MONEY-SAVING MOMENT: New mortgage rates are just about the lowest they've ever been. The average 30-year fixed is around 4.97 percent and the average 15-year loan is at 4.4 percent.

Remember, these kind of marquee rates will go to those who have great credit, equity in their homes and who really know how to shop around for the best deal. (Editor's note: Rates accurate as of Sept. 24, 2009.)

Now is the time to take advantage of this opportunity because the Federal Reserve will be gradually reducing its support for the housing market. That will raise mortgage rates to where they would otherwise be. In fact, the Fed's artificial support may be gone as early as March.

The good news is that even those who are upside down in their homes can take advantage of this latest interest rate bonanza. The Making Home Affordable program has a special refinance provision for those who are up to 125 percent upside down.

Meanwhile, those in ARMs that are favorable right now may be tempted to sit out these great rates. But if you think you'll stay in your house beyond the period when your rate resets, you should take advantage of these new low mortgage rates.

Just don't be one of those people who doesn't refinance because it's a royal pain. Refinancing today can put a lot of money back in your pocket in the long run. To prepare for the paperwork requirements, dig out your tax returns; your last 2-4 pay stubs; and be sure to have a clean credit report and a solid debt-to-income ratio.

ING Direct is helping to restore the private mortgage market with a new 5/1 ARM at 3.99 percent. That rate is good on loans up to $750,000, which should be a boost to those in jumbo loans.

Did you know that the federal government now writes some 90 percent of all loans? You may think you're dealing with a private lender, but that private lender turns around and sells its loans to federal entities like Fannie Mae and Freddie Mac. Or else you're talking about a VA or FHA loan to begin with.

This is not a scenario for long-term health in the mortgage marketplace.

As you probably know, ING Direct is an online-only bank that can offer some innovative deals because of its unique business model. Their 3.99 percent offer is a little lower than the market at this time, but there are some other more compelling reasons why this deal is so remarkable.

First, the closing costs with ING are much lower than with a traditional bank. Second, the size of the loan is the real clincher. This is first real initiative since the banking crisis began over a year ago to provide real money at decent rates for those in jumbo loans. Jumbo loans are defined as anything over $417,000.

Other requirements for this particular ING loan include having a down-payment or equity of 25 percent. For many people, that's not realistic. But it's a way for ING to insulate itself from risk of default.

Finally, you must make bi-weekly payments. That is, you must make half a payment every 14 days. This will actually get you out of debt quicker, and it's not a rip like so many other bi-weekly payment plans!

Of course, after 5 years, the loan will adjust and you'll likely have to get out of that ARM.

But for now, Clark hopes other competitors follow in ING's footsteps and continue to open up the private loan market again.

Mortgage rates are down again after the lows of late spring. Right now, 15-year loans will save you as much as three-quarters of a point over a 30-year loan. 15-year loans are running about 4.5% or lower right now. (Editor's note: Rates accurate as of Aug. 31, 2009.)

Of course, you'll need to have good credit and a substantial amount of equity in your home.

Let's say you only have good credit but no equity. You still may be able to refi through the MakingHomeAfforable.gov program -- even if you owe up to 125% of your home's current value.

The biggest problem right now is that it takes longer to get loans closed and you may see more junk fees. Good rates are a mirage if a bank can't execute your refi or they fee you to death in the process.

Speaking of fees, the giant banks continue boosting theirs on savings and checking accounts. You may see a monthly fee of $6-$12 if you have a low balance. That's when you should consider firing your bank and using a smaller bank or credit union.

Ditto for the low CD rates from the giant banks. The online banks, meanwhile, may give you up to 2% on a 1-year CD and 1.5% on a savings or money-market account.

Looking for a better deal? Clark has two other options for you. Costco has a new special deal on savings for its members. And AAA motorists are eligible for another such deal.

A few caveats, though. First, don't go for 5-year CDs with their current terrible rates. Visit MoneyAisle.com to let the banks compete for your CD business.

Second, do not put more than $235,000 in any account. That will help ensure you're well under the $250,000 limit of FDIC protection. This is especially important for businesses, non-profits, charities and wealthy individuals.

Finally, Clark is sad to say he's read the number of banks in severe financial trouble has risen by a gigantic number. More than 400 banks are reportedly at risk now. But the list is kept secret by the government so it doesn't become a self-fulfilling prophecy. Again, heed the FDIC limits to stay safe.

Are you taking out a mortgage or doing a refinance? There are new federal rules going in place to protect you. This is a case, however, of the cavalry arriving too long after the mortgage market massacre, according to Clark.

Much of the new rules are really no-brainer stuff that you'd be surprised was not already in place.

Here are some of the highlights of the new laws, which go into effect July 30, 2009:

• You won't pay anything upfront until you have your loan cost disclosures in writing.
• Your lender must provide your appraisal 3 days before closing.
• If your lender tries a bait-and-switch at the closing table, the loan is automatically put on hold for 7 days to give you time to think.

Banks had been able to block rules like this for so long. But their current lack of moral authority in Washington means that they can't hold them back any longer. These are overdue protections for the public.

See journalist Kenneth Harney's complete write-up of the new rules for additional details.

The federal government has expanded its Home Affordable Refinance program to include more Americans who originally were ineligible because they were too far upside down in their homes.

The first incarnation of the program only applied to those who were 105% upside down. But now that limit has been raised to 125% of a home's current value.

The government is doing this to give an incentive to hang in there to struggling homeowners. Mortgage rates have dropped recently to about 5.35% on 30-year loans and 4.85% on 15-year loans. (Editor's note: Rates accurate as of June 30, 2009.)

Speaking of 15-year loans, there's a special new incentive from the feds. Under the new rules, the government will cover much of your closing costs if you shorten the length of your loan and go for a 15-year note.

Clark says this is a real triple threat -- in the good sense. First, you have the expanded opportunity to refinance. Second, you have the incentive to go into a 15-year loan, which automatically has a lower rate. Third, you have the feds absorbing some of your closing costs on a 15-year refi.

