TIME TO "WORK OUT" YOUR LOAN

Even if you are not in trouble, this may be a time for you to reduce your mortgage without paying an extra dime. Property values are dropping and what we need to happen is to stop the flow of foreclosures. It is time to call your mortgage company and ask to re-work your loan. You may be able to reduce your loan amount by 10 or 15%.

It can't hurt to try. If you are have financial problems, the first step is to talk to the lender and see if they can re-work your loan. Re-working a loan consists of lowering interest rates, extended time to the next adjustment and lowering the balance of the mortgage.

Please read more from AOL:

Fed chief sees housing problem as serious economic threat
Scott Lanman and Steve MatthewsBloomberg NewsMar. 4, 2008 05:54 PM
WASHINGTON - Bernanke's call for banks to forgive portions of mortgages at risk of defaulting goes beyond the stance of the Bush administration and even previous Fed comments, indicating that he sees housing as a serious threat to the economy that can't be addressed by fiscal or monetary policy alone. During a speech to bankers in Orlando, Florida on Tuesday, the Fed chief highlighted the threat posed by home values falling below mortgage balances, something Treasury Secretary Henry Paulson played down as recently as Monday. Bernanke said the "recent surge" in delinquencies has been "closely linked" to the slide of home equity and warned that the housing crisis could deepen.

The idea that lenders may benefit in the long run by accepting less than full payback of mortgage loans goes further than even recent Fed proposals. The Fed's Feb. 27 report to Congress called for lenders to "pursue prudent loan workouts" through means such as modifying mortgage terms and deferring payments.
'Won't Dictate'
"We're not going to dictate" how lenders should alter mortgage contracts, Treasury spokeswoman Brookly Mclaughlin said in an e-mailed response to questions. "If lenders find that in some cases a principal write-down is less costly than foreclosure, then that is an option they have the incentive to consider."Mortgage servicers "should have a clear basis for concluding" that borrowers are unable to make their payments, "rather than simply being unwilling to do so" before reducing loan principal, the American Securitization Forum said.The forum, whose members include Goldman Sachs Group Inc. and Citigroup Inc., lobbies for investors, traders, underwriters, accounting firms, ratings companies and other institutions involved in the creation and sale of mortgage-backed securities. The group commented in a statement Tuesday.Democrats in Congress have said relying on lenders to alter loan terms hasn't yielded enough progress and are pushing for a stronger government response.
Deeper Crisis
Bernanke warned Tuesday that the housing crisis may deepen."Delinquencies and foreclosures likely will continue to rise for a while longer," Bernanke said in the comments to the Independent Community Bankers of America. A surfeit of homes for sale indicates "further declines in house prices are likely," he said.Bernanke spoke in a state that's among the worst affected by the housing collapse. Miami home prices have dropped 17.5 percent in the past year, the most of 20 large U.S. cities, according to the S&P/Case-Shiller index. Foreclosures in Florida jumped at more than double the nationwide pace, rising 158 percent in the past year, according to RealtyTrac.
Subprime Rates
Subprime borrowers are about to see their mortgage rates increase more than 1 percentage point, he said. "Declines in short-term interest rates and initiatives involving rate freezes will reduce the impact somewhat, but interest-rate resets will nevertheless impose stress on many households."In the past, homeowners could refinance, though that option is now "largely" gone because sales of bonds backed by subprime mortgages "have virtually halted," Bernanke said. "This situation calls for a vigorous response."Bernanke didn't comment on the outlook for interest rates. Traders expect the Federal Open Market Committee to lower the benchmark rate by 0.75 percentage point by or at the panel's next meeting on March 18, based on futures prices.Fed Vice Chairman Donald Kohn told lawmakers today that officials are considering whether "we have adequate insurance" against the risks of a deeper downturn in growth. He also reiterated policy makers' call for banks to raise capital, and added that they ought to review their dividend plans.
'Reluctant' Lenders
"Lenders tell us that they are reluctant to write down principal," Bernanke said. "They say that if they were to write down the principal and house prices were to fall further, they could feel pressured to write down principal again."The Fed chairman countered that by reducing the amount of the loan, this "may increase the expected payoff by reducing the risk of default and foreclosure."Bernanke also urged investors in mortgage bonds to accept "short payoffs" of loans by allowing borrowers to refinance at a lower principal.For investors, a reduction in principal that's "sufficient to make borrowers eligible for a new loan would remove the downside risk" of further write-downs or defaults, Bernanke said. Investors may be able to share in future gains in home prices under some plans, he said, citing a proposal by the Office of Thrift Supervision.Paulson, by contrast, has declined to endorse the OTS plan. John Reich, director of the OTS, last month proposed a program where borrowers would refinance mortgages at current home values. The lender would receive a "negative equity" certificate that could be redeemed if the house is sold.
No Response
The Treasury chief on Monday stressed that it's the responsibility of borrowers to get in touch with lenders if they're facing payment problems. He said 80 percent of homeowners who were sent letters by the Hope Now alliance of mortgage servicers haven't responded.The number of U.S. homeowners entering foreclosure rose 75 percent in 2007, with more than 1 percent in some stage of foreclosure during the year, according to RealtyTrac Inc. of Irvine, California. For the year, more than 2.2 million default notices, auction notices and bank repossessions were reported on about 1.3 million properties.Monday, the Fed and other regulators sent letters to institutions they supervise, encouraging the banks to report on their efforts to modify mortgages at risk of default."This will make it easier for regulators, the mortgage industry, lawmakers and homeowners to assess the effectiveness of these efforts," Fed Governor Randall Kroszner said in a statement on Monday.

