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.

Are you a Countrywide borrower who fell delinquent? Are you worried that they may have cooked the books about how much you owe? A federal judge has ruled that an investigation of Countrywide on this allegation can continue. Florida, Georgia, Ohio and Pennsylvania are among the states probing the nation's largest independent mortgage lender. There's a lot of smoke surrounding Countrywide on this one, so Clark thinks there's got to also be some fire. But really this is just a sideshow with what's gone on in the mortgage marketplace.

A recent Wachovia internal memo leaked to the media claimed the bank would discontinue its option-payment loans program. Such loans -- also called negative amortization loans -- were being pushed under the Pick-A-Payment tag. But the internal announcement now seems to have been premature. You should avoid the Pick-A-Payment choice at all costs because the balance on the loan actually rises over time. Here's how it works: If you borrow $100K at 6%, the bank only calculates the interest as if it were at 1%. The other 5% goes straight to your balance every month. Wachovia has been pushing the Pick-A-Payment plan, but that hasn't been a smart business move; negative amortization loans only increase the likelihood of default. This really highlights the lack of common sense in the housing market.

Clark is amazed that the federal government has not pushed for meaningful disclosure in mortgage lending. There were proposed rules about 3 years ago to demand full, plain English disclosure when you sign a mortgage. But the banks and brokers went berserk and showered Capitol Hill with money to get the proposal stifled. Don't hold your breath waiting for a change in policy -- instead check out a disclosure form developed by the American Enterprise Institute. We got into mess because so many people did the wrong thing. What we need is somebody to stand up and make sure we do the right thing going forward.

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.

RIP-OFF ALERT: Clark gets very steamed whenever he hears about children or seniors getting ripped off. Here's a scenario that affects the latter group: Clark has been getting a lot of reverse mortgage questions. Reverse mortgages offer a way for retired folks who are running out of cash to be able to remain in their home and get a check each month by borrowing against the value of the property. This can be a good option if you don't want a family member to inherit the house, but historically the fees on reverse mortgages have been too high. Now Kiplinger's reports that insurance salesmen and women are convincing seniors to do reverse mortgages, cash out the value of their homes and…you guessed it…buy variable annuities. AARP finds that 1 in 10 people doing reverse mortgages were conned into doing so with the promise of such pseudo-investments.

This is unconscionable. Clark doesn't know what goes on in the minds of the banks, brokerage houses and insurance companies who push these modified reverse mortgages. The variable annuity shtick is bad enough, but it's really infuriating that they're pouring salt into a wound by stripping the equity from a home. Clark believes it's not enough to fine people who push this stuff; the only way to stop this is to send them to prison. The fines that can be levied are never enough and just reinforce that idea that crime pays. So you must be the cop on the beat for your elderly relatives. Be nosy and find out what's going in their lives. Hopefully they were there for you as a young person, so try returning the favor by being there for them in a time of need.

CLARKONOMICS: There's been so much buzz about 6 of the largest banks offering foreclosure relief to millions of homeowners. The relief will be temporary, but it could lead to changes in loan terms and payments. Participating lenders include Bank of America, Citigroup, Countrywide, JP Morgan Chase, Washington Mutual and Wells Fargo. The bottom line is that they are not prepared to deal with millions of people going into foreclosure. They simply don't have the staff to manage REO (real estate owned) properties in their portfolio. Each foreclosure costs upwards of $70K in clerical expenses. So this move was really designed to prop up the big banks, more than it was intended to help out homeowners. Clark's advice is to contact your lender if you're behind on your loan and you've been avoiding them. Remember that yesterday's "no" may be a "yes" today or tomorrow. Just keep in mind that this is not charity -- the lenders just don't want the expense of foreclosed homes!

What these lenders have agreed to do is call a time-out and look at the financial situation of borrowers facing foreclosure. They may reduce your interest, your balance or both to keep you in your home. Those who are current in their mortgages will not get similar rate reductions. If that's you, file this one under the "life's not fair" category because there's nothing you can really do about it. To get some historical perspective on this new development, you need to look to commercial real estate lending. Commercial borrowers who get into trouble can lose their properties, but more often than not lenders will do modified loan agreements to avoid having to take on the properties. The closest parallel in residential real estate is probably the short sale. However, the fallout from Japan's '80s real estate bubble proves there's danger in putting off the day of reckoning too long.

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.

