Transcripts of Interviews

Sunday April 13, 2008

By Jean H. Telfort

Jason Levy: Independent Broker

Date stamp; Interview Friday April 10, 2008

Hi, my name is Jason Levy, I am an Independent Broker and I will be talking about the Mortgage Crisis

The mortgage crisis to me goes back to what is called the American Dream

You have the subprime mortgage buyer looking to buy his first house

What he does is, find a house that may not the most expensive house then he’ll buy it, and he may not be able to get a fixed rate mortgage again but just an adjustