Headlines scream today that mortgage applications hit their highest level in two years, but are they really up, or are people just putting in more applications hoping one of them will succeed in finding new money? Credit is tight and there is a lot less money going around now that many investors have left the mortgage market. Even Countrywide (NYSE: CFC) admits that 80% of the new mortgage loans it approves must meet Fannie Mae (NYSE: FNM) or Freddie Mac (NYSE: FRE) standards. Fannie Mae and Freddie Mac both say they are in trouble and their available funds are tight as well.

So to get a mortgage today, you either have to have an excellent credit rating, or good timing -- applying at just the right time when the lender involved has some money available from one of the few private investors still in the mortgage marketplace. If you don't have a prime credit rating, then you have to count on your lender finding mortgage money from private sources. Freddie Mac and Fannie Mae are not touching subprime loans right now and are tightening their approval requirements for prime loans.

The Mortgage Bankers Association reports that its index of mortgage applications rose by a seasonally adjusted 2.5% to 811.8 for the week ending Dec. 7, with demand for both new purchases and refinances. Hopefully, that means people with ARMs resetting are finding a new mortgage rather than allowing their home to go to foreclosure after the interest rate resets. Also, hopefully that means more people are out there buying up the glut of homes at bargain basement prices, so we can clear up the excess and start seeing stabilization in the housing market.