There's an old saying that tells us, "If everybody's unhappy when a leader takes a stand on an issue, then they probably did the right thing." Clark thinks that's the situation President Bush finds himself in after announcing his voluntary plan to handle the mortgage meltdown. As you may recall, Bush is allowing lenders to voluntary freeze the interest rate on bad loans for 5 years -- if the homeowner had been current with all their payments. A lot of critics, including Clark's friend Bill Brennan of the Legal Aid Society, have emerged saying that Bush's plan is just mere window dressing. People of a libertarian mindset are upset on account of the free-market interference.

The truth is there's no tidy way to clean up this mess -- even though candidates from both sides are making promises. Things could remain messy in some high-spec areas until 2015. The speculative-buying fever of the early 2000s fed a rash of bad loans like 80/20s, no docs and more to falsely inflate housing values. The real tragedy is the human one when children and families are put out on the street. Clark's late father had that happen twice as a young child and it really shaped him for the rest of his life. Now a lot of new homeowners may not be able to stay in their homes if they can't make the payments. The equity the average American has in his or her home is down to 49 percent. The flipside of this whole discussion is that there will be great opportunity in 2008 or 2009 for those willing to take a risk on distressed property. But we're not there quite yet.

Don't attempt to adjust your radio if you hear some ambient noise this hour. That's just Clark broadcasting on location as part of Christmas Kids 2007! Interested in helping out a needy child this holiday season? Clark will be personally accepting donations at stores throughout the Atlanta area until Dec. 15. If you're not able to make it out, why not donate online? By working with the Salvation Army, your gifts can be distributed to children right in your own state or area!

Switching gears for a moment, Clark wants to discuss President Bush's announcement about a voluntary plan for people in mortgage meltdown to receive assistance from their lender. Those who took out blow-up mortgages like 2/28 loans in the last few years and have been current on their payments are most likely to benefit. 2/28 loans are typically offered to first-time homebuyers or people with damaged credit. The homebuyers were conned into 2-year loans at a decent rate that becomes outrageous after 24 months. Sometimes the blow-up rate will put the annual payments near or equal to the homeowners' annual income.

Under Bush's plan, lenders can voluntarily freeze the interest rate for 5 years if it's a homeowner's primary residence and they've made timely payments for the first 2 years. This will not help speculative buyers who got into 2/28 loans. Ironically, there are protections under bankruptcy law for spec buyers that don't apply to owner-occupied property. Clark thinks it's reasonable that there shouldn't be any coercion on lenders to freeze the rate. If the government were to try to impose its will, it would have a negative effect on the confidence of investors making loans. After all, why should an investor take on the risk if the government will just come in and decide how much money they'll be able to earn back? Some lenders would be wise to freeze the interest rate; it's a much cheaper option than having to pay to foreclose on tons of properties. Nobody wins in those situations.

Several proposals about how to handle the mortgage meltdown are floating around on Capitol Hill. But politicians are not interested in helping people because they have big hearts. The talk of bailouts is to prop up the banks and lenders -- who are big political contributors -- yet it's being done under the good-natured guise of rescuing the borrowers. Does this sound cynical? Just follow the money and you'll see what Clark means. Remember that economics is often called "the dismal science." That's because the reality is that our country will suffer if we do exotic things to keep people in homes they can't afford. Look at Japan. The government over there decided to bail out the commercial speculative real estate industry and went into a recession for 2 decades as a result. Japan is still struggling 20 years later to come out of it. That example teaches us that there must be an actual business reason to do a bailout with someone.

Clark recently spoke to a man who was just days away from foreclosure and wanted advice. But he could not give the man false hope; some people have never even been able to make their initial teaser payments. The typical homeowner who is in over his or her spends between 45 and 55 percent of their pre-tax pay on their mortgage. Clark knows of woman who has a payment that's higher than her income. What is a bank doing making that kind of loan? Either the paperwork was forged or she didn't have to disclose her finances to get the loan. The mortgage broker, meanwhile, probably made a huge commission on that deal. These ugly abuses are the reasons why the feds should not save an industry that partied too hard during the good times and now wants a helping hand. The fact that it's being done under the guise of helping homeowners is tragic. It's really about helping cronies in the mortgage and banking worlds.

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.

Clark was recently heartened that the U.S. House voted to enact truth-in-lending laws in the mortgage business. This was a bipartisan effort to avoid a federal bailout of those who are in foreclosure. But now some banks are fighting to get a veto from Pres. Bush or stop this bill in the Senate. Certain unethical lenders are opposed to fiduciary responsibility, which means that the broker would have to do what's in your best interest -- not what will put huge kickbacks into his or her pocket. Banks are also opposed to letting people income qualify based on the maximum monthly payment amount. They'd rather qualify you on the teaser rate. But we have a real problem when 1 in 5 homeowners are delinquent on their loans.

