For a while now, many can spectulate the trouble started at the tail end of 2006 with the mortgage industry busy, the American economy has been struggling, facing uncertain times.  Many understand the historic significance of last week but the implications of a federal bailout has yet to hit home.  With the annoucement that the Federal Reserve will aid the ailing AIG with an $85 billion rescue package, the details seem murkey as more politicians throw in his or her two cents of how this bailout will work and impact the economy.  While the bailout does not favor AIG, the company must hand over 80 percent control of the organization's future business dealings, this new bailout and the status of future bailouts remains in the balance and hands of the federal government who stepped into save the mortgage giants Fannie Mae and Freddie Mac not too long ago with a $100 billion package.  Where this differs and many fail to see a need to save AIG is that Fannie and Freddie were already government controlled and sponsored by federal dollars.  Why should the federal government step in and save a stockholder owned company?  What I am trying to say is that this bailout of finance giants has been a popular trend, starting with a $30 billion loan to Bear Stearns in February.  It is a trend we will see more of and possibly a part of the Federal Reserve's strategy to save the American economy.  I believe many who are struggling to make ends meet, living pay check to pay check, the working class and even the upper class, when push comes to shove and with a cold winter on the way, wish that the Federal Reserve would give the American people a loan.  That $300 incentive check just did not cut it.

While AIG must pay the Federal government back or risk losing control of its interests, many are concerned with the level of government involvement and bascially, the bottom line, who really will be paying for the bailouts?  Is Washington really to blame for this mess?  What about corporate accountability and the management of these organizations?  Something is rotten in Denmark as Shakespeare wrote in Hamlet.  Really it does not add up.  It is cause to worry of how this can be avoided in the future but also how this will impact the American people over the years to come. Many will argue that this has been a long time coming that part of the issue has been a faillure to tighten lending practices and that the subprime market has lead to the downfall of the whole market.  Truly companies like Countrywide should have known better instead of living high on the hog.  We could have avoided a lot of trouble today with bad loans.

So should the federal government step in and save companies riddled by bad behavior in the market place?  This whole crisis begins and ends with the practice of predatory lending and we've known it since before the mortgage buble burst.  As said above, not only Countrywide but other banks allowed their lending practices to be too flexible allowing many under qualified borrowers to purchase items like homes and cars.  Many brokers pushed such products on people who otherwise should not have been buying in the first place.  Many did not look at the full picture and mainly the issue of repayment.  Now the market is suffering due to underperforming loans or bad loans.  Still the bank is at fault, they should have never allowed such practices to continue but they were leveraging on the risk involved as long as the portfolio was performing well, the bank was making money on subprime products.  Now the current situation prevents this demographic of people with blemished credit from establishing any credit and only the prime customers (A & B paper) will prevail.  Many will have to learn to live without or forget about keeping up with the Jones because there will just not be any loans out there for these customers.  It is unfortnate because this takes aways from sales people's commission salaries and many people of these professional will be out of work.  Truly this is why so many people have never believed in the concept of credit in the first place.  It creates a vicious cycle. 

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News flash for all real estate investors looking for the ultimate bargain! Fannie Mae, the nation's largest home mortgage lender, is making it easier to take advantage of "short sales" on houses in risk of foreclosure or already in the proceedings of foreclosure.

For those not familiar with "short sales", let me just say it has nothing to do with a drop in business. "Short" actually refers to the dollar amount at which a property is for sale is less than, or short of the actual value of the property or the outstanding debt on the property. In essence, the property is being sold "short" of the owner's financial goal. In fact, the difference is usually very short of the actual value, which creates the possibility for a very profitable turn for the right investor.

Fannie Mae is taking steps to shorten the process of ridding their portfolio of these types of loans, so a liquidation of the rock-bottom prices on these properties is imminent. This process, at present, is lengthy and can be very involved.