It's win, win, win.

Why would the feds work extra hard to get you to shorten the length of your loan? You start hitting more of your principal from the start on a 15-year mortgage, which ultimately lowers the risk to taxpayers.

Yet there's a lot of resentment from people who have been able to pay their mortgages. They wonder why we are paying to subsidize those who are drowning.

Clark's response? You're missing the bigger picture. Stopping foreclosures helps preserve everyone's property values -- including yours.

One caveat: In order to take advantage of the new expanded mortgage bailout, your loan must be owned by either Fannie Mae or Freddie Mac. See instructions on how to determine if you qualify.

CLARKONOMICS: The newly released Confidence Index (as compiled by the Conference Board) shows that consumer confidence has taken a dive. People who had hoped their own situation was getting better aren't feeling so optimistic any longer.

It means that we're not seeing the "green shoots" popping up we were hearing about back in the spring. People are not feeling the love from the economy.

Is there a valid reason to be more pessimistic? That's a very personal question that Clark can't answer for you.

What he can tell you is that we're in a long haul deal. It will take years to work off the problems of too much house, too much debt, too much car and on and on.

It doesn't mean, however, that we'll always have high unemployment and no economic growth.

Meanwhile, Clark wants to alert you to a window of opportunity that's opening for cheap mortgages and cheap refinances. He expects that rates will drop a quarter-point to half a point over the next week in response to this newfound pessimism.

Mortgage rates are directly related to the 10-year Treasury. Several weeks ago, 10-year Treasury rates were in the 4s. Now the last rate Clark saw was 3.48%. (Editor's note: Rates accurate as of June 30, 2009.)

The opportunity is there, especially for 15-year refis; look to credit unions for 7-year fixed and 10-year fixed loans as an alternative.

Mortgage lenders across the nation are seeing a trend of people opting for 15-year refinances instead of 30-year refinances.

This is a huge reversal back to the ways of an era when we didn't want to be in debt. For too long, Americans heard the hotel ballroom pitches about using "other people's money" (OPM) as a way to get rich through leverage by borrowing, borrowing, borrowing.

Now, the pendulum has swung the other way.

15-year refis don't have the same dramatic savings they once did vs. 30-year refis. In fact, the typical monthly payment on a 15-year refi is now 50% higher than on its 30-year counterpart.

So why the sudden appeal?

Homeowners know that the equity comes from paying down debt. Of course, have a narrow focus on wiping out your mortgage if you're not maxing out your retirement accounts is not advisable either. You've got to strike a healthy balance.

No matter how you slice it, people are getting more reflective about their finances. Christa and her husband like to have what they call "money movie night" each week where they put a film on for their children and pore over their finances.

Questions about refinancing a mortgage are among the hottest we're getting on the show right now. Today Clark spoke to one caller and shared a few tips to make the process as smooth as possible.

If you're in the market for a refi, begin by visiting myFICO.com and getting your true credit score. In the example of today's caller, she had a score of 703 and her husband's score was 824. Clark recommended they try to qualify for the refi on his income alone; most lenders will base your rate on the lower score if you're a couple.

Who can you go to for a refi? Clark recommended checking with a local bank or credit union. You'll want to get quotes from multiple lenders. And you may even want to get an online quote to use as leverage in negotiations. Whatever you do, be sure to get all quotes within a 14-day window to avoid damaging your credit.

Make sure you're prepared with all the paperwork that will be required of you…and it's going to be a lot. At the very least, you'll need to have your tax returns handy.

Finally, if you're waiting on the sidelines for rates to drop another quarter of a point, stop it! Even Clark's own predictions of months to come of ultra-low interest rates look like they're not going to pan out. Now is the time to strike.

Whenever Clark makes a public appearance, he's constantly bombarded by questions from people who are in over their heads with their mortgages and want to know what to do.

Conventional wisdom holds that your monthly housing expenses should only be slightly more than 30% of your take-home pay. However, many people are paying more than 50% of what they bring home. In extreme cases, some even owe more than 100% of their income!

The consumer champ had previously spoken about the Making Home Affordable (MHA) initiative and the opportunities it presented for refinancing. But many people were frustrated in their efforts to make any headway with MHA.

Now there's a new free website from the Fair Isaac people that should help homeowners who've been waylaid in their past efforts to get some kind of mortgage workout.

MortgageReliefOnline.com poses a battery of questions and then instantly tells you if you're eligible for assistance under the MHA plan.

Clark has spoken a lot about the benefits of refinancing your mortgage during the last few months. A recent Freddie Mac survey found that rates are the lowest they've been since record keeping began in 1971 -- the same year that the consumer champ first became a menace to society when he started driving!

The penny pincher has even gone on record predicting that we'll hear from someone who got a 15-year refinance below 4% by May 1…or he's agreed to be filmed getting pie thrown in his face for charity!

Meanwhile, a separate analysis in Barron's recently predicted that later this year, 30-year fixed rates will average 4.2%. Today, they're around 4.8%. Will Barron's be right? Your guess is as good as Clark's.

If you're having trouble nailing down a refinance, you've got to understand that the lenders are short-staffed and everyone's trying to refi right now too. But the low rates should last for several months, so check again in the summer if you're at an impasse.

And remember a few pointers whenever you're seeking a refi:

• Be sure you're on top of your paperwork.
• Make detailed notations on everything that transpires so you have a record of the status of your application.
• Send all the required documents in a timely manner.

You never want to be the source of a delay or problem!

The refinance processors are overworked, so it behooves you to stand out as a polite but sophisticated borrower who will stay on top of them.

Are you eligible for a refinance under the terms of President Obama's Making Home Affordable plan? Clark is sensing a great deal of confusion over his original explanation of the program earlier this month.

Fortunately, there is an easy way to find out if you qualify. You can simply visit the newly established MakingHomeAffordable.gov and complete a self-assessment test.

There are really only 2 possible scenarios under which you might qualify. That's because Making Home Affordable is an umbrella name for 2 separate programs.