Prospective homeowners need more information to make educated choices. The American Enterprise Institute has drawn up a mortgage cheat sheet (and definition of terms) that you can use as a plain-English disclosure when getting a loan. No surprise that the mortage industry also opposes this kind of disclosure! But Clark is also disappointed that Bush is opposed to such disclosures. Clark wants to see legislation that bans brokers from putting you into bad loans for kickbacks; adopts a clear language form like the one from the AEI; ban lenders from putting people into loans based on teaser payments alone; and eliminates all pre-payment penalties.

In the latest installment of Clarkonomics, Clark examined Countrywide's decision to modify the loan terms affecting tens of thousands of homeowners facing foreclosure. The mortgage lender was one of the prime exponents of weirdo exotic loans across the country. Now 80,000 homeowners will be offered a refinance option so they can go into fixed loans and keep their payments affordable. Countrywide is not doing this out of charity. It's pure capitalism at work; lenders lose money when they foreclose. Meanwhile, sales of homes are declining. A new study shows that used homes sales have dropped to their lowest pace since recordkeeping began. There's a glut of houses on the market and the average one will now sit for 11 months before being sold. Keep in mind that much of what Clark is talking about does not affect most Americans because they're not planning to move or sell anytime soon. There's so much focus on the losers in the housing market. But the winners include buyers, particularly first-time homebuyers, and those who are very careful when buying distressed property. This latter group does not include the "Dare To Be Great" set, but rather those who stick to the fundamentals. You must buy below fair market value, know the neighborhood and have the property inspected. Be sure to know exactly how much you want to pay and not exceed it. Don't get caught in the heat of the moment if you're at an auction of distressed property. You want to buy with ice water in your veins!

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!

The troubles in the mortgage market are having an unexpected side-effect on renters. It all starts when people who own homes and condos that they can't sell become involuntary landlords. Those folks rent out their places while waiting for the market to recover so they can sell down the road for a profit. But what happens when an investor who buys multiple properties on spec gets into this situation? Even if those investors have tenants in their properties, they usually can't recoup all their costs when multiple mortgages come due every month. So they sometimes stop paying the mortgage on one of their properties while continuing to make payments on their others. You're going to find an eviction notice on your door if you're unlucky enough to rent at a property that's facing foreclosure. Tenants in this situation have fewer rights than if they didn't pay their rent for months.

Clark was in this situation at age 22 when he rented a condo with an option to purchase from a divorcing couple. One day he came home after playing tennis and found a notice on his door ordering him to vacate in just seven days. His landlords were taking his rent every month and not paying their mortgage. So Clark called the mortgage company's lawyer and asked for more time than seven days to vacate. He was denied extra time, but wound up working out a deal to purchase the townhouse for $36,000 with a five percent down-payment. He also got great loan terms because the bank didn't want to deal with a foreclosure. His mortgage payment actually wound up being lower than what he'd paid in rent! So out of adversity there can be opportunity. Clark still owns this property, which has been long since paid off. He's been renting it out for 25 years and it's been a cash cow for him.

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.

Many years ago, Clark saw a bumper sticker that read, "He who has the gold makes the rules." There's a real truth to that phrase. For example, sometimes companies are so large that they get federally bailed out. That's what happened to Chrysler in 1979 when Lee Iacocca grabbed the company's reins and used taxpayer money to get things back in shape. Taxpayers (and Chrysler!) eventually benefited from this move, but Clark is never happy when a federal bailout is needed to help out a capitalist enterprise. But that's the core of the unwritten "too big to fail" rule: If a company is so big that going under would have negative repercussions on an international level, then that company must be kept afloat.

Today we have a modern variant of the "too big to fail" rule in the housing market. Call it the "strength in numbers" phenomenon. Wells Fargo -- the second largest mortgage lender -- is looking to arrange workouts with homeowners who can't make their mortgage payments. Why? Because there are overwhelming number of homeowners with mortgages in default. All the delinquencies are forcing Wells Fargo to find alternate plans. Homeowners who make the best candidates for these workouts are those who fell behind on their mortgage but now are in a position to make payments again. But beware if your loan was sold off by your mortgage lender. The rules of the sale may have stipulated that no adjustments can be made to the loan terms. You may need to get a waiver from the current loan holder -- if you're able to track them down -- to get the benefits of the Wells Fargo workouts.