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Like holding your breath underwater, homeowners facing foreclosure are desperate for air. While the solution of coming up and taking a breath seems simple, the work needed to get out of water can be a challenging journey. Many struggling homeowners face the journey of avoiding foreclosure and seek help to prevent it, thus beginning the quest loan workouts and restructuring.

When the pressure of foreclosure begins to mount, the goal becomes as clear as a ray of light on a cloudy day. Fix the loan. It is at this point where the journey becomes a cat-string game, the excitement of lenders dangling the string (loan details, interest rates) over the cats (borrowers) heads and the cat making desperate attempts to grab hold of the string and gain composure once again. Essentially, avoiding foreclosure comes down to numbers and the fact that what is best for the borrowers is often not in the best interest of the lenders.

With that in mind if you are feeling the pressure of foreclosure mounting down on you, the first step you need to take is having a discussion with your lender, sit them down and talk numbers. While with your lender present your financial situation. Show the lender details about your income, where your money is being extended to, and what your family spends on food, clothing, car payments, credit card debt, and student loans. Homeowners also need to present copies of their pay stubs, bank statements, and utility bills to back up their claims. Homeowners will need to make some changes in order to stay in there homes, so say goodbye to premium cable packages and give up your expensive habits because it is time to buckle down.

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A new study says a tidal wave of foreclosures-about 1.1 million- will soon flood the nation.

Christopher Cagan, director of research and analytics for First American CoreLogic, explains that the study focused on 8.4 million adjustable-rate mortgages (ARMs) that were obtained in the period of 2004 to 2006. More than a million of those borrowers will lose their homes to foreclosure in less than a decade.

There are ways to tell if you're the type of borrower who is likely to lose your home. For instance, ARMs are a losing bet right now. Homeowners who got one of these mortgages in 2004, 2005 or 2006 have a one-in-three risk of foreclosure. Those who got a subprime ARM during those years have a lower risk, with only one in eight of those homeowners projected to lose their homes.

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With the state of real estate markets, coming to an agreement between buyer and seller is difficult enough. This difficulty is increased when a so-called short sale is attempted, usually by a borrower struggling with their home loan. In these situations the seller must also have the approval of their mortgage lender.

The term short sale refers to an owner attempting to sell a property for an amount less than the value of their loan. These types of arrangements are hard to accomplish in part because the mortgage servicing company must also approve of the diminished sale price.

In this situation, the parties involved are at the mercy of the institution in ownership of the loan of the seller. Even when a sale price is agreed upon by both buyer and seller, the company owning the loan could be hesitant to accept the offer and may take upwards of two months to make a decision in regard to the suggested figure.

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A short sale is negotiating with the lender to release the lien that is secured to the property upon receipt of less money than is actually owed, meaning, getting a lender to take less than what is owed on the loan. For example, if a seller owes the lender $80,000 on their property, and the seller sells the property to you for $50,000, the seller is going to be roughly $30,000 short of money to pay off the lender.

Lenders will consider giving a discounted "short sale" payoff when the seller is behind on their mortgage and the loan amount is at, or near, or over the property's market value. An example of this is when the seller is over leveraged, meaning, they owe more than what their house is worth. Sometimes, lenders will even discount the loan payoff when the loan amount is well below the market value, especially if the property is in poor condition.

If the lender can take a discounted payoff now, it saves them from the costs of foreclosure and all the other problems that come with taking back the property. The costs of foreclosure can include not only legal fees, but also taxes, insurance and the expense of maintaining the home until the property is sold and repairing any property damage. Lenders will do a short sale because it has an impact on how much money the government will allow them to lend out on new loans.

If the loan is VA or FHA insured, lenders typically do not want to take back the property. It is especially not in the lenders best interest to file a claim with the FHA or VA if the money they will get back is minimal, because FHA and VA do not insure the entire loan. Some lenders will require the seller to go through counseling class with a HUD approved counselor. This is not required by HUD and it depends on the lender. The lender will approve if they want to do a short sale and will accept the offer price if it comes in close to the appraised value. To the buyer, some lenders will not pay buyer's closing costs.

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