Under the first program, you can refinance if you're current on your mortgage -- even if you have no equity in your home. See what criteria you'll have to meet. Approximately 4 in 10 homeowners will be eligible.

Under the second program, you can get a loan modification if you're behind on your loan. This is very controversial because of the issue of moral hazard. See what criteria you'll have to meet. Bear in mind that this second program is completely different than the failed HOPE NOW alliance, and it requires the voluntary participation of lenders. The feds, however, are throwing in $750 billion to grease the wheels and get things going.

If you haven't refinanced recently and are sitting at 5.625% or higher, you may be candidate for a refinance right now or in a few weeks when the initial burst of activity dies down.

Meanwhile, Clark recently made a prediction that 15-year refinances would be available at 3.875% by May 1…or his staff will get to throw pie in his face for charity!

Finally, something he failed to mention in his original discussion: Some credit unions may be offering real deals on refinancing into either 7 or 10-year loans, so keep your eyes open!

CLARKONOMICS: The federal government wants to get the economy moving, right? Well, now they're essentially poised to print $1 trillion to buy up debt that they issued in the form of treasuries!

$750 billion will be going into the mortgage market. The intention is, in part, to drive interest rates down on mortgages.

So here's an extreme prediction from Clark: By May 1, we'll see people locking in on mortgages with rates that start with a 3 for 15-year loans. Specifically, he's making a prediction that he'll hear from a caller who refinanced for 3.875% on a 15-year loan. In addition, he also thinks 30-year loans will be around 4.25% by May Day. As always, you would need top credit to land deals like these.

Will Clark get pie on his face if his predictions prove false? You'll just have to tune in on May 1 and find out!

Meanwhile, there's always the fear that trying to push down interest rates by printing money could cause runaway inflation like they have in Zimbabwe. However, economists theorize that our depressed level of factory utilization creates just enough slack in the economy to help us avoid that dangerous scenario.

Clark has always despised cash-out refinances -- the kind where you refi your mortgage for more than you owe so you walk out with cash. This was very common over the past 10 years and it's been a part of the foreclosure problem.

That's why the consumer champ was pleased to learn that cash-out refis are going away as of April 1, 2009. You won't be able to do them except under the strictest of circumstances through the FHA program.

So if your heart is set on one despite Clark's reservations -- and he can't believe he's saying this -- you've got to hurry and do it right now before the deadline.

Meanwhile, the best rates on refinances of all types remain fairly elusive. The great rates that the penny-pinching guru quotes from time to time on the show are contingent on an applicant having great credit (a minimum of 720); good equity in their home; and solid proof of income.

As a reminder, AnnualCreditReport.com is the only site to get your free credit report. And as always, Quizzle.com, CreditKarma.com and Credit.com all offer free non-FICO credit scores online.

CLARKONOMICS: There's much confusion over the federal bailout for homeowners and Clark wants to clear some of it up.

There are two scenarios under which the "Making Home Affordable" program could possibly work for you. The first is if you're behind on your mortgage, and the second is if you're current.

Let's examine the first scenario. If you can not afford payments and can not refinance for whatever reason, you will have the opportunity to have your loan temporarily reduced to 31% of your monthly income. This applies to homes valued at up to $759,750 in most areas of the country. Your interest rate may drop to as low as 2% for the next 5 years!

Under the second scenario, those who are current on a mortgage held by Fannie Mae or Freddie Mac will also be allowed to refinance -- as long as they're not more than 5% upside down in their home. (Note: This does not include a second mortgage). The new loan you'll get will likely be re-written to an interest rate of around 5.125%.

To determine if you're loan is held by Fannie Mae or Freddie Mac, simply follow our web links or call them directly. Contact Fannie at 1-800-7-FANNIE and Freddie at 1-800-FREDDIE from 8 a.m. to 8 p.m. ET. Start with Fannie Mae -- they're the larger of the two.

And you may also be eligible for assistance even if your loan is not with Fannie or Freddie. That's up to your individual lender, so get in touch with them to find out if you qualify.

For an additional resource that fleshes out more details, see The San Francisco Chronicle's Q & A and a link to the Treasury Department's official guidelines.

Meanwhile, it looks like the idea of empowering bankruptcy court judges to cram down mortgages is gaining momentum -- despite Clark's worries that this would undermine some of the basic tenets of capitalism. We'll keep you updated.

Fannie Mae -- which controls nearly half of the mortgages in the country -- will launch a new program in April to help those who are self-employed or have bad credit take advantage of the refinance craze.

The Refi Plus program will waive the normal credit score requirement for a refinance; it will have reduced documentation standards for proof of income; and it will allow for computer-based appraisals, which tend to inflate the value of a home and make it easier to qualify for a refinance.

More people stand to be affected by these upcoming changes than the entire number of people who have already gotten their refis!

However, Refi Plus will ultimately lead to higher defaults and more foreclosures; it is, after all, a lessening of standards. But apparently the "experts" aren't overly concerned. They're holding out for the hope that the program will actually allow people who couldn't make their mortgage every month to do so.

Mortgage rates are the lowest they've been since records first started being kept in 1971. The average rate we're seeing right now is a touch over 5%. For those with good credit, you could be looking at rates in the 4% range.

What kind of credit are we talking about? Usually 720 or above on the FICO scoring model. Clark suggests either buying your FICO score at MyFICO.com or trying TrueCredit.com for an approximation of the best rate you could get. The latter costs $10.

In addition to having a good credit score, you'll also need to be sure your house "appraises out" -- essentially, that you have enough equity in your home to go through with a refinance.

What can you do if you're $10,000 or $20,000 shy on your equity? The consumer champ reluctantly recommends that you consider borrowing against your 401(k) to make up the difference. This is one of the only scenarios where borrowing against your 401(k) could actually be a good thing. (Editor's note: Whew! Clark thought he might be struck by lightning as this advice left his lips!)

One final thought: Clark often talks about cramdowns -- a tactic used in commercial real estate where the lender will reduce the outstanding balance, interest rate, etc.

