Homeowner Survival Guide: The Housing Bubble
by Andrew C. Mungar
Published by AuthorHouse, Second Edition is now available

NEW RECOMMENDATIONS:

• Suggested loan programs to help unemployed homeowners
• Create a National Foreclosure Prevention Center to facilitate the processing of loan modifications
• Offer tax credit to companies hiring new employees in the next six months

The book is also available at Amazon.com, BN.com and all major book retailers.

Overview

The Homeowners Survival Guide is dedicated to helping homeowners understand and resolve all the problems associated with the devastating financial crisis and the housing bubble. It is a complete one-stop manual that will walk you through step-by-step every option that is available to you and teach you how to get your lender’s approval. Topics include but are not limited to:

• ♦ A Quick Reference Guide to see the Options You Qualify for
• ♦ How to Reduce Your Mortgage Payments
• ♦ How to Process Your Own Loan Modification
• ♦ What Are the Major Lenders’ Qualification Guidelines
• ♦ The Effect of the Housing Bubble
• ♦ How to Settle Credit Card Debts for 40+% Less
• ♦ What Caused the Financial System to Collapse
• ♦ How to Prepare a Budget Acceptable to Your Lender
• ♦ Do You Qualify For the “Making Home Affordable” Programs
• ♦ How to Write a Hardship Letter Acceptable to Your Lender
• ♦ Can Commercial Loans be Modified
• ♦ Top Ten Tips on How to Avoid Scams
• ♦ The Contact Information of all Major Lenders
• ♦ The Flaws in the Credit Rating System
• ♦ How to Improve Your Credit Score
• ♦ How to Process a Short Sale or Short Refinancing
• ♦ Is a Deed-in-Lieu of Foreclosure Right For You
• ♦ Can a Broker’s Price Opinion Value be Manipulated
• ♦ Is a Reverse Mortgage Right For You
• ♦ What You Need to Know About Foreclosure & Bankruptcy
• ♦ What is a Forensic Loan Doc Audit
• ♦ When Can You Expect Home Values to Recover

This book contains valuable information based on the vast experience of the author, his extensive researches, and interviews of insiders revealing the secrets of how to get lender approvals. With the help of this guidebook, most homeowners will be able to resolve their problems, saving them time, money, and possibly their homes.

About the Author

The author, Andrew C. Mungar, has been a well-respected real estate expert in Texas, who has provided consulting services to developers, lenders, homeowners, investors and government agencies for nearly thirty years. He has received numerous accolades and some of the highest industry awards. The Greater Houston Builders Association honored Mr. Mungar with the prestigious Harris B. Lieberman Distinguished Service Award, given each year to one person for his outstanding service and dedication to the real estate and construction industry and its trade association. Mr. Mungar also received many other top awards, such as Entrepreneur of the Year and Developer of the Year. He has held a Texas real estate broker license for over twenty-five years and holds a degree in accounting and finance.

Thousands of families have lived in homes built by or in communities developed by My. Mungar, including many world-renowned celebrities. He was one of only a few developers that survived Houston's deep recession and housing bubble in the mid 80's. Over the years, Mr. Mungar was appointed by mayors and congressmen to serve on many state and city government agency boards and committees. He was also a key witness who testified on behalf of the IRS and U.S. Attorney's Office against sub prime loan scam artists. Mr. Mungar has had speaking engagements in many major cities and is now devoting his time to teach seminars to help troubled homeowners survive the current housing bubble crisis. In order to reach out and help homeowners across the country, he has decided to put his vast experience and knowledge, plus his interviews of loss mitigation negotiators, homeowners, consultants, fund managers, attorneys, and government officials, into one of the most comprehensive self help guidebooks ever written.

Preview

What Went Wrong?

Young Bryan moved to Texas and bought a donkey from a farmer for $100. The farmer agreed to deliver the donkey the next day. The next day he drove up and said, Sorry son, but I have bad news. The donkey died.

Bryan replied, Well, then just give me my money back.

The farmer said, Can’t do that, I went and spent it already.

Bryan said, Okay then, just bring me the dead donkey.

The farmer asked, What ya gonna do with him?

Bryan said, I’m going to raffle him off.

The farmer said, You can’t raffle off a dead donkey!

Bryan said, Sure I can. Watch me. I just won’t tell anybody he’s dead.

A month later, the farmer met up with Bryan and asked, What happened with that dead donkey?

Bryan said, I raffled him off. I sold 500 tickets at $2 a piece and made a profit of $998, less the $100 I gave you.

