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Fed Cuts Interest Rate by 1/2 Percent

By Frank Ramos

A Much Needed Dose of Relief

On Tuesday (9/18/07) the Federal Reserve lowered its benchmark interest rate by a half point to 4.75 percent, the first cut in four years, to protect the U.S. from sinking into a recession sparked by fallout from the housing-market collapse.

“Today’s action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets,” the Federal Open Market Committee said in a statement after meeting in Washington. The central bank will “act as needed to foster price stability and sustainable economic growth.”

All I can say is, it’s about time!  Some of us have been predicting bad things for awhile now and calling on the fed to take action.  It’s pretty obvious that, given the extent to which the U.S. economy is driven by consumer spending, any change that would result in a large number of consumers having less money to spend, such as the loss of or in some cases the complete collapse of home owner equity, would affect the economy as a whole.  To think otherwise is really wishfull thinking in my opinion.

- Frank

Short Sales

Edited By Frank Ramos (from an article by Elizabeth Weintraub)

Short Sale Basics

There are many ways to lose a home but signing away ownership in a foreclosure that often destroys credit and embarrasses your family is one of the hardest. If you can't afford to pay your mortgage, there are alternatives to bankruptcy or foreclosure proceedings. One of those alternatives is called a "short sale."

When lenders agree to do a short sale, it means the lender is agreeing to accept less than the total amount due. Not all lenders will accept short sales, especially if it would make more financial sense to foreclose. I recommend that you:

• Obtain legal advice from a competent real estate lawyer
  
• Call an accountant to discuss potential tax implications

As a real estate agent, I am not licensed as a lawyer or a CPA and cannot advise you on those matters. Be aware the I.R.S. will consider debt forgiveness as income, and there is no guarantee that a lender who accepts a short sale will not pursue you for the difference between the amount owed and the amount paid. This amount is known as a deficiency. A lawyer can help you determine whether your loan might be considered a deficiency judgment or claim.

Although lenders have different requirements and may demand that you submit different documentation, the following should give you a good idea of what you can expect:

• Call the Lender
  You may need to make a number of phone calls before you find the person responsible for handling short sales. You want the name of the individual capable of making a decision.
  
• Submit Letter of Authorization
  Lenders typically do not want to disclose any of your personal information without written authorization to do so. If you are working with a real estate agent, closing agent, title company or lawyer, you will receive better cooperation if you write a letter to the lender giving the lender permission to talk with those specific interested parties about your loan.
  
• Preliminary Net Sheet
  This is an estimated closing statement that shows the sales price you expect to receive and all the costs of sale, unpaid loan balances, outstanding payments due and late fees, including real estate commissions.
  
• Hardship Letter
  The sadder, the better. This statement of facts describes how you got into this financial bind and makes a plea to the lender to accept less than full payment.
• Proof of Income and Assets
  It is best to be truthful and honest about your financial situation and disclose assets. Lenders will want to know if you have savings accounts, money market accounts, stocks or bonds, negotiable instruments, cash or other real estate or anything of tangible value.
• Copies of Bank Statements
  If your bank statements reflect unaccountable deposits, large cash withdrawals or an unusual number of checks, it's probably a good idea to explain each of those line items to the lender.
• Comparative Market Analysis
  Sometimes markets decline and property values fall, as they have in Northern Virginia. If this is part of the reason that you cannot sell your home for enough to pay off the lender, this fact should be substantiated for the lender through a comparative market analysis (CMA). Your Realtor can prepare this for you.
• Purchase Agreement & Listing Agreement
  When you reach an agreement to sell with a prospective purchaser, the lender will want a copy of the offer, along with a copy of your listing agreement.

Now if everything goes well, your lender will approve your short sale. As part of the negotiation, you might ask that the lender not report adverse credit to the credit reporting agencies, but the lender is under no obligation to agree.

If you are in the unfortunate situation where you might need to do a short sale, I'd be happy to help you through this difficult process. Just Send Me an Email and I will schedule a time when we can sit down and discuss your situation.