The Stimulus Bill

President Obama signed the $787 Billion American Recovery & Reinvestment Act into law today. Woohoo! 4.00% here we come! Right?

Not quite yet. Expect the specifics of the Bill to be analyzed via every conceivable news outlet known to man in the next fews days. Well maybe there will be a lack of coverage on Al Jazeera and maybe in sunny North Korea.

So far though we haven't seen any real effect on mortgage rates. The 10-Year Treasury Note opened up a bit this morning causing rates to hover in the mid-5.00% range. The Dow lost ground closing down 297.81.

I foresee any gains in bonds and thus mortgage rates to be realized in the next few days as the market reacts to this stimulus.

Mortgage rates should dip if the Treasury plans on buying up "toxic" mortgage-backed securities from Fannie and Freddie. That was what caused the big decline into the high 4.00% range a month ago. We should also see some relief from the artificially inflated rates as lenders continue to clean out their pipelines.

Keep in mind though that the number one priority of the Bill is job creation which won't necessarily be good for mortgage rates in the long-term. As job losses slow and new jobs are created the stock market will most likely rally at the expense of the bond market and thus mortgage rates.

One of the more interesting provisions in the Bill is the extension of the First Time Homebuyer Tax Credit. In a nutshell this is a $8,000 interest-free loan from the IRS for purchasing a home before December 1, 2009. More to come on this though when I see the finalized version in print.

- Andrew