There were mixed messages for borrowers in this week’s mortgage news, but there was certainly no shortage of headline-worthy stories:

• The U.S. Federal Reserve Board released a new set of mortgage lending guidelines on July 14th, designed to reform some practices that have been associated with the current lending crisis
• Leading government-sponsored mortgage financers Fannie Mae and Freddie Mac struggled to fend of rumors that they did not have enough liquidity to survive without a bail-out
• Perhaps more quietly — but of grave concern with regard to mortgage rates — inflation continued to surge, with very high readings for both wholesale and consumer price increases in June

The message on balance was that potential mortgage borrowers may not want to delay exploring their options, as long as they make educated choices about their loans.

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The US Treasury Department’s plan to increase the two mortgage giants’ lines of credit and stabilize their liquidity is important to consumers looking for mortgage financing or refinancing. As long as Fannie and Freddie are able to purchase loans, banks and other mortgage lenders will be able to continue to offer mortgages to their clients  with reasonable terms and at relatively affordable rates.

According to MarketWatch, solid borrowers with good credit, reliable income, and substantial equity or down payments will be able to get loans with no problem anyway. However, Fannie Mae and Freddie Mac keep additional money in the mortgage lending pool, which allows more consumers to be able to obtain real estate financing at decent rates. This additional liquidity is needed to speed up the recovery of real estate markets in troubled parts of the country, dry up the oversupply of housing, get more first-time home buyers into the market, and allow homeowners to once again build equity in their property.

There’s lots of noise online about mortgage rates — enough to drive you crazy. “Fannie Mae limits are higher! This means loans will cost less!” “The Fed lowered rates! This means we’re saved!” No it doesn’t. There is a reason investors are willing to offer lower rates to those with good credit, low loan-to-values, and borrowing $417,000 or less. It’s because statistically they are proven to be less risky than larger mortgages. So calling what was a $600,000 jumbo loan last week a “conforming” loan this week doesn’t magically reduce its risk to that of a $417,000 loan. Talking about trying to put lipstick on a pig… The bottom line is that investors will continue to evaluate risk based on loan-to-value, credit scores, and yes, loan amounts. And the loans will be priced accordingly — the Fannie Mae Loan-Level Price Adjustment matrix is what your lenders will be referring to when determining what rates they can offer you. Take a look — you can see how the combination of variables affects your loan price. For example, a borrower with a credit score of less than 620 would be charged 2.75% more than someone with a score of 720 for the same loan if he borrows more than 70% of the home’s value. However, if he borrowed less than 60% there is no surcharge at all. And a borrower taking a “jumbo-conforming” 30 year mortgage pays .25% to .75% more in fees to get the loan. So before you shop, check out the matrix. See yourself from an investor’s point of view and know what to expect when you shop for your loan.

An April 13^th article from the San Francisco Chronicle stated that it will be more costly than ever to walk away from a mortgage just because the investment didn’t pan out. New guidelines bar lenders from making Fannie Mae loans to applicants who went through foreclosure within 5 years unless they can prove extenuating circumstances. And even after 5 years the borrowers will have to come up with at least 10 percent down and have gotten their credit scores back up to at least 680. Rival mortgage clearing house Freddie Mac indicated that it is going after walk-away borrowers in court to collect deficiencies (the difference between what a borrower owes and what the lender gets in a foreclosure sale). Fannie and Freddie’s actions should be far-reaching — 76% of all new mortgages are bought by the giants and must therefore meet their guidelines. These actions should be welcomed by taxpayers and homeowners alike — very few neighborhoods haven’t felt the blight of a foreclosure and the resulting hit to the adjacent property values, and making those truly responsible face their consequences should lighten the burden for everyone else.