The farmer said, Didn’t anyone complain?

Bryan said, Just the guy who won. So I gave him his $2 back.

Young Bryan grew up and became an investment banker at Lehman Brothers.

In many ways, this joke reflects what happened in the real world, which is not a laughing matter.

A Quick Reference Guide

1. If your Loan-to-Value Ratio is under 70 percent, your best solutions are:
   1. Sell or Lease your home – chapter 12;
   2. Refinancing - chapter 12;
   3. Home Equity Loan - chapter 12;
   4. Reverse Mortgage - chapter 24;
   5. Hard Money Loan - chapter 12;
   6. Possible New Programs - chapter 14.
2. If your Loan-to-Value ratio is between 70 percent - 140 percent, your best solutions are:
   1. Loan Modification - chapter 5;
   2. Making Home Affordable Programs - chapter 13;
   3. Debt Settlement - chapter 21;
   4. Forensic Loan Doc Audit - chapter 26.
3. If your Loan-to-Value ratio is over 140 percent
   1. Short Sale - chapter 22;
   2. Short Refinancing - chapter 22;
   3. Deed-in-Lieu of Foreclosure - chapter 27;
   4. Forensic Loan Doc Audit - chapter 26;
   5. Hedge Fund Short Refinancing - chapter 22;
   6. Foreclosure Alternative Programs - chapter 13
   7. Foreclosure - chapter 28;
   8. Bankruptcy - chapter 30.

Loan Modification Present Value Test

Your lender will consider modifying your loan to allow you to reduce your mortgage payment if it believes it will lose more money foreclosing on your home than the concessions it will give you in a loan modification. All lenders will run their own Present Value Test to determine whether they will even consider you for a loan modification. In chapter 10, I will point out that most lenders order a Broker’s Price Opinion to determine the current market value of your home. In chapter 11, I will show you that the typical net proceeds to the lender from a REO sale is between 75 percent to 80 percent of the market value, after deducting about 7 percent for sales expenses and another 15 percent for marketing, legal, utilities, property taxes, insurance, maintenance, repairs, distress sale discounts, and so on. If your loan-to-value (LTV) ratio is 70 percent or below, your lender will not even consider you for a loan modification because it does not believe it will lose any money by foreclosing on your home. Generally speaking, 78 percent LTV ratio is considered the break even point whereby your lender is expected a 100 percent loan recovery.

For example, you purchased your home for $400,000 four years ago. You had a 90 percent loan of $360,000, at the interest rate of 7 percent, thirty year fixed. Your current loan balance is $343,700. Now you’ve suffered a hardship (see chapter 14), resulting in a deficit in your budget (see chapter 15) and are unable to continue making mortgage payment. The current market value of your home has dropped to $340,000 (LTV ratio is now 101 percent). You would prefer to keep your home rather than letting it be foreclosed which will hurt your credit score (see chapter 31) significantly. If your lender proceeds with foreclosure, they will expect to net about $265,200 ($340,000 less 22 percent), which is well below your current loan balance. Thus, your lender will be more than willing to modify your loan as long as the Present Value of the modified loan will net them a greater amount than $262,200.

How Soon Will the Home Values Recover?

As more and more homeowners are choosing loan modifications, refinancing, or short sales, the number of foreclosures will level off by early 2010. Many of the foreclosed homes will end up in the hands of bargain investors. At some point, these investors will have to unload these investment houses, which will flood the market with more housing inventory. Therefore, it is safe to assume a buyer’s market will continue in the upcoming years.

In order for home values to recover, home sales must first pick up. Unfortunately, there are so many barriers preventing that from happening. Aside from having to compete with foreclosure sales, regular sellers are unable to sell their homes because very few buyers are able to obtain mortgage loans, unless they have ample amount of money for down payment. To make things worse, lenders have tightened their appraisal guidelines. As a result, many sales were lost when the appraised value fell below contract prices.

Millions of Americans have had their credit ruined by foreclosures, credit card defaults, or bankruptcies. Such serious adverse events stay on a borrower’s credit report for at least seven years (see Chapter 32). Assuming there are no more sub prime loans available, most of this large group of people will probably not be qualified for a loan to buy homes again in the next 7 years. After that, we could see a large increase of home buyers re-entering the market. Therefore, it is safe to assume that it will take at least 7 years, possibly longer, for home values to recover to a level prior to the current housing bubble. Remember, if home values have dropped by 50 percent, it will take a 100 percent increase to return to the old level. Just do your math!

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