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Greg McBride

No change from Fed

By Greg McBride · Bankrate.com
Wednesday, April 28, 2010
Posted: 3 pm ET

The Federal Open Market Committee's two-day meeting concluded this afternoon, with no change in rates and virtually no change in their statement. The Fed did mention the job market "is beginning to improve," that "growth in household spending has picked up recently," and that housing starts "have edged up but remain at a depressed level."

Sometimes I think the only sensible one of the bunch is the Federal Reserve Bank of Kansas City president Thomas Hoenig, who again dissented. Hoenig feels the continued use of the "exceptionally low levels of the federal funds rate for an extended period" phraseology could lead to bubbles and inflation at worst, or at least just limits "the Committee's flexibility to begin raising interest rates modestly."

As stated in my last post, a tweak to the statement was certainly in order (it didn't happen) and removing the word "exceptionally" would not limit the flexibility to boost rates modestly when needed. Is the Fed worried that raising rates from 0.25 percent to 0.5 percent, 0.75 percent, or even 1 percent is somehow going to bring the whole economy down? I'm not convinced the economy is springing  back to life, not with household income growth essentially nonexistent, credit tight, and consumers still heavily leveraged and undersaved. But does the economy still warrant a near zero rate on overnight borrowing? How much more pain do savers, retirees, and other income dependent investors need to endure?

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May 24, 2010 at 4:09 pm

Hi Greg, Two weeks ago my current lender PNC, who I have been with for several years, called me and asked me if I wanted to apply to refinance my current mortgage for a lower interest rate and a shorter term using HARP.I said yes and applied.The loan officer immediately pulled my credit report. He told me I had a 700+ credit rating and that I had a high DTI within 5 minutes after pulling my credit report. I was asked to fax two sets of docs: one to the loan officer and one to the title company. Last week the loan officer called me back to tell me the underwriter told him my application was being declined because my Debt-to-income(DTI)was too high. I already have a loan with them. This makes no sense to me and the loan officer said it made no sense to him either. I need the lower interest rate and the shorter term to finish paying off my loan. Any suggestions how to get PNC to work with me.I have proven my credit worthiness with PNC. I've never been late on a mortgage payment. If I can pay the higher payment, why would I not be able to make a smaller payment? Can you explain why the underwriter would decline my application for the lower rate and term using HARP? Who can I write to for help? Mary B.

April 29, 2010 at 2:02 pm

Hi Greg, I'm losing my mind over these low rates and people getting mortgage writedows. The prudent savers like myself who had nothing to do with the mortgage meltdown are getting the shaft. Why does the government reward the same people who don't save and caused this mess in the first place? -frustrated in Michigan