Now that you are off the Ledge…

You know what your mother always said – every cloud has a silver lining. With financial markets out of freefall, you are hopefully a comfortable distance from the ledge. Therefore, now would be a good time to examine how the news of the week might positively impact your life.

Gifts from Uncle Sam: The big news out of DC yesterday was the announcement of the fiscal stimulus plan, which is due to hit President Bush’s desk by mid-February for signing. There are three components: tax rebates, business write-offs and expanding the limits on conforming mortgages. The one garnering the most attention is the rebate.

$300 checks will go out to almost everyone earning a paycheck, including low-income folks who earned at least $3,000 in 2007, but may not have paid income taxes. Families with children would receive an additional $300 per child, while those paying income taxes could receive rebates of up to $600 ($1200 for working couples). The full rebate would be limited to individuals earning $75,000 or less and couples with incomes of $150,000 or less, but a partial rebate would go to individuals earning up to $87,000 and couples earning up to $174,000.

OK, the checks are nice, but the part of the package that really caught my eye was the expansion of limits on conforming mortgages. The plan will raise the limit on Federal Housing Administration loans from $362,000 to $725,000. Boosting the cap on loans that Fannie Mae and Freddie Mac can buy from $417,000 to $725,000. That should vastly improve the wounded jumbo mortgage market and help those who live in areas where real estate is still expensive. Finally, to help spur business investments, there will also be so-called bonus depreciation and more generous expensing rules.

Buying Low: It’s always hard to force yourself to buy low, but if you are investing in your employer-sponsored retirement plan through payroll deductions, then you are doing just that! Think of it as being one of the first into a store when everything is marked down. This does not mean that you should change your allocation—the old mantra of a well-diversified portfolio is still imperative. Given that the markets have fallen dramatically from the highs, now is a good time to get your IRA or Roth money to work.

Refinancing: Although the Fed rate cuts do not directly affect mortgage rates, the yield of the 10-year Treasury has dropped substantially, allowing many homeowners the opportunity to refinance at 30-year fixed rates that we have not seen in years.
Adjusting in the right direction: Those who have adjustable rate mortgages, home equity lines of credit or adjustable credit cards have suffered a great deal as interest rates went up. There is finally good news---the interest rate on your loan is tied to the Fed funds rate so the result of the Fed slashing rates on Tuesday us that you should see your monthly payments drop.

Now all of that is some good news to take you into the weekend!