Monday afternoon, the U.S. House of Representatives defeated the $700 billion "Bailout Bill", surprising Wall Street and the world. 

The Dow Jones Industrial Average responded by falling 777.68 points -- its largest one-day loss in history and, this morning, every newspaper in America is covering the story as front page news. 

Lost in the coverage, however, is how the "No" vote created a terrific opportunity for mortgage rate shoppers. 

Yesterday, as money fled the tanking stock market, most of it ended up getting parked in the relative safety of government-backed bonds which includes, of course, the mortgage bonds.  This rising demand for mortgage bonds caused rates to fall.

To investors, stock markets represent risk and bond markets represent safety.  So, when market sentiment changes, as it did yesterday, Wall Street players often shift their dollars from one forum to the other.  This is why yesterday's stock sell-off was good news for mortgage rate shoppers -- the added demand for "safe" securities drove down rates.

Conforming mortgage rates were lower by about an eighth-percent Monday.

Now, today, mortgage rates are opening flat, suggesting that markets are in a Wait-and-See Mode.  Wall Streets knows that the defeated bill will re-emerge later this week and, when it does, expect traders to respond accordingly.

If the new-look bill is viewed as favorable to U.S. businesses without harming taxpayers, expect stock markets to improve and mortgage rates to rise.  If the bill fails to accomplish that goal, however, expect mortgage rates to improve.