Today was Stimulus and “TARP II” day!
Good afternoon, this is a long one so please hang in there with me… there is a lot going on!
Today was Stimulus and “TARP II” day! Before I jump into that, I want to give a quick snapshot on how this yet again historic day is moving our mortgage rates. Due to the lack of solidarity of both plans and the minimal details being released, skeptical investors have pulled money out of the stock market (Dow down 400 currently) and shoved it in the longer term bond market. This is what is giving us our second day in a row of better mortgage rates.
That being said here is where we are at, or should I say what we know so far J :
TARP II (Bank Recovery) –
$1.5 Trillion Total
$500 Billion from Private Cap some of which will come from remaining funds from the original TARP (Trouble Asset Relief Program)
Buy illiquid securities including mortgages
Idea is to support Consumer and business lending
All banks will undergo “stress” test to see if they can survive tough economic times and if passed they are eligible for Government funding from this plan
Taxpayers will receive dividends and securities from banks involved in program
Banks will be required to be “more” forthcoming about what they will do with the Government funding they receive and will accept restrictions on executive compensation
TALF – part of plan that is still in the works – leverage money up to $1 trillion to “kick start lending” with new loans
Will also use some funds to buy Mortgage Backed and other AAA securities – would help mortgage rates
Details on another $50 billion to help “troubled” homeowners (on verge of foreclosure) will be release later by the Treasury
Stimulus Plan –
The latest and greatest version which was passed by the Senate (61 to 37) is set at a total of $839 billion
$293 Billion is in the form of tax relief
$546 Billion is in the form of spending measures
The next step in the process is for the Bill to be reviewed by House and Senate members and for an agreeable version to be passed. There are some key differences to be ironed out including some protection from AMT (Alternative Minimum tax) for higher income earners and home buyer credits for those buying this year (Senate in favor of both). The next 24 hours should allow enough time for these issues to be mulled over and hopefully a consensus will be reached. However, it is entirely possible that it may drag out a bit longer than that. We will be sure to keep you posted.
Please let us know if you have any questions or if there is anything that we can help you out with!
