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Contrary to the conviction of deeply confused civilians and reports by lazy news media, mortgage rates are unchanged, about 5.75 percent for the lowest-fee 30-year paper.

If you don't believe me, visit www.freddiemac.com and its weekly survey. It is unbiased by sales jive, although it suffers from "survey lag" (early-week data released on Thursdays always misses real-time reality), and assumes a fractional origination fee. Last week's "5.48 percent" captured the one-day hysterical bottom when the industry could not log onto rate-lock Web sites. Yesterday's "5.68 percent plus 0.4 percent origination" is still about right, and all but identical to the prior week's "5.69 percent plus 0.5 percent."

Yet, the media refer constantly to "dramatically lower mortgage rates." They are better, but ... drama? Freddie's average for the whole of 2007 was 6.34 percent. A half-percent drop is nice for buyers, and a help to a few refinancers, but no fire sale.

"How can it be the same ... !?!" says the client, after a cumulative 1.25 percent cut at the Fed in only eight days? Answers follow.

Brand-new January economic data are not that bad. They're not bad enough to justify the Fed's panic, let alone to anticipate more cuts. Payroll growth slipped to flat in January (negative 17,000 is within the huge range of error and revision), unemployment down to 4.9 percent in a workforce statistical quirk -- soft, but hardly a recession. The purchasing managers reported their first gain in six months, likewise soft, but with persistent strength in foreign orders. Fourth-quarter GDP grew by a mere 0.6 percent; however, aside from a temporary drawdown of business, inventories grew at 2 percent.

The Fed's form is disturbing to long-term investors. Central banking is not figure skating, but Fed Chairman Ben Bernanke has departed his predecessor's 17 years of gradualism for lurching on the rink. A Fed that will lurch down will lurch up.

Investors bought long Treasurys and mortgages at these levels 2002-2004 because former Fed Chairman Alan Greenspan said after every meeting into 2006: Excessive monetary stimulus most likely will be "removed at a measured pace." Translation: You're safe for now, and we'll give you time to get out before we kill you.

In those late Greenspan years, deflation was the problem. Today, inflation is rising all over the world: Australia at a 16-year-high of 3.8 percent core; Europe at a 14-year-high of 3.2 percent; U.K. at 2.6 percent core; China at 6 percent-plus; and an economy completely out of control beginning to export inflation to us. Each time the Fed has lurched to a catch-up ease, all the way back to August, it has rescued stocks, commodities, oil, gold, and tanked the dollar.

I have chewed on the Fed for its inaction and credit-wreck oblivion. However, this situation is NOT a monetary problem: It is a banking-system near-insolvency that may morph into a recession, each making the other worse. The crying need for six months has been transparency of credit loss and bad-asset firewall. Cuts in the overnight cost of money may intercept recession, but inflation means that these cuts cannot be maintained or removed at a measured pace.

A central bank chairman must be prepared for the ultimate sacrifice: No tough inflation problem was ever solved by slow growth. It takes a recession. It takes higher unemployment and crushing the commodity spiral. To get long-term rates down, Bernanke must get the good out of this slowdown: He must let it get ugly. Instead, he has rescued inflation-pushing markets again and again.

Two non-Fed forces holding up mortgage rates: Credit fear about Fannie and Freddie has the spread between mortgages and the all-defining 10-year Treasury (3.57 percent today) over 2 percent for the first time ever. Second, somebody by accident may arrive at an effective credit-wreck bailout: The giant bond insurers, Ambac and MBIA, may be resolved in days. If no collapse, then credit fear will give way to inflation fear.

The Fed's cuts have had a dramatic effect on ARM adjustments, and should revise estimates of housing doom to the better -- also reducing bond-market fear. This month, common one-year Libor-floating loans will adjust DOWN to 5.125 percent.

Lou Barnes is a mortgage broker and nationally syndicated columnist based in Boulder, Colo. He can be reached at lbarnes@boulderwest.com.

By June Fletcher

Question: My husband and I are first-time home buyers and found a beautiful house being sold as a short sale. It almost seems too good to be true, and our real estate agent referred to short sales as playing a game of roulette. Are the risks and time involved with a short sale too much for us to handle as first time buyers?

-- Christine Pellum, Chicago

Christine: A lot of things in life are risky and scary the first time you do them, like going skiing, dancing in public and playing the stock market. But that doesn't mean you shouldn't try.

Notice that I didn't put falling in love on this list, since that's what you shouldn't do with this house. A short sale, which involves buying a house for less than the amount the seller owes the lender, can be time-consuming, frustrating, and --- if the lender refuses your offer -- ultimately unsuccessful. But if it works, you could be getting a very good deal.

Short sales also require some sophistication, skill and patience on the part of a real estate agent, so keep that in mind if you decide to bid on this house. If the agent you've been using doesn't want to get involved, ask him or her to refer you to someone who specializes in this sort of work. You also need to hire an attorney experienced in this kind of transaction.

A short sale usually occurs when a seller can't make his loan payments because of death, divorce, job loss or other hardship. When homes are rising in value, owners can sell the house and pay back the lender. But when home values are dropping, like they are in many places today, and the owner hasn't built up much equity, that's not an option. So some lenders will accept less than the amount owed to avoid the hassle and expense of auctioning the house, providing the owner proves that he doesn't have other assets to make up what he owes.

Even with experienced people at your side, it pays to arm yourself with facts before you make an offer. Don't assume that the house is a bargain, since the owner may have bought the house at the peak of the housing cycle and may owe so much that he can only discount it to current market prices. Find out what comparable houses are selling for, whether a foreclosure notice has been filed for the property, who owns the loan or loans, and how much is owed -- you'll have to deal with them all.

The seller may eagerly accept your offer, but he isn't the final arbiter of the deal -- the note holders are. So make your offer contingent on the acceptance of the lender or lenders. Since the lenders want to know that you can back up your offer, include as much information as you can on your financial resources, as well as a preapproval letter from a lender.

Although the property may be advertised as-is, make sure the deal gives you the right to have and approve home and pest inspections by qualified professionals. Short sellers usually have given up maintaining and repairing their homes; you need to know what other expenses to expect.

Also, place a time limit on your offer -- ask your agent what is customary in your area --since lenders will sometimes drag their feet, hoping to get a better deal. Short sales rarely take a short time to complete, but you shouldn't have to wait around forever.

-- June Fletcher is a staff reporter at The Wall Street Journal and the author of "House Poor" (Harper Collins, 2005). Email your questions about the residential real-estate market. Please include your name, city and state. If you don't want your name used in our column, please indicate that. Due to volume of mail received, we regret that we cannot answer every question.

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