Talk about kicking people when they’re down. Credit card companies are now targeting those in danger of losing their homes because of sub-prime mortgages. Imagine being a homeowner who is in trouble and getting offers for new credit cards in the mail. While you might think you’re getting a lifeline, you’re actually being thrown a cinder block. The Boston Globe reports that the credit card industry has doubled its solicitations to households in sub-prime status. The Consumer Federation of America is angry at the banks for targeting these people. So if you are in trouble and get these solicitations, look at them as a burden -- not a gift. The banks are trying to score money on your hard times. Compounding debt on top of more debt is not a path to wealth -- it’s more like rearranging the deck chairs on the Titanic. So which banks are the worst offenders? HSBC is tops, with its solicitations to sub-prime mortgage holders doubling year over year. Following closely behind is Capital One, with its solicitations up 20 percent; and Washington Mutual, which is up 35 percent.

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?

There are great rates on savings popping up all over the place. While the mega-banks are reducing their interest rates on CDs and savings, a lot of newfangled banks continue to offer good rates. Now there's a new player in the game: Mortgage lenders, which through their bank subsidiaries, are now offering CD rates as high as 5.5 percent. Yet with these new opportunities come hazards. Clark advises people not to sink more than $90,000 into a CD through a mortgage lender. Sure the CDs are FDIC insured up to $100,000 and your principal is always protected. But if you put in the full amount and the mortgage lender goes bust you'll lose your interest. By only putting in $90,000 you'll have your principal and interest safeguarded if the lender fails. You can find the various mortgage lenders' great CD rates through newspaper ads or online. Visit BankRate.com for more information. Clark also thinks people should ladder their CDs, which means having several CDs of different lengths going at the same time -- six months, one year, two years and five years, for example. This allows you to have access to your money every six months to a year, plus not have to guess where interest rates are headed. When your six-month CD matures, just put that money into one of your other CDs that has a good rate. That way you'll spread your money out and reduce your risk.

Have you been approached by a representative from a company called either Metro Dream Homes, POS Dream Homes or Metropolitan Grapevine promising to help you pay off your mortgage in about seven years? This offer is yet another scam that's come to Clark's attention. All you have to do is pay $5,000 and agree to give up 15 percent of your home equity! Metro then says they'll invest your money in credit card machines, ATMs and other "revenue-generating devices" and use the profits to pay off your mortgage in five to seven years. Once the mortgage is paid, you then have to give Metro half of the new equity in the home. The state of Virginia recently crunched the numbers and found that they are mathematically impossible. Meanwhile, The Washington Post reports that Virginia and Maryland are seeking temporary injunctions and cease-and-desist orders against Metro. Don't buy into the pipedream being pushed by the company.

There's a big push and shove going on right now to determine who should help out people who are in over their heads with mortgages. The Federal Reserve had issued some weak guidelines, known as workouts, to try to lend a hand. That's OK, so long as it doesn't become a federal bailout. Clark is opposed to a plan that's been floating around Congress to use federal money to keep people in their homes. This whole problem came about because lenders were greedy and/or foolish in the loans they wrote, while borrowers were also foolish for believing they could handle loans that they really couldn't. There needs to be a change in how mortgage brokers are overseen -- they can't be the Wild West part of the market anymore. Lenders and mortgage brokers should be liable, along with defaulted borrowers, if they wrote unsuitable loans just to pad their pockets. Then they'll be forced to police their own industry. Taxpayers should not be on the hook to bail things out. When more than 90 percent of homeowners conscientiously meet their mortgage obligations, why should they subsidize the others who don't?

Clark owns a mortgage that he collects payments on much like a bank would. Recently he's noticed that he is getting mail and phone calls from note buyers. These are people who are involved in the latest dare to be rich scheme. They've heard a pitch in a hotel ballroom somewhere about how you can score quick cash by approaching someone who owns a mortgage and offering to buy their note right now. They typically ask the note holder to sell his or her interest for anywhere between 70-90 cents on the dollar. Clark admits there is a very, very small legitimate business opportunity here. But most of these note-buying schemes are rip-offs.