There is no residential equivalent for home mortgages at the moment. But it looks likely that in the next 4-6 weeks there may be a new statute that will permit cramdowns in the residential market. Clark will be able to provide more particulars as the legislation takes shapes.

We're currently in the midst of the greatest mortgage refinancing frenzy of the past 5 or 6 years. Rates are now the lowest they've been since mid to late 2003, which had been the best time since the golden era of mortgages in the '60s.

This time, however, there are some special wrinkles that Clark wants you to know about. It's more confusing to shop for a mortgage today than it's ever been. First, you don't know if your house will appraise out permitting you to refi. Second, you don't know if your credit score will qualify you. Third, you don't know who to trust! Finally, it can be difficult figuring out the math if you have 2 loans like many Americans.

Executive producer Christa is completely mortgage obsessed and spends at least a half-hour each day researching mortgages. She's currently locked in at 5.375% on a 15-year loan and is looking to refinance. Christa's been noticing some real oddball options in the marketplace including 7. 10 and 20 year refis -- and we're not talking about ARMs here.

Her obsession flies in the face of Clark's typical advice that housing debt shouldn't necessarily be a front-burner issue. After all, it is widely considered the least worst type of debt. But she's in a unique scenario where she and her husband have too much housing debt and they're already saving plenty for retirement, which is one of Clark's top issues. So her single-minded focus is actually a good thing in her case.

But most people won't do the level of research that Christa does. That's why Clark recommends TrueCredit.com. For a fee of $10, this service tells you the best rate you should qualify for.

When you're shopping quotes from lenders, beware of points that they'll try to impose on your refi. Each point is a fee of 1% on the amount you borrow. You shouldn't pay any origination fees or discount points. Finally, pay attention to the closing costs.

Another route to go is the no closing cost or stated closing cost option. These options may have an interest rate that's up to half a point higher to cover the lender's lost closing costs.

Looking for more info? Clark recommends checking HSH.com and MTGProfessor.com.

Mortgage rates have been flying up and down like a yo-yo. Clark's brother in law just got a 30-year fixed loan at 5.75%. Our producer Kim, meanwhile, is in the process of refinancing her condo at 5.125% on a 5/1 ARM fixed for 60 months. Clark's credit union, meanwhile, offers an oddball 7-year refinance at 4.375% right now. Still others in the marketplace are getting loans at 7% or higher.

Obviously, there's some real distortion in the home market and there's real opportunity to refinance. There are so many crosscurrents in the market that your rate could be all over the map. So now more than ever, you need to shop around when you're looking for a mortgage or a refinance.

If you are in a home and want to refinance, 2 things are absolutely key. First, you must have meaningful equity in your home. Second, you must have a good credit score.

If you are a homebuyer, try accessing first-time homebuyer programs through HUD. The FHA loan program -- after several years of being almost non-existent -- is once again important. Clark also recommends trying non-traditional lenders like ING Direct for a loan or a refinance.

CLARKONOMICS: The federal takeover of Fannie Mae and Freddie Mac is the kind of thing that makes most people's eyes glaze over. But it does have some direct consequences for your wallet.

In short, mortgage rates are going down, down, down. If you are in the market to buy a home and you have a good credit standing, you can take out mortgage in the 5% range. If you are in an existing mortgage somewhere in the 6% range and you have some good equity, you should be able to refinance in the 5s.

The nationalization of Fannie and Freddie has both positive and negative aspects. On the plus side, it brings some relief and stability to the housing market (even though there's still too much oversupply). But on the other hand, we taxpayers are on the hook for literally trillions of dollars.

CLARKONOMICS: The economic news today is frightful. Wholesale prices of goods rose at the fastest level in 27 years. Retail has also reported dismal signs, including J.C. Penney, Target, Home Depot, Staples and more.

But Clark wants to take the headlines down to an individual level. He wants you to see how your decisions cause financial heartache and how you can change your behavior. The core of his message is, of course, save more and spend less!

New stats from the Federal Reserve show that the average American only has about 40% equity in their home. 20 years ago, we had 75% equity in our homes. But that all changed when banks started pushing home-equity borrowing like a dealer pushes illegal drugs.

People were only too happy to borrow for lifestyle. Now the banks are in a tight spot. We're defaulting on our home-equity lines left and right. Banks are losing money when they foreclose, but what choice do they have when we're not paying anymore?

We need to do a hard restart in our brains. Some people think it's a good idea to borrow home equity at a low rate to pay high-interest credit cards. But doing so only frees up the credit cards so you can charge them up again, plus it creates a deficit against your home.

There isn't really a quick solution; you've got to climb out of debt step-by-step. You didn't get into debt overnight and you won't get out of it that way. It all comes down to this: Do not use borrowed money to achieve a desired lifestyle.

You've got to come up with your own deterrent -- think of it as financial electric shock therapy -- when you're contemplating spending money you don't have.

The real estate market's greatest losses -- in terms of both dollars and percentages -- have come in tony neighborhoods. That's because jumbo loans have not been available, or were only available at very high interest rates. Jumbo loans typically begin at $417K.

Months ago, a law was passed that allowed you to take out a jumbo loan in expensive housing markets at conventional loan rates. But the loans never really appeared in the market. People thought they'd be able to refinance or move up to a larger house, yet it was essentially vaporware.

Now these modified conventional loans, which are about a quarter of a point higher, finally are showing up. So if you were trying to sell and would-be buyers couldn't get financing, take heart. Or if you wanted to refi a high-cost loan in a high-cost neighborhood, you may be able to get that loan now. The politicians hope this will get the high-end market moving again.

What areas will benefit most from the new influx of jumbo loans at near-conventional rates? Check out the complete list. (Editor's note: This is a PDF file.)

Have you heard of anyone who wanted to refinance their mortgage and couldn't do so because the appraisal came in too low? This is the natural result of the pendulum swinging back after a spike in inflated real estate appraisals.

Months ago, Clark told you that 90% of appraisers say they've been pressured by mortgage lenders to artificially raise the value of a house. About 5 years ago, that number was just a little over 50%. Standards and ethics became much looser as everybody tried to make the deals happen.

