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Via Calculated Risk, this observation from Morgan Stanley's David Greenlaw:
The Fed’s announcement signals a clear intent to continue to drive mortgage rates lower and we expect them to meet this objective. This could represent a powerful source of stimulus for the household sector of the economy. In 2008, the average mortgage rate on the outstanding stock of loans was about 6.50%. So, if the Fed brings 30-yr fixed rate mortgages down to 4.50% and all homeowners are able refi, the aggregate permanent cash flow savings would be on the order of $200 billion per year.CR observes that even if half of homeowners were able to do this, the stimulus would be significant. Similarly, the administration's housing plan, including both loan modification and Fannie/Freddie refinancing, will also act as a stimulus, saving homeowners hundreds to thousands of dollars a month that, instead of paying for bloated housing loans, could be spent and help grow the economy. One reason that the administration's housing focus has been on monthly payments is that it's another way to inject more money into the system. As well as counteracting the bad effects of foreclosure and helping prop up the financial system by stabilizing the mortgage market, both the Fed plan and the administration's housing strategy are a kind of secret stimulus.
-- Tim Fernholz