On a related note, the median home price in the United States -- the level at which half of all homes are more expensive and half are less -- has declined this year for the first time since the feds started keeping records in 1950. Home prices are expected to get lower still in 2008 and even lower in 2009. There are some markets like Portland, Seattle and Charlotte, N.C., that are still increasing. But bubble markets such as Phoenix, Las Vegas, lots of California, lots of Florida, the Washington D.C. metro area and Boston are hurting. The only bubble market that hasn't burst yet is the New York metro area. Expect the average price of a home to decline about 1-2 percent per year for the foreseeable future. Just remember that you have nothing to fear if you're in a home and have no intention to move or sell. That being said, two million families will still be put out on the street this year alone. The only silver lining here is that the bulk of the foreclosures are not owner-occupied. They instead belong to speculative owners who may never have seen the properties they're losing. This housing "correction" is actually healthy because it will allow the country to get back to a place where home prices are more affordable to the average person. Finally, Clark denies that the media has caused the housing slump. The market is slumping because it was built on irrational loans that stretched people too far and too many houses going up on spec.

Clark's Consumer Action Center has been receiving a lot of questions about accelerated mortgage offers. People are wondering if these offers are a new kind of scam. Clark thinks "scam" is too strong of a word, but he does think this is a serious rip-off -- and he wants to show you how to avoid it! First, let's take a look at the offer. It arrives as a friendly letter inviting you to pay off your mortgage years quicker than you normally would. The deal is that you have to pay your bank or an appointed marketing company $200-$400 to set you up on a bi-weekly payment plan. It also stipulates that you'll be billed another couple bucks each time you make a payment, or alternately that you'll pay nothing up front but every bi-weekly payment will be assessed a fee. This plan will have you paying half your monthly mortgage payment every two weeks. That's equivalent to 26 half-payments in a year. At the end of year, the marketing company on behalf of your bank makes one additional payment toward your mortgage. So the end result is that you pay 13 months in a 12-month period. But because you probably paid an initial fee to set this up, the bank held some of your money all year long and got rich off the interest.

Here's what you should do instead. Clark wants you to keep making monthly mortgage payments and add one-twelfth extra in the additional principal box on your monthly coupon. So if your monthly payment is $1,200, pay $1,300 instead. That way you'll do for free what your bank wants to charge you for -- and you'll bring your principal down quicker. There's one more possible bank rip-off related to your mortgage that you should avoid. They're going to try to sell you "croak and choke" insurance -- otherwise known as mortgage life and disability insurance. It states that if you buy their policy and die, they'll pay your mortgage. But Clark sees two problems here. First, you're paying an insurance premium to protect the bank. At the time of your death, there may be better uses of your money for your heirs. So you're better off with a standard term life insurance policy. Second, the bank charges a premium that's about 10 times as much as your plain old life insurance policy. Sometimes Clark wonders where the ethics in banking have gone!

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.

It's no secret that the nation's housing market is in bad shape. Foreclosures in California are at an all-time high, and the market is equally hurt in Nevada, Arizona and Washington D.C. How did we get in this mess? Well, after 9/11 people became nesters and saw their homes as safe harbors. The tech bubble in the stock market had just burst and people psychologically started clinging to "real" estate in the tangible form of their homes. The home improvement industry enjoyed a surge in popularity as a result. But in the middle of it all, the standards for home lending fell apart. People with bad credit who had no money got horrible loans with low teaser payments that were like ticking time bombs. After two years, there was a huge increase in the mortgage payment and they could no longer afford it. Foreclosures started to become more common. There was a false demand for houses, and speculators bid up the prices. Also, all speculative buyers used to have 30 percent down. But that requirement was relaxed during this time, too. Clark says he knew we were in trouble when he started hearing about people buying houses they'd never seen and property in states they've never visited.

Thankfully, the teller window is now closed for people with bad credit and no money down; those who can't document their income; and those who want to buy on spec with no money down. Clark thinks this a good thing. He's just amazed that now the feds are starting to make noise about wanting to ban these kinds of lending so late in the game. Capitol Hill wants to make it so that when you take out a loan, you have to get an explanation of all the details in plain and simple language. But the funny thing is that the feds aren't considering making hard-and-fast rules -- just some proposed guidelines. Well, the American Enterprise Institute beat them to the punch by drawing up a mortgage cheat sheet (and definition of terms) that tell you exactly the right questions to ask of your lender. Clark really likes the AEI's version because it helps homebuyers avoid getting ripped off. He also thinks it's so much easier to understand than the feds' guidelines.

It's no secret that right now it's a tough time in the housing market for sellers and a confusing one for buyers. If you're selling and you have a lot of foreclosures in your neighborhood, you've probably noticed the value of your home declining. And if you're buying, you're facing a variety of exotic weirdo loans with adjustable interest rates, option payments and more. But relief may be around the corner in a market phase called capitulation. Look at markets like Denver, Salt Lake City, Houston and Southern California. These are all places that suffered through a bad real estate depression, but recovered and thrived. How did they make a comeback? Well, the ultimate measure of whether or not a real estate market will thrive is job growth.

