Economic Recovery on the Way

President Obama released more details on his economic recovery plan early this week. The plan covers five major areas:

• ENERGY, including weatherizing at least 2 million homes and doubling U.S. renewable-energy capacity
• HEALTH CARE, guaranteeing health care coverage to 8.5 million Americans who lose their jobs and risk losing their health insurance
• EDUCATION, offering a new tax credit to make college more affordable and also doubling the size of the Early Head Start Program
• INFRASTRUCTURE investments that would tighten security at 90 major ports, repair and modernize thousands of miles of roadways and begin new waste water projects, including rural water and sewer projects
• TAX CUTS & BENEFITS, which would cut taxes by about $1000 for 95 percent of U.S. families and also extend the child tax credit to parents of 6 million more children as well as offer increases in food stamp benefits to 30 million people.

The Washington Post gives more detail in its 1/25/09 story "Obama Details Recovery Plan" by Philip Rucker.

Democrats and Republicans Getting Along?

Yes and no ... but compared to the days of old, it seems to be a relatively good beginning.

Democrats are making a specific effort to include proposals that have strong bi-partisan support, e.g., Rep. Chris Van Hollen (D-MD) and Rep. Zach Wamp (R-TN) have jointly submitted a renewable energy proposal they developed together for the Recovery Package.

However, there is growing controversy on both sides of the aisle as to what should be included in the stimulus package. Some Republicans are demanding more tax cuts but an issue more important to rural Americans is also bubbling. This question revolves around how to aid distressed mortgage holders, especially those in bankruptcy.

The AP Wire Service has carried a story which covers in detail the controversy: "Fight Building Over Judges Redoing Mortgages" by Larry Margasak. Though work on all the issues will be helpful to rural citizens, this one carries particular risk for rural home buyers in the future, i.e., the provision as written calls for homeowners in bankruptcy to be eligible for having the principle on their loans re-written by bankruptcy judges. In the short term, this may be a good idea, but for rural home owners there are additional considerations, e.g.,

• Rural home owners primarily get their loans through FHA and VA, or RHS, and these loans carry Federal government guarantees for the mortgages in the case of foreclosure, but not in the case of a bankruptcy inspired reduction in principle payments on the loan. The guarantees are very important to community banks, who carry the loans. If bankruptcy judges write down the loans, the local banks will carry the losses without being able to resort to coverage from governmental guarantees available if the mortgagees are foreclosed. And this could have the effect that local banks will no longer be willing to offer the low-down and no-down payment FHA, VA or RHS guaranteed loans, with the added effect that home buying in the future will be more difficult for rural buyers just entering the market.
• FHA and VA loans, with their government guarantees, have always up until now been considered an iron clad promise by the Federal Government, and legislation breaking this link, i.e., the Federal promise, on these loans could cause rates to go up, or worse yet, cause local banks who relied on the Fed's to cover their risk by refusing to lend to rural home buyers via these programs.

For urban home owners, the need for some sort of solution to the drop in home values is more dramatic. And in the majority of cases, mortgages in cities are more likely conventional loans (because government guaranteed loans are capped at levels of financing more common in rural areas, while urban housing is generally more expensive and does not qualify for these Federally guaranteed loans.) In these conventional loans, the Feds didn't offer a complete guarantee while private lenders were expected to build in additional risk for non-Fed guaranteed mortgages.

These and other issues have led to the provisions regarding homeowner bankruptcy -- originally planned for the Stimulus Package -- to be separated from the Package and expected to be considered in separate language.

My Rural America will continue to follow these financial and stimulus issues that are so important for the well-being of rural Americans.