Treasury Secretary Henry Paulson believes the best way to kick start the ailing U.S. economy is to fire up the U.S. housing market.

That’s his argument in favor of a rescue plan for Fannie Mae and Freddie Mac, the government sponsored enterprises that now back about 80% of all U.S. mortgage originations.

Without mortgages there is no housing market, goes Paulson’s theory – a sound one, at that.

But even with Fannie and Freddie backstopped by federal dollars, many potential homeowners are finding themselves shut out of the housing market by ever tightening lending standards.

“The pendulum has swung,” said Juan Boldizsar, a mortgage broker from Chicago, referring to lenders’ sharp turn away from the lax standards earlier this decade that contributed mightily to the current housing woes.

The question is has it swung too far?

A recent survey by consulting firm Deloitte LLP revealed that two in three Americans believe its tougher now to get a mortgage, a sentiment that has eroded consumer confidence and undoubtedly contributed to the housing malaise.

And the hard numbers back up that consumer sentiment: 30-year fixed mortgage rates are at their highest levels in a year; sales of existing homes fell to a 10-year low this week, according the National Association of Realtors; and the Mortgage Bankers Association’s index of mortgage applications recently fell to the lowest level in seven years.

How things have changed.

Three years ago, just about anyone could have purchased a $360,000 home simply by signing some papers and agreeing to a monthly mortgage that, given the payment options available at the time, would have come to about $1,200.

Not any more.

That same $360,000 home today will likely require a $72,000 – or 20% -- down payment. And with mortgage interest rates running at about 6.5% the homeowner would be on the hook for about $1,900 a month.

And you’ll get nothing unless you can garner the right credit score and prove that you have the means to pay off the mortgage.

A closer look at some three-year-old numbers shows exactly just how much times have changed.

A study conducted in early 2005 by the National Association of Realtors showed that over two-thirds of all first time home buyers at the time had put down less than 10% to purchase their homes, and a whopping 42% of those first-time buyers had put down nothing.

“It was remarkably easy to get a loan back then. If you had a pulse, you could get a loan,” said Greg McBride, senior financial analyst at Bankrate.com.

Now most lenders say they are reverting back to standards last seen around 2000. That was before interest-only loans, payment option ARMs, “no doc” and “low doc,” no income and no asset loans, and piggyback mortgages all moved from niche products into the mainstream.

Once Wall Street stopped buying risky loans to turn into investment securities that could be sold to investors, lenders stopped making them.

“It’s over. It’s done,” said Hill Chandler, of Empire Mortgage Services in Somerset, N.J.

As the housing downturn worsened in 2006 and 2007, lenders at first cracked down on borrowers with poor credit records, the so-called subprime borrowers. But now home seekers with good credit are now finding it difficult to get a mortgage.

In truth, the standards are simply reverting back to where they were before the housing bubble threw all lending practices askew.

Now, in order to qualify for a conventional mortgage – a 30-year fixed rate loan, for example -- lenders are back to requiring a minimum down payment of 20%.

“That was the old standard and it’s become the new standard as well,” said Chandler.

If you don’t have 20%, you’ll be required by your lender to obtain private mortgage insurance, which typically costs about one-half of 1 percent of the purchase price of the home and is designed to protect the lender should the borrower default on the loan.

Mortgage brokers note that the borrowers overall mortgage costs will be less if they can pull together the 20% down payment, thus avoiding mortgage insurance.

But borrowers can still get a Federal Housing Administration (FHA) mortgage with a down payment of as little as 3 percent. But where qualification standards were once relatively lenient for FHA mortgages, that too has changed in the wake of the subprime meltdown.

“Even getting an FHA loan is more difficult than it was,” said Chicago broker Boldiszar, citing the FHA’s higher standards for credit scores. And FHA loans also require borrowers to pay mortgage insurance premiums.