How Candidates' Economic Plans Would Impact a Real, Struggling Pa. Family

April 21, 2008 — -- Meet the Riveras.

When Yajaira Cruz-Rivera and her husband Freddie bought a house in Philadelphia back in 2005, they were hoping to settle in for decades. And it had to be big enough to fit their four children, who today range in age from 21 months to 17 years old.

Yajaira wanted to open up more space and let more natural light come in. They tore out a wall, making a large front room for the family.

The family had big dreams.

But three years later, there are still half-finished renovation projects in every room. The dining room is only partially painted.

The Riveras can't afford to keep renovating. They really can't even afford to live in their home anymore.

When they bought the house they thought they were signing up for a 30-year fixed-rate mortgage at a 7 percent interest rate. They thought their monthly payment would be $920.

"We can afford that with no problem," Yajaira said.

It's unclear exactly how they got into the loan they ended up with — but the rate was much higher and it adjusted upward.

"That next rate hike was to 11.25 percent, and a new mortgage payment of $1,671 a month," she said.

Their mortgage payment is now nearly double what they expected, and even though Freddie works 12 hours a day supervising a truck fleet, they can't come even close to paying it.

The presidential hopefuls have spent much of their time giving stump speeches about their economic plans, and "Good Morning America" broke down just how each would help a family like the Riveras.

Mortgage Relief

The Riveras are exactly the kind of family all three presidential candidates talk about on the campaign trail., and all three would offer the family some relief, according to their economic plans.

Because they have a sub-prime mortgage, the Riveras likely would have access to a new government-backed 30-year loan with a lower rate under a President Barack Obama, a President Hillary Clinton or a President John McCain.

McCain would have borrowers like the Riveras go to a post office to fill out a new loan application.

Both Democratic candidates believe McCain's rules governing who qualifies for a new government-backed loan would be stricter and that the Riveras may not qualify.

The McCain campaign believes the Riveras likely would qualify. But his program, as laid out, is directed at a smaller pool of people than the programs proposed by the Democrats.

Clinton also calls for a 90-day moratorium on foreclosures. Interestingly, that's an idea that's already been put into practice where the Riveras live.

In Philadelphia, families like the Riveras have joined with community activist groups like Association of Community Organizations for Reform Now , or ACORN, to lobby local leaders and stop foreclosure sales.

A judge has ordered that foreclosure sales, called "sheriff's sales" in Philadelphia, not resume until at least July 1.

Both Obama and Clinton also would put aside huge amounts of money to deal with the foreclosure crisis. Obama proposes a $20 billion fund. Clinton's fund is $30 billion.

Obama's plan would split the money, giving $10 billion to states and $10 billion to homeowners.

Clinton would give the money to states and localities.

Both Democratic candidates have deliberately kept the fine print of how that money would be allocated vague. But both campaigns say the money would certainly help the Riveras find credit counseling.

Clinton has suggested that other uses for the funds could range from purchasing foreclosed lots, to fighting crime or graffiti in a neighborhood hit hard by foreclosures.

McCain has no such fund. His campaign believes the Democrats are simply throwing a lot of money at the problem without concrete plans for the funds.

Tax Relief

Because the Riveras make less than $250,000 a year, they would continue to benefit from the tax cuts they've received the last eight years under President George W. Bush, regardless of who is elected the next president.

But beyond that, the candidates' tax plans differ.

Obama would give a tax break on mortgage interest to homeowners who do not itemize their taxes. For families who use the EZ form but own a house, Obama would allow a credit for 10 percent of the mortgage interest they paid.

But the Riveras did itemize their taxes, so they would not qualify for that break.

Obama would give Freddie Rivera, who is employed, an automatic $500 tax credit to recoup payroll taxes.

Clinton would give the family up to a $1,000 tax credit, but there's a catch.

In order to get that Clinton tax credit, they would have to enroll in a new kind of retirement savings account and start saving. Uncle Sam would match their contributions with that matching tax credit.

But the Riveras aren't in a position to do that.

"I can't afford to save for retirement because I am worried about keeping a roof over my head," said Yajaira Rivera.

McCain's plan would double the standard exemption the Riveras take on their tax forms for each of their children. Currently the exemption is $3,500 per child. McCain would double it to $7,000 per child.

College Tuition Relief

Yajaira Rivera really wants to see her children go to college, like she did. But the family currently has no money stashed away for college funds.

The Democratic candidates have outlined plans that would help.

Obama would provide the most money for college tuition — $4,000 per child per year of college. That assistance phases out for families making more than $120,000 a year.

Under Clinton's plan, each child would receive $3,500 per year of college, and her plan phases out for families making more than $90,000.

McCain has not outlined specific education proposals yet. His campaign said he will have more to say on the subject in coming months.

The McCain plan also acknowledges that he is unlikely to support such a broad college tuition tax credit. Philosophically, McCain believes there are already a lot of government programs, such as Pell Grants, in place to help Americans pay for college. And McCain does not believe the federal government has the resources to expend on a large college tax credit program like Obama's or Clinton's.