Now we're in a time when many mortgage lenders are questioning appraisals because of the rapid decline of home values in many markets. Plus, they're scared of increased scrutiny of their lending practices.

Here's what's been going on behind the scenes: New York State Attorney General Andrew Cuomo has been pressuring the industry to change how appraisals are done. He wants to ensure that loan officers can't influence appraisers and would actually be separated from the decision of which appraiser is hired.

The Mortgage Bankers Association is fighting hard to overturn the new rules so they'll still be able to get "liar's appraisals." That's just shameful, according to Clark. We've had enough harm done already to families who got into homes they couldn't afford and are now being put out on the street.

Meanwhile, Countrywide has been under a cloud for cheating people on their loans by coming up with false paperwork saying they owe additional money. Clark already relayed the report about Countrywide fabricating documents when they got caught cheating a homeowner with inflated loan fees. But after being caught, the company reached an agreement with the homeowner to keep the documents secret. Thankfully a federal judge intervened and said these documents need to come out -- especially in light of similar allegations against the company all over the country.

Countrywide is going to disappear as a company; either Bank of America will go through with a purchase, or it will fail. It's a shame that a once-respected brand has been sullied. Yet a lot was built on false pretenses and foolish lending. Clark was surprised to learn that the company had internal procedures in place to cheat people, especially those in bankruptcy.

As always, Clark would love to have a Countrywide representative come on the show and explain their position.

CLARKONOMICS: People's eyes often glass over when Federal Reserve Chairman Ben Bernanke starts talking about macro and micro economics, M1 and M2 and other gibberish. The real question he should be answering before Congress is are we or are we not in a recession? Bernanke really hedged his bets on that one during his latest Congressional appearance. He instead talked about a market facing risk from housing, credit card and job sector woes.

Let's take a look at the housing sector and see how it's been impacted by the Federal Reserve. A few weeks ago, a listener called in looking to refinance a mortgage. He wanted to know if he should wait for the Fed's cuts to get a lower rate on the refinance. But the Fed's interest rate cuts actually drove mortgage rates up by almost a full point. Here's why: Say you're an investor. The Fed is pumping money into the economy, and that makes you fret about inflation. You then have to calculate into a mortgage how afraid you are that the rate of inflation over 30 years will kill your rate of return. So that automatically slightly bumps up the mortgage rate.

However, there is some good news about where we're headed as a country. If we are moving toward an economic spill, we have a great point of entry. The rate of unemployment is hovering in the 4s; historically, economists did not even think it was possible to get this low. So that's a good thing. As unemployment rises from here, remember that we've seen far worse before. And no, you don't have to look back to the Great Depression -- just look back to the early '80s.

The reality is that we're in a "hangover" phase. We borrowed too much, bought too much and didn't pay enough. Dancing to the music of cheap money is over. There are a couple of long-term things we need to do to establish sound financial ground. First, we as individuals need to spend only the money we have. Not a penny more. Second, our government needs to spend only the money it has. Trying to borrow from tomorrow to pay for today is a problem. That's why the Fed flooding the market with money and lowering rates is not having the desired effect.

Several just-released home market stats highlight how stinky the real estate market has become. In the latest session of Clarkonomics, Clark explains how the current market situation is turning some of his long-standing advice on its head. New stats show that home prices in 10 major metro areas are down 8.5 percent from a year earlier. That's the worst number since stats have been kept. Meanwhile, the Commerce Department reports that sales of new homes have dropped 27 percent -- the worst since record keeping began 44 years ago. Finally, the National Association of Realtors reports that overall home sales are down 13 percent over the last year. Add it all up and there's no denying that the new home market is in much worse shape than the used home market.

If you read Clark Smart Real Estate, you know that Clark spoke about people putting too much focus on foreclosures; and about how buying used is a better deal than buying new. But that's not the case anymore. Right now, you're better off getting a new home -- preferably one that's an REO (real-estate owned). When a lender takes a house back, they drive it into the toilet because they're not in the business of property management. So REOs quickly morph into overgrown, smelly houses that deteriorate into crummy shape. That's when you can steal a deal, hopefully somewhere in the range of 20 percent below market value. Of course, you'll have a lot of cosmetic work to do.

Congress is currently cooking up some temporary props for the housing market. There's talk of giving people in jumbo loans (above $417K) the chance to refinance at standard rates, not jumbo ones. Keep your credit score as high as possible in preparation for when/if this legislation goes into effect.

The slowing economy presents many challenges along with many opportunities. In the latest edition of Clarkonomics, Clark focused on some of the latter. The Fed's drop in interest rates has led to an opportunity to refinance. Here's the back-story: People who are skittish about the stock market right now are instead putting money into U.S. treasuries, which are like CDs for rich people. Clark recently saw a 10-year treasury trade going for around 3.6 percent. That low rate in turn affects what you pay for a mortgage.

Let's look specifically at how Countrywide is helping to make refinancing a smart move. The mortgage lender had gotten into all kinds of trouble with their undesirable liar's loans and option payment loans, which they hoped to sell off to investors. But there are no buyers willing to take the risk in these tough economic times. So Countrywide is stuck with them. The Los Angeles Times reports that right now the mortgage lender may be willing to work with you if you're in one of their weirdo, exotic loans. They'll waive all kinds of requirements to get you into a good loan. Their goal is simply to package you up with other "safe" loans and sell you off to investors. So keep asking what you can do to get into a better loan -- even if you've been turned down before. Meanwhile, what do you do if this scenario doesn't apply to you because you're in a relatively good loan? The Fed's interest rate cut still means that you may have the opportunity to refinance for an even better rate.

So much has happened on the economic front while Clark was away in Hawaii. In the latest installment of Clarkonomics, Clark discussed the Federal Reserve's big cut in interest rates and the news about the economic stimulus package/rebates that will be coming this summer.

