Mortgage rates down for 4th week

Mortgage rates moved down very slightly in a week that wasn't newsy.

The benchmark 30-year fixed-rate mortgage fell 3 basis points, to 5.55 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.39 discount and origination points. One year ago, the mortgage index was 6.77 percent; four weeks ago, it was 5.8 percent.

The benchmark 15-year fixed-rate mortgage fell 4 basis points, to 4.89 percent. The benchmark 5/1 adjustable-rate mortgage fell 5 basis points, to 4.93 percent.

As far as the economy goes, the biggest news of the week was the twice-annual testimony before Congress by Ben Bernanke, chairman of the Federal Reserve. Bernanke notified the House and the Senate that he is cognizant, contrary to popular opinion, of the phenomenon called inflation, and that the Fed will combat it by tightening monetary policy when the time comes.

He then threw the argument back into the faces of his congressional interlocutors, telling them that fiscal stimulus is necessary today, but warning them that they should "begin planning now for the restoration of fiscal balance."

Bernanke said that he doesn't believe the Fed will have to break out its Whip Inflation Now buttons anytime soon. He said the Fed "believes that a highly accommodative stance of monetary policy will be appropriate for an extended period." Or, as a monosyllabic chairman would say: The Fed will keep short-term rates low for a long time.

The Fed has an easy-money policy because lenders don't. "It's a host of little problems," says Dick Lepre, senior loan consultant for Residential Pacific Mortgage, in San Francisco. "People are still worried about (home) values, so lenders are more cautious."

That caution takes the form of "absurd conditions" on loan files, such as one where "the escrow officer didn't put the subordination fee in the right spot in the Truth in Lending statement and they want it re-disclosed," with an accompanying pile of paperwork and a delay.

There's been a lot of chatter lately that home prices have bottomed out in some markets, including some parts of the Bay Area, where Lepre toils. But lenders aren't convinced that prices won't go lower. The possibility of even lower house prices, plus rising unemployment, makes lenders cautious to say yes.