DEMS Lose Seat In House...Health Care Bill Now In Question...Wall Street Looks For Direction

Last night the Republicans pulled off a huge upset in the State of Massachusetts by taking over the Senate seat once held by Senator Kennedy. For the first time in over 40 years the Republicans now control that seat which now makes things very interesting for the Health Care Bill as the Dems no longer have their 60th vote to push this through. Regardless of which side of the aisle you sit on this news has been favorable for interest rates….at least for today. The Federal Government is the mortgage markets biggest competitor in terms of attracting capital and if the Health Care Bill were to pass...the Feds would have to raise money to fund this endeavor which would compete for capital that could be directed towards mortgage backed securities which would keep rates low. The passage of the Health Care Bill would most likely move rates to higher levels….So, for now, we have missed a bullet and rates are holding steady with some bias towards lower levels. As noted yesterday in Market Watch, there is little meaningful economic releases coming out for the remainder of the week. Look for rates to once again take their direction from the DOW. If the DOW moves lower, rates will move lower which was exemplified in today’s trading. The mid-range ARM’s are beginning to come back in play as the 5 year conventional ARM is trading around 3.375% and the FHA ARM with 1 and 5 caps is now at 3.875% and borrowers get to qualify at the START RATE!!! FHA came out with their new proposed changes and I will update you on those in the next Market Watch.