Did the Fed make the rate cut just to protect big-money interests in banking or did they have the long-term strength of the country in mind? The answer won't be clear for a few years. But you can feel the impact of the move right now: This is a great time to refinance your mortgage. Consider this option if you have good credit, some equity in your home and a current interest rate in the high 5 percent range. The greatest benefit will be for those who want 15-year loans, which may start at 4 percent. 30-year mortgages will probably see the low 5 percent range. If you have a home equity line of credit, these rates should be back in the 5 percent range after peaking in the 8s. Come March or April, you may want to look at converting from a floating rate to a fixed rate home equity line of credit. One of the ironies of the Fed's move is that being a borrower looks more favorable than being a saver right now. Most banks and credit unions are slashing their rates. So you may want to use this opportunity to put more of your dollar toward your floating rate debt and knock it out faster.

The economic stimulus package, meanwhile, makes use of the idea of negative income tax. That means people who are lower on the economic ladder are given more incentive to work by getting rebates and not having to pay income tax. But let's not lose sight of one thing: The purpose of this rebate money -- $100 billion approximately -- is so that politicians can get re-elected. It's not about stimulating the economy. Sure, people will be excited about the rebate, but the reality is it won't address the real problem. In the long run, we're better off with lower tax rates and a simpler system than having the government send out candy to people. One promising part of the stimulus package is that there will be specific tax breaks for entrepreneurs. Now that's a great way to create long-term rewards for the economy!

The exit polling from New Hampshire told us that the economy was a big issue for people. The slowdown affects us in a lot of ways. For example, hourly employees may find their hours diminishing. There are always winners and losers in any economic scenario. Right now is a great time if you're in the market for a refinance on your mortgage. The loan originators practically have no customers. But it's not uncommon for people to hear the headlines, watch the news and still miss the opportunity. Try refinancing if you're current in your mortgage and have an interest rate that's 6 percent or above. Also try refinancing if you have a floating rate.

Meanwhile, Clark recently upset some people with his comments about Countrywide. The company is in serious trouble and there are reports that they may file for bankruptcy. But there are still a lot of question marks surrounding the whole situation. So here's what Clark wants to reiterate: If you are an existing Countrywide customer, nothing changes for you whether they go bust or not. You'll still owe on your loan. One caveat: Be sure to track your loan balance. See that each month's payments are being applied properly and the balance is dropping correctly. Don't trust your lender to do the math.

Clark recently received an offer in his mailbox to get a mortgage on his house for 1.5 percent interest! It's like 2004 all over again when the weirdo loans were rampant. It turns out this is a new trend among mortgage companies. Lenders have seen the volume of business fall so much that they're getting increasingly desperate -- hence a slew of mailings trying to get you to treat your house like an ATM. Clark received a mailing from Countrywide offering $511,000 for a refinance. Meanwhile, The Los Angeles Times reports that lenders are also sending out mailings about option payment loans again. These are the kind where the balance rises over time instead of declining. What is going on here? When Clark looked closely at the first offer, he saw it was a teaser rate that's only good for 90 days. So beware that these mailbox offers can financially blow up in your face. Remember there is no free lunch. Clark wants you to learn in his school, rather than the school of hard knocks.

The rate of delinquencies on mortgage loans is on the rise now that people who got adjustable-rate mortgages in the mid-1990s are being hit hard by interest-rate resets. This is a cyclical problem and it will probably continue through mid-2008 until it settles down again. Money magazine reports that calls to foreclosure counselors are up 1730 percent as people face massive increases in their monthly payments. Clark has advised people to call their lenders early and often if they're having trouble with their payments. Many folks have been complaining that the lenders don't want to hear it. Yet the mortgage lenders one by one are coming around and developing some workouts. A workout means that the lender will modify the terms and conditions of your loan to make payments possible for you moving forward. The lender gives up a lot of money on paper, but you win because you avoid foreclosure and can protect your credit rating throughout the process.

The Los Angeles Times reports that people who make the best candidates for mortgage workouts are those who made every payment on time before their interest-rate reset blew them out of the water. Lenders won't be inclined to help those who haven't been able to make payments from the very beginning of their loan. The second situation when you may be able to get a workout from a lender is if you've made timely payments and suddenly lose your job. Lenders will usually help you out for three months, but it's difficult to work things out any longer than that. Keep in mind that not every lender is willing to do a workout. But the smart ones will embrace workouts so they don't wind up paying to foreclose on a house they don't really want. HSBC, which was one of the big lenders of weirdo exotic loans, has been trying workouts. HSBC's model involves reset your interest rate based on a calculation of your basic expenses and how much other income is left to pay the mortgage. So Clark's advice stands. Call your lender persistently if you're in trouble. You do not, under any circumstances, want to just bury your head in the sand!

Did you know that about two-thirds of all loans are not done by the lenders themselves? They're done instead by mortgage brokers. Mortgage brokers don't have the cash, but they're like the retailer who sells you a loan. Meanwhile, there's a new report out that says about half of all sub-prime mortgage holders could have qualified for good loans at good rates. So what happened? Some mortgage broker conned them into it a sub-prime loan. Washington Mutual has issued a new policy that requires brokers to tell people the truth about whether their interest rates will change, if they'll face a prepayment penalty and if the broker will receive kickbacks (aka bribes) from the deal. Whenever Clark talks to people who are in weirdo exotic mortgages, he always asks them if they knew beforehand that they'd have a prepayment penalty. You have to be sure that this is disclosed to you before the closing. WaMu is also going to call each borrower before the closing and verify that they aren't being ripped off by the broker.

The best way to protect yourself is to shop around for a mortgage. This is a huge field where many people are ethical, but there are some who engage in criminal behavior. Clark thinks two steps should be taken to help out: First, prepayment penalties should be banned. If you find out before closing that you'll be subjected to one, walk away from the negotiating table. That's what Clark did once when he was almost about to be hit with such a penalty. Second, the Department of Housing and Urban Development needs to develop a clear disclosure form to explain in plain English the details of a mortgage. Until they do it, there's a disclosure form that Clark really likes developed by The American Enterprise Institute.

