Let’s get one thing straight here. A rate cut by Mr. Ben Bernake and the glorious Federal Reserve will do nothing to ease the category 5 Hurricane of foreclosures that is engulfing homes and local economies across the US. A cut would be a confidence boost to settle panicked markets but it will provide little relief for struggling homeowners.
It’s really is quite simple and I’m not going to make this post long and drawn out. So let me just make my points as to why this will do nothing to help our housing and mortgage crisis.
OK, in order for a rate cut to benefit borrowers they first need to be able to qualify for a mortgage. In case you didn’t know, 90% of the mortgages that were available a year ago are no longer available today. That loan you qualified for 1-3 years ago, is gone with the wind and most likely much of your homes equity has been sucked down the drain with the values in your neighborhood. (from foreclosures)
The mortgages that are availably right now are for the Kings of Credit and Equity. Only the elite homeowner with great credit scores, fully document able income and sufficient equity will be able to take advantage of a rate cut and refinance if they choose. The underwriting guidelines are so tough right now and there are so few mortgage refinance options for borrowers.
Where does that leave the rest of the 90% of homeowners that do not have A+ credit? It leaves you with no options like you have today. A rate cut is good for Wall Street and that’s it. Struggling homeowners that are looking for a way out of their toxic mortgage will see not one ounce of benefit.
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