It's also important to remember that the mortgage market is not a monolith and some segments are already in good shape. For those with decent credit seeking a conventional 15, 20 or 30 year loan, the rates are now lower than they were just a few weeks ago. What it comes down to is that a lot of speculative markets had bubble growth and it will take time for them to unwind. So if you're considering buying a home before the year is out, you may want to just wait a little bit longer until 2008. Likewise if you're in a cold climate, once winter comes there will be more opportunity, according to Clark. Think of the push toward capitulation like a baseball game; right now we're in the third inning of a nine-inning game, Clark says.

There are now new rules about mortgages in place after all the problems with the "fake-a-bake" loans that poisoned the marketplace. "Liar's loans" (also called Alt-A loans) will now be stopped. "Liar's loans" got their name because you didn't have to prove anything about your financial situation to the lender. You paid a little higher interest rate and the lender just gave you a wink and a nod to whatever you said about your bottom line. Meanwhile, there are new laws for sub-prime loans now in place. In the past, lenders had fake opening rates so that people could qualify initially, but then they would reset at a higher rate forcing homeowners into foreclose. In fact, one in five loans made to people with damaged credit is now in delinquent status. So now, thankfully, the banks have to actually qualify people based on what the rate will become after the low introductory period.

Clark would like to have seen the regulators do even better by saying that people would have to qualify based on what the highest possible rate could be -- but the banks would have balked at that model. The result of the new regulations is that people will be qualifying for smaller, less expensive homes now. This is a good thing; people are not helping themselves by being forced into foreclosure and being put out on the street. Lenders now have to make sure that the loan makes sense for the customer. Another alternative is the one presented by Bruce Marks and the Neighborhood Assistance Corporation of America. The NACA makes loans to people only after they've saved money for a year to demonstrate that they can handle their mortgage. It's almost like being on probation. Say for example your rent is $800 and the home you want to buy will have a monthly payment of $1,200. You've then got to save $400 every month to prove yourself ready for a loan from Marks' organization. NACA rates are often three-quarters of a percent below the standard rate.

Many Americans are behind on home mortgages and millions are now facing foreclosure in the next year or so. That situation creates the opportunity for a scam called "equity stripping." Have you ever seen those signs on the side of the road that say something along these lines: "In trouble with your home? Avoid foreclosure! Call now!!!" With equity stripping, you essentially sell your house to a company or individual who then pays the mortgage. They'll often let you stay in your house until you can get back in financial shape. You also sign a contract stating that you'll later be allowed to buy back your home for a nominal fee -- sometimes as low as $5,000. Here's where the real scam begins. The person or company who was "rescuing" you from foreclosure turns around and borrows up to the full amount of hard-earned equity that you put into your home. Then they disappear with the cash in their pocket and an eviction notice goes up on your door.

So if you are behind on your mortgage payments, you can't rely on anyone other than yourself. Keeping an open line of communication with your lender and wisely juggling your financial commitments are the keys to avoiding foreclosure. Go back to your lender and work out a payment plan that allows you to keep your home. If you've already approached your lender once and been turned down, get in touch with them again. Stay in constant contact. Finally, you have to re-prioritize your bills. Your mortgage should be at the top of your list for paying every month -- even if that means putting other commitments like your credit card on hold until later.

The real estate market around the country is in the doldrums. The number of homes for sale increased in May, which is unusual, since most people prefer to move in the summer. If no other homes went on market, it would take 9 months to sell all the homes currently out there! Plus, the cost of a mortgage is more expensive than it was, with interest rates rising. In reality, it's not that homes aren't selling - 6 million a year change hands - it's just not a good time to be a seller. If you're a buyer, there will be some real deals as people slash prices. Home prices are down about 2% from a year ago. To balance this, builders are reducing the number of homes they're building, and people are choosing not to put their homes on the market right now. If you simply have to sell, one thought is to do what lots of people are doing, and rent the place out while you wait for the market to stabilize. This isn't an option for many condo owners, as some have rental restrictions, and the rent you would get generally doesn't cover the cash outlay per month. So now is the time to buy condos, since the market has fallen out under them. In general, the real deals on single family homes will be coming this fall and into 2008, as we move out of the prime summer selling period. This winter will be especially friendly for buyers...but not for sellers.