The question of who's going to rescue the two or three million families who are facing foreclosure is the hot potato that everyone's tossing around right now. Going into foreclosure affects more than just the people who are thrown out on the street; the average home value in a neighborhood that has foreclosures drops one to 1.5 percent. President Bush has been talking about a proposal to help out. The Federal Reserve is putting pressure on the banks to come up with workouts such as changing loan terms and stretching out payment plans. All of this will help some, but many families will still be in over their heads. That's because a lot of loans may have been securitized, or bundled together into a collateralized debt obligation (CDO) and sold off by a mortgage company. The rules of the CDOs usually state that the loan terms can't be modified.

The best solution would be to help people avoid getting into loans they can't handle. To that end, the state of Illinois has come up with a plan that Clark really likes. The Chicago area is facing major foreclosure problems, so the state is now requiring candidates seeking loans with pre-payment penalties and adjustable rates to go to independent counseling and learn about the dangers of their choices. The mortgage lenders, meanwhile, are going berserk over this new rule, and they're trying to have it thrown out because many of them want to continue ripping people off with exotic loans. Clark gets worried when he hears presidential candidates talking about federal bailouts to solve the foreclosure problem. Wouldn't it be better if people were educated not to make the wrong loan choices from the start?

With the financial and housing markets in turmoil, people always wonder about the likelihood of a recession. While a lot of reputable sources are saying that it won't come to that, Clark has noticed that the interest you earn on a CD or treasury is actually higher for shorter-term investments. Historically, recession has followed when short-term investments like a 90-day treasury pay better returns than a 30-year treasury. In addition, the stock market may be ready for what's termed "correction" -- when it drops by 10 percent. On the real estate front, we've been binging on the housing punch bowl for years and it's starting to dry up. Normally, a home's value goes up by the rate of inflation plus a smidge more for the fact that there's a limited amount of land. So in the past a house would appreciate about three percent per year. But more recently it hasn't been uncommon for a home to appreciate three percent per month.

For example, Clark's oldest brother lives in a Phoenix suburb. He and his wife bought new construction and during the nine months it took to build their home, the value went up $100,000. Then the next year the value went up $150,000. But when Clark recently visited his brother, there were a ton of houses for sale in his neighborhood with no willing buyers. If the housing market gets ahead of itself and people can't afford anything, it has to correct. Think of the market as a ladder, where people enter on the first rung with a starter home, condo or townhouse. But when you can't even reach the first rung, the builders have a tough time selling. So the builders themselves have gotten into the mortgage business and lowered the lending standards so that people can qualify for homes that may be out of their price range. The problem is that homeowners now can't sell for close to what they owe on a loan and they can't refinance. As many as five million people across the country are in a similar situation and could face foreclosure. So where's the silver lining? Well, the long-term benefit is that when we're done with this "correction" period, homes will become affordable again for the typical family. The question is how long will this process take? Meanwhile, Clark doesn't profess to be an economist, but he does think the odds of a recession are better than 50/50.

You’ve probably heard that people who put money away for longer periods of time earn more money than those who put away money for a short period of time. It’s called an “inverted yield curve,” and it’s typical in investing. Well, right now things are upside down and backwards. The 10-year Treasury is paying much lower interest rates than it was 4 months ago with rates at about 4.6 percent. That’s important to you because the treasury directly affects what mortgage rates people can get. And people aren’t thinking about refinancing or filling out paperwork around holiday time. So, it’s a great time for you to take advantage of the slow down. You can shop your refi all over right now – both online and at banks and credit unions. If your credit is rock solid, you can get a loan in the five-percent range on a 30-year loan right now. Many are paying more than 6 percent, but it is possible. For 15-year loans, you can get below 5.5 percent. Even if you don’t have great credit, you can still get a good deal. Also consider a home equity loan if you have a second mortgage. Rates on HELOCs are great at credit unions, if you’re willing to borrow for five years and you have good credit. So don’t sit on your hands. Take advantage of this opportunity.

Clark’s blood boils every time he hears about people getting ripped off on mortgages and closing costs. It happens a lot because there are a very small group of honest workers in a large pond of scum. A wave of reform is emerging in the business though. Companies are playing fair and square with their customers and are even helping coach people through the process. You’ll know these companies because they guarantee the closing cost amount in writing. That is your first step when trying to find one of these companies. ABN-AMRO, eTrade, eloan, DiTech, and Priceline are just a few of the organizations that are offering customers a fair deal. Secondly, you must compare interest rate, points and closing costs from lender to lender. It’s not just about the interest rate. Clark prefers that you not pay a point, but that is up to you. You must also decide what kind of loan you want – fixed, variable or other. The best loan in Clark’s opinion is a fixed rate for 15 or 30 years. But if you’re not staying in the home that long take out an ARM for the amount of time you think you’ll be there – 3, 5 or 7 years. Figure out what you want and then no one can play games with you. For help, check out mtgprofessor.com

USA Today reports today that Americans have become a nation of ATM users instead of savers. Historically, people have paid down debt on their homes, not taken money out on their homes. But more and more people are treating their homes as piggy banks. People are taking out 800 percent more money on “cash out refinances” on their homes. And banks have been happy to allow you to tap most, if not all, the value of your home. People use the money to buy a car, go on a vacation or pay off debts. But within about 18 months, those debts are back up to the level they were before. So, those folks now owe more on their homes and the credit card bill is still looming. Clark wants you to pay off your home so you can own it. Many people think ownership means buying the home. But ownership actually means you don’t owe anymore on it. It’s time that we start looking at housing in a different way compared to the past five years. Home prices may not go up much this year, and, in many places, they may go down. Then, if your home value doesn’t go anywhere for a few years, you’ll be ok when it’s time to sell.

