Senator and Republican Presidential candidate John McCain gave a speech in Orange County, Calif. yesterday that has clearly vexed many mortgage industry participants. In his remarks, he appeared to call for the industry to voluntarily offer zero percent mortgages to troubled borrowers:

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.

Frank James at the Baltimore Sun took the comments at face value, and noted that “McCain might also want to propose that we repeal the phenomenon called inflation, since that’s about as likely as mortgage bankers offering zero percent interest rates.” McCain’s campaign managers, of course, are now hotly contesting the notion that McCain was actually suggesting free mortgages — instead, they say, he was only intending to illustrate how an industry came together to deliver a solution during a past crisis. “If he had been suggesting zero-percent mortgages, don’t you think he’d just say that?” Brian Rogers, a McCain campaign spokesperson said yesterday. (Pardon our confusion here, but we thought he just did.) Hullaballoo over his zero-percent comments aside, McCain did make it clear that he’s against public intervention in the mortgage markets. “I have always been committed to the principle that it is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers,” he said. “Government assistance to the banking system should be based solely on preventing systemic risk that would endanger the entire financial system and the economy.”