In his Saturday radio address, President Bush cautioned against too much government involvement in resolving problems in the US economy. Focusing on housing market woes and Sub-Prime Bailout proposals, Bush noted: “If we pursue some of the sweeping government solutions that we hear about in Washington, we could make a complicated problem even worse…”

Worse? What’s worse than families  losing their homes to foreclosure? What’s worse than choosing between buying food and fuel or making the mortgage payment on time? What’s worse for neighborhoods and communities than blight and lost revenues caused by foreclosed homes? What’s worse than mortgage executives retiring with golden parachutes while legions of their customers are losing their homes?

One of the challenges faced by the average home owner or potential buyer is deciphering how to react to big-picture news about the mortgage market. Often, the right move runs counter to the news cycle.

Over the past week, that news cycle continued to focus on negative stories. For example:

• Mortgage foreclosures were reported to be up sharply in February over the prior year’s levels
• Treasury Secretary Henry Paulson outlined proposals to tighten regulation on mortgage lenders
• Meanwhile, one result of mounting economic concerns is that mortgage rates remain near the 6% level, which is low by a few different measures

In other words, the macro-economic view of housing and mortgages continues to be bleak. It may be counter-intuitive, but this could well be an environment which calls for action, on the part of home owners and potential buyers alike.

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Recent news that New York’s Attorney General is working with Fannie Mae and Freddie Mac toward an agreement requiring independent appraisals for mortgage loans purchased by Fannie and Freddie underlines the importantce of understanding how appraisals impact mortgage applications.

Mortgage lenders employ licensed appraisers to establish home values for mortgage approval. A home appraisal typically costs about $400. Paying for several appraisals can limit your ability to make simultaneous mortgage applications. The good news is that independent appraisals can reduce the practice of inflating home values for the purpose of approving mortgage loans.

Fannie Mae and Freddie Mac have raised their loan limits, a move designed to make mortgage funds available and to ease the loan approval process for borrowers living in areas where housing prices are very high.

The new lending limits vary according to region, but typically allow for more borrowing power in areas where housing prices far exceed Fannie and Freddie’s previous loan limit of $417,000.  As an example, borrowers in Honolulu, HI may now qualify to borrow as much s $793,750 under the new loan limits.

This is great news, as it evens the playing field for borrowers and mortgage lenders in areas with astronomical home values. The ability to qualify for conforming mortgages can  ease the mortgage applicaton process and help borrowers save on financing costs associated with non-conforming jumbo loans.

Being bombarded by the constant (and mostly negative) news on the mortgage industry, many of us are viewing home purchase as a topic not for discussion; however, that approach may not be right for everyone.

The housing market has changed throughout the nation and some areas have been significantly more impacted than others. These fluctuations, on the other hand, have opened up potential opportunities to some buyers who are able to take advantage of the lower housing prices, decreased demand, and their fairly good credit score.

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Hope Now, the housing assistance coalition, has assisted more than one million households struggling with foreclosure. It’s important to note that approximately 278,000 of these cases involved loan modifications. Modifying the terms of a mortgage loan can help homeowners maintain their payments by eliminating rapid rate increases, negative amortization and other “exotic” terms that can make it difficult for homeowners to make payments once the initial period of very low payments expires.

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In an effort to help homeowners, HUD is temporarily changing the FHA loan limits. Effective March 6, 2008, the new FHA loan limits range from $271,050 to $729,750. The new maximum amount of $729,750 will only be available in extremely high-cost metropolitan areas, for comparison, the previous limit in these areas was $362,790. Use this interactive map to view the FHA loan limits in your area.

The temporarily increased FHA loan limits are part of the Economic Stimulus ACT of 2008 and are believed to help provide liquidity and stability in the volatile housing market in the US. These temporary increases are effective until January 2009 and then the limits will decrease to their previous amounts unless the U.S. Congress approves a legislation to permanently increase loan limits.

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Even as mortgage conditions worsened, comments from top policy makers made it clear that a full-scale bailout isn’t in the cards. The best relief in sight came in the form of a downward turn in interest rates. 

Here’s what the government had to say:

• President Bush and Treasury Secretary Henry Paulson called some Congressional bailout plans an inappropriate use of taxpayer dollars. 
• Federal Reserve Chairman Ben Bernanke asked lenders to forgive some portion of borrowers’ debts.

Here’s what housing statistics had to say:

• The mortgage foreclosure rate reached a record high
• Home equity levels fell to an all-time low

And finally, here’s how interest rates may help:

•  After rising steadily over the previous five weeks, thirty-year mortgage rates took a step back and fell to 6.03% as of March 6th.

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Custom stone counter tops. Professional grade stainless steel appliances. High end bath renovations worthy of a five star spa. Although luxurious upgrades appeal to homeowners, the surplus of homes on the market has changed the focus of many buyers, who seem less impressed with high end features than in recent years.

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