The Feds have raised interest rates several times already this year and it’s about to happen again. The difference is that this time it’s going to go up even higher. Economists are predicting that the prime rate is going to 7.5 percent. That means if you have a home equity line of credit, and you don’t have very good credit, you could be paying upwards of 10 percent on your loan next year. So, how do you keep from getting hurt? Join the 36 percent of people who don’t carry a balance. Come up with a plan to pay your credit cards in full every month. Of course, you have to stop using the card first! Then, see if you can either pay off your HELOC or get it changed to a fixed rate. People obviously see the rising interest rates coming because they are getting out of exotic loans like crazy. That includes interest only loans, LIBORs and option payment mortgages. Clark is ecstatic about this. Even if you have to pay a little bit more upfront when you refinance to a long-term fixed rate, you’re going to be much better off in the future.

There has been an unexpected change in mortgage rates over the past few weeks, and people in interest only loans and other variable rate loans need to pay attention. If you’re going to be in your house for any period of time, this is very important. Because of some surprise movements in marketplace interest rates such as the 10-year Treasury, interest rates have gone down. If you’re buying a home, for instance, interest rates are great. If your credit score is solid, you can get rates between 5.12 and 5.5 percent. On a 15-year loan, you’ll find 4.75 to 5.12 percent loans. A 5/1 ARM is also a consideration. Rates on those loans are usually 5.25 percent. So, it’s possible to get great rates on refinances right now.

The Federal Reserve has just released information about debt in America, and the results are staggering. Americans owe $11 trillion in debt, which is double what we owed 10 years ago. So, for an individual household, the debt burden for families is huge. The “must pays” that we’ve developed in our lives are growing exponentially. Half of all consumer debt is floating rate interest and more than one fourth of mortgage debt is floating rate interest. So, think about what you’re borrowing money for and what you’re going to have to pay back. If you have a floating rate mortgage and you’re going to stay in your house for any length of time, refinancing to a fixed rate loan is still a great idea.

Clark sometimes must eat crow, as they say, when he makes a mistake on the show. That happened the other day when he spoke to a caller named Shawn about a refinance he was thinking of doing. Shawn said he’d been offered a home loan for 1 percent for five years, and Clark told him there was no such thing. He told Shawn that it was probably a teaser rate that would balloon soon after he signed for up it. Well, it turns out that it does exist, but it’s much worse than he originally thought. What happens is the company charges you as if the loan is at 1 percent interest, but it’s actually being calculated at the real market interest rate. So, if you pay on the loan for five years, you will owe much more money at the end than you did when it started. The home’s value may not go up at all. So, it’s basically playing with fire. Now is the time to open boring, vanilla fixed rate loans, especially if you plan to be in your home for a while.

This was the year that Clark – and many economists – figured that it would finally not be a good idea to refinance. But today, one out of two people could benefit from refinancing their mortgage. That’s because interest rates that the federal government does not control are defying all predictions. Ten-year treasuries are now selling at 3.9 percent. And that rate is what sets the rate for mortgages. So, if you took out a 30-year loan, you could get a 5.5 percent rate on your loan if your credit is good. You will pay about 5.8 percent for a 15-year loan. That’s fantastic! It’s not a biggie if you are not going to be in your home long. But if you’ll be there a while, you want a fixed loan. As for car loan rates, they were rising and have declined some, but you can still get about 3.5 or 4 percent. The odd thing is that adjustable rate mortgages are going to move higher than fixed rates. So what about savings? CD rates have shot up recently, but they’re coming back down now. It’s a good idea to purchase Series I savings bonds instead. They are earning 4.8 percent right now and you can keep these for up to 30 years. Learn how to buy them at savingsbonds.gov. You can buy online and be on your way.

This was the year that Clark – and many economists – figured that it would finally not be a good idea to refinance. But today, one out of two people could benefit from refinancing their mortgage. That’s because interest rates that the federal government does not control are defying all predictions. Ten-year treasuries are now selling at 3.9 percent. And that rate is what sets the rate for mortgages. So, if you took out a 30-year loan, you could get a 5.5 percent rate on your loan if your credit is good. You will pay about 5.8 percent for a 15-year loan. That’s fantastic! It’s not a biggie if you are not going to be in your home long. But if you’ll be there a while, you want a fixed loan. As for car loan rates, they were rising and have declined some, but you can still get about 3.5 or 4 percent. The odd thing is that adjustable rate mortgages are going to move higher than fixed rates. So what about savings? CD rates have shot up recently, but they’re coming back down now. It’s a good idea to purchase Series I savings bonds instead. They are earning 4.8 percent right now and you can keep these for up to 30 years. Learn how to buy them at savingsbonds.gov. You can buy online and be on your way.

The Federal Reserve has raised interest rates again, which means that the prime rate is going up and credit card rates will most likely go up. Home equity loans will also go from 4.5 to 5.5. percent, and that rate will slowly increase. At the same time, something strange is happening. Typically when the Feds raise interest rates, other rates go up too. Mortgage rates, for example, typically go up with interest rates go up. But that has not happened this time. Home mortgages have gone down, not up. So, a 30-year fixed rate mortgage will now be about 5.25 percent. A 5-1 ARM will be about 4.75 percent at the most. So it’s a good idea to “go long” as they say. You fix your costs at a lower rate than you can float your costs. So, those with floating rate credit cards should do what they can to pay down their debts. And, if you’re in an ARM, think about getting out and shifting to a fixed loan.

Home equity line values are growing dramatically. The amount of money people are taking out has been steadily increasing. But as you take more money out, your net worth declines. As you borrow against the value of your home you have debt against your assets. So your worth declines. Home equity lines have become like ATM machines, meaning people just withdraw money whenever they want. There are circumstances when these loans are a good idea. For instance when you’re remodeling or redecorating. But paying back the money can get tough. And if you have a floating rate, the interest rate could jump all over the place. So, bigger banks are now offering you the chance to lock in the rate on your loan. The Wall Street Journal reports that Bank of America and Wells Fargo are a couple of the banks offering fixed rate home equity lines. They allow you to take a portion of the home equity line and fix the rate on it. If it convinces people to use these loans for their intended purpose – making home improvements – that’s great. But don’t use it to buy a boat, car or to take a vacation. If you get deeper in debt and are unable to make payments, the bank can take your house.