Want free money? Go to TARP. But only if you’ve already got lots of money…

(Hat tip: Sumbprime Blogger)

Happy Friday!

Yesterday, the House passed an economic stimulus bill that included a lot of spending. One of the items, though, is good news for first time homebuyers. In an effort to kick-start the housing market last year, Congress passed a bill that gave first time homebuyers up to $7,500 in tax credits. Unfortunately, the money had to be paid back over 15 years.

The latest economic stimulus bill allows for a true tax credit — one that doesn't have to be paid back. Too bad I bought my home in 2007, and I don't get to take advantage of this. Oh well.

At any rate, the bill still has to pass the Senate. However, if anything does get taken out of the bill, I doubt it will be the tax credit, since the GOP is all about the tax stuff.

With the Fed rate currently at 0.25%, chances are that today's FOMC meeting will not include any announcement of a rate cut (although there is speculation that the Fed could go to 0% at some point). Instead, the Fed is more likely to continue its regular meetings and make comments on the state of the economy — as well as try other actions to free up credit and get things moving.

One of the more interesting possibilities for today's Fed meeting will be the possibility of the purchase of long-term securities by the Federal Reserve. Mortgage News Daily reports on how purchase of securities might be discussed by the FOMC:

According to Michael Feroli, an economist at JPMorgan, the most
interesting aspect of the FOMC meeting will not be whether rates are
cut, but rather if the Fed will begin to consider purchasing long-term
securities.

Last night, Timothy Geithner was confirmed as the Treasury Secretary in the Obama Administration. This move was expected — in spite of a small flap over tens of thousands of dollars in unreported taxes (he did pay them back with interest).

Geithner has promised to move economic stimulus plans forward quickly. We'll see how quickly things can move forward, as well as how effective the economic stimulus package ends up being. One centerpiece of the economic stimulus Geithner has been backing is more help for banks.

Personally, I think that helping the middle class directly would do more for the banks, and the economy, then just throwing more money at the big guys. But I doubt we'll get to see whether or not such an approach would work.

If you are interested in buying a luxury home, you might be able to do so and get an interest rate of 3.99% on a 30 year fixed loan. As you know, that is a very good rate. But it only works if you are buying a home from Toll Brothers. CNN Money reports on the promotion the builder is running in the hopes of propping up the new home market:

This is an interesting development. It's also a good move by Toll Brothers. Many would-be homebuyers are waiting to see if mortgage rates fall further before making a move. But it is hard to beat a 30 year fixed rate at 3.99%, and Toll Brothers hopes that the stunt will encourage more to take the plunge. Now, if only the other homebuilders would follow suit…

The new Geico commercials with the googly eyes absolutely kill me. I love them. Disclosure: I had Geico once. I do not have Geico now.

Happy Friday!

Mortgage interest rates have moved higher this week, heading back up above 5%. After dipping below 5% (and causing a flurry of mortgage applications), rates are on the rise again. As bond yields edged up earlier this week, so, too did mortgage rates.

However, it is questionable whether or not mortgage interest rates will remain above 5% in the long term. Treasury Secretary nominee Timothy Geithner promises that he will engage in easing of monetary policy in an effort to help the credit markets and spur more lending. If this happens, we are likely to see a drop in mortgage rates again.

There are things that I like about President Barack Obama’s ambitious economic stimulus package. I think that our infrastructure and energy issues need to be addressed, and that, in doing so, we will be able to provide jobs and other benefits to the economy. I also agree that something needs to be done about health care. However, I’m not sure how beneficial the proposed tax cuts would be.

Right now, the idea is to introduce a $500 tax cut. This cut would be applied on paychecks, so that you would have “more money in your pocket.” Unfortunately, if you divide up that $500 over the course of time, the more money in your pocket doesn’t amount to much. Certainly not enough to allow you to do the following, which are stated goals of policy makers:

While direct help to homeowners in the form of loan modification is expected with the new economic stimulus, one of the selling points of this tax cut is that you could use the money to make a mortgage payment. Seriously? Most of the people in foreclosure trouble need waaaaay more than $500.

As far as consumer spending is concerned, that $500, spread out over two years, would be basically useless. An extra $21 a month is going to do a great deal in terms of kick-starting the economy through consumer spending? Riiiight.

Besides, $500 seems small potatoes next to the billions being spent on retention packages for folks at the top of the economic food chain. Trillions go to big banks, while we are stuck footing the bill. $500 of our own money back just doesn’t seem like enough. On a number of levels.

SocioFluid

Right now, with President Barack Obama expected to single-handedly fix the economy, there are a number of ideas floating around with regard to possibilities. Stock Market Funding reports on two of these plans:

Associated with the idea of buying up bad assets is the formation of a government-run national "bad bank" that would house them. Many policymakers believe that banks need these toxic assets off their balance sheets in order to truly get an economic recovery moving forward.

So, when are they going to move my bad assets off my balance sheet?

With his inauguration coming up tomorrow, it is no surprise that Barack Obama is in the news a lot lately. And, recently, he promised to do a better job with the foreclosure crisis than the outgoing administration has done. Most of that promise is aimed at changing the way the second half of TARP funds are spent.

Many lawmakers — and most of the public — have been appalled at how most of the first half of TARP funds has gone to help big banks with no interest in actually loaning money out to help homeowners in danger of foreclosure. The second half of the funds, we are promised, will be used to help consumers and will actually stave off foreclosure.

I guess we'll see whether this really comes to pass when the funds are released and they start being spent.