a big issue in the presidential election. In 2007 there were 1.5 million foreclosures. Treasury Secretary Henry Paulson said today that the number for this year could be 2.5 million, and as we've seen already, the mortgage crisis has a serious effect on the economy as a whole.
Congress is working on legislation designed to address the crisis, and it will present a challenge to the next president. NPR's Chris Arnold reports on what Barack Obama and John McCain say they would do.
CHRIS ARNOLD: The foreclosure crisis creates a pickle for politicians. That's partly because there are some people who deserve help and others who just don't.
You've got working-class families who've been in their homes 10 years, who got lied to and cheated by crooked mortgage brokers, but then there are also speculators or people with very low incomes who bought $500,000 homes, and nobody wants to bail them out, and it was on that note that John McCain first waded into this issue.
Senator JOHN McCAIN (Republican, Arizona): Lenders ended up violating the basic, fundamental rule of banking: Don't lend money to people who can't pay it back. Some Americans bought homes they couldn't afford.
ARNOLD: McCain spoke to a small business group back in March.
Sen. McCAIN: I've always been committed to the principle that it's not the duty of government to bail out and reward those who act irresponsibly, whether they're big banks or small borrowers.
ARNOLD: The speech was an easy target for Democrats. They roundly criticized McCain's remarks and said he was out of touch with the struggles of everyday people. Barack Obama said McCain's views amounted to, quote, little more than watching this crisis happen. Obama gave a speech two days later.
Senator BARACK OBAMA (Democrat, Illinois): While this is consistent with Senator McCain's determination to run for George Bush's third term, it won't...
(Soundbite of applause)
Sen. OBAMA: ...it won't help families that are suffering, and it won't help lift our economy out of recession.
ARNOLD: McCain's camp fired back that Democrats were mischaracterizing his remarks and playing politics, but soon McCain changed his stance on the housing mess.
That came after Obama endorsed a housing assistance package from Congressman Barney Frank and Senator Chris Dodd.
Sen. OBAMA: This will allow Americans facing foreclosure to keep their homes at rates that they can afford.
ARNOLD: The idea is to let struggling homeowners refinance into more affordable and traditional loans. They'd get 30-year fixed-rate mortgages backed by the government. To qualify, they'd need to be an owner-occupant who could pay a reasonable interest rate, and their lender first would have to agree to lower the amount that they owed to 90 percent of the home's current value.
Mr. OBAMA: The Dodd-Frank package is not a bailout for lenders or investors who gambled recklessly. They will take their losses. It's not a windfall for borrowers, as they will have to share any capital gain. Instead it offers a responsible and fair way to help bring an end to the foreclosure crisis.
ARNOLD: At the time Obama gave this speech, McCain had not endorsed the legislation, but soon after McCain also came on board backing it, though he says he would prefer some changes to it.
McCain soon gave a speech on the economy where he sounded a lot more sympathetic to homeowners facing foreclosure.
Sen. McCAIN: To help our workers and our economy, we must also act in the here and now, and we must start, we must start with the subprime mortgage crisis, with the hundreds of thousands of citizens who played by the rules yet now fear losing their houses.
ARNOLD: So the two candidates seem to be coming closer together on the issue. Economist Mark Zandi is a McCain adviser.
Mr. MARK ZANDI (McCain Advisor): The headline here is that they're more similar than not.
ARNOLD: Obama economic adviser Austin Goolsby, though, bristles at that idea.
Mr. AUSTIN GOOLSBY (Obama Advisor): No, no, I really wouldn't agree with that.
ARNOLD: Goolsby says Obama has pledged to go farther to intervene in the housing crisis. For one thing, Obama's backed a proposal to change the bankruptcy code. That would enable judges to order lenders to lower interest rates or modify loans for borrowers in some cases.
Sen. OBAMA: It's time to amend our bankruptcy laws so families aren't forced to stick to the terms of a home loan that was predatory or unfair.
ARNOLD: McCain hasn't taken a position on that proposal. McCain economic adviser Douglas Holtz-Eakin says that's because the candidate has some concerns about the possible unintended consequences of such a move, and he just doesn't think politically that proposal has a chance of making it through Congress.
Mr. DOUGLAS HOLTZ-EAKIN (McCain Advisor): It might sound good, and it might be nice to talk about it, but it won't actually happen.
ARNOLD: McCain himself, though, says he is open to any and all ideas.
Sen. OBAMA: I will not play election year politics with the housing crisis. I will evaluate everything in terms of whether it might be harmful or helpful to our effort to deal with the crisis we face now.
ARNOLD: Still, some economists say it's taken a very long time for the government to pass any legislation that would help homeowners on a large scale. Some think the wave of foreclosures is cresting this year, and by the time the next president takes office it may be too little, too late to help hundreds of thousands of people who might otherwise have been able to stay in their homes.
Chris Arnold, NPR News.