AND THE POINT IS???

The Federal Reserve cut its key federal funds rate to between 0% and 0.25% yesterday, from a rate that was already the lowest in over half a century to help battle the financial crisis. Today mortgage rates on a 30-year fixed and others dropped again to below 5%.

A good friend of mine walked into Wells Fargo, a bank with plenty of ready money to loan, and filled out a mortgage application to re-finance his $100,000 mortgage which is a 5/1 ARM getting ready to adjust in March 2009. He has virtually no debt with the exception of his mortgage, $40,000 cash in the bank, a stock account worth maybe $5,000 and his home is worth about $400,000 in today's market. He is self-employed and has had several bad years, but still managed to show $80,000 income over that two year period. He was turned down because he was told that the banks are now going strickly on income over the last two years and he didn't make enough to qualify.

What I find interesting is that these same federal regulators who allowed banks to make loans to people who never really qualified in the first place have now put such a stranglehold on those same banks as far as loan restrictions go to the point where very few people may actually qualify.

The point is that they can lower the mortgage rates to lows not seen in a hundred years, but if few qualify, what's the point. It isn't going to stimulate anything!

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