Good morning!
Well I didn't write the subject line this morning, but it is appropriate. For some (Messrs. Obama, and Reid and Mrs. Pelosi) it smells like roses. For others it just plain smells. We now have it passed by both the house and the senate and Pres Obama is to sign it into law on Tuesday in a ceremony in Denver, CO, so I choose to be hopeful of its benefits but not blind to its high risks. Let's do a quick run down on the good the bad and the ugly related to The American Recovery and Reinvestment Act of 2009 in reverse order.
Ugly: $787 Billion of spending that will all be borrowed by the treasury on top of record deficit spending anticipated for 2009 and 2010. If you were to spend a dollar every second of every day you would reach $787 billion in 24,956 years! Or at $1,000,000 every day it would be 2,156 years to spend that much. This is mucho dinero and the congress was encouraged to set aside "politics as usual" and just vote for it without truly vetting the merits. The debate that did take place seemed to be about pork items rather than some of the sea change events that are occurring with this borrowed money. Bad: Of course the effect of printing or borrowing money is the threat of inflation. You know that the worst enemy of long term interest rates is inflation. While the current economic recession (now in its 15th month) is driving prices down or at least keeping them tethered (oil hit $34/bbl this week more than a 75% drop from its all time high of exactly 7 months earlier), the aftermath of borrowing and spending to tame the recession will certainly impact the future inflation story.
The Good includes some housing and mortgage benefits among the spending: The $8,000 Homebuyer Tax Credit is there, but as reported mid week, much was stripped out of the original $15k plan. But for first-time homebuyers (haven't been paying a mortgage or owned a home in the past 36 months) this Credit is much better than last year's $7,500 Credit. Let your First Time Home Buyers know that this credit is direct dollars to many of them with no requirement to repay if the home is held at least 3 years. Of course it is only available to those with joint income of <$150k/yr or individual filers with <$75k/year. The effect of the changes in the Credit was to reduce the estimated price tag from $35.0B to $3.7B. But for those who qualify this is a real opportunity. Purchases must be completed between January 1, 2009 and September 1, 2009.
Another Good news item is the return of higher FNMA loan limits in high cost areas such as much of California. This doesn't affect the loan limit number in Deschutes County where I live ($417,000), but it will likely make the purchase and sale of homes in California easier and that should create improved demand for purchases in our most desirable area for those relocating from the Golden Debt State.
The temporary elimination of government fees charged in SBA 504 and 7(a) loans is also a boon for small businesses looking to borrow funds. Perhaps more importantly, the expansion of TALF to bolster the secondary market for bank financed portions of those loans is hopefully going to make funds more available. Signet has relationships with national banks who have been lending throughout this credit crunch, but the media-reported tightness and community bank problems have certainly stymied a number of would-be borrowers/buyers who didn't know to visit Signet.
There are other good things about this Act (e.g., Reagan and Clinton each took 8 months to pass significant legislation after their inaugurations) and as I said, I choose to be hopeful of positive results from this historic legislation. Please read on below for news of the week on mortgage backed securities and the coming week's economic reports outlook. There are also tips on maximizing tax deductions.
For now the rates are exceptional and lending is happening despite reports of tight money. You, your friends, family and clients deserve the very best professional mortgage services. We're ready to take care of you. Make it a great week! -Dave
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