FED CUTS 1/2 POINT

Wow, after taking the back seat and letting this economy shift gears, good ol Ben is getting pretty aggressive. I did not expect to see the Fed lower another 1/2 point after giving up 3/4 of a point last week. The market got what the market wanted, the Fed doesn't usually do that. I am impressed. I hope that is not a sign of more difficulties ahead. This should really help in the mortgage market to free up liquidity and bring more products for buyers to purchase.

Read the Fed's Statement
http://www.cnbc.com/id/22917035

Fed Cuts Rates Half Point, to 3%, to Fight Recession
Topics:Interest Rates Inflation Ben Bernanke Employment Consumers Federal Reserve Federal Budget (U.S.) Economy (Global) Economy (U.S.)
By Reuters 30 Jan 2008 02:15 PM ET
The Federal Reserve cut a key U.S. interest rate by a half-percentage point Wednesday as part of an aggressive effort to halt a sharp slowdown in an economy hit by a housing slump and a credit crunch.
The Fed's action takes the bellwether federal funds rate target to 3 percent, the lowest since June 2005, and comes just eight days after it slashed rates by a bold three-quarters of a point. Wednesday's follow-up reduction was in line with the expectations of many financial market participants.
The cumulative 1.25 point reduction in the benchmark overnight rate in less than two weeks ranks among the most abrupt rate-cutting sprees in the modern history of the U.S. central bank.
http://www.cnbc.com/id/22916491

Federal Reserve Cuts Fed Funds Rate by 3/4%

Ask and you shall receive! What ever. I was just blogging for a full 1% and found they dropped 3/4%. WOW! I was shocked. Shocked they dropped the interest rate, but even more shocked they dropped right at the same time I was blogging for the drop! You go Big BEN! Hopefully this will calm the markets.


Federal Reserve Cuts Key Interest Rate
By MARTIN CRUTSINGER,
AP
Posted: 2008-01-22 08:28:15
WASHINGTON (Jan. 22) - The Federal Reserve, confronted with a global stock sell-off fanned by increased fears of a recession, cut a key interest rate by three-quarters of a percentage point on Tuesday. The Fed said it was cutting the federal funds rate, the interest that banks charge each other on overnight loans, to 3.5 percent, down by three-fourths of a percentage point from 4.25 percent. The Fed action was the most dramatic signal it can send that it is concerned about a potential recession in the United States. It marked the biggest one-day move by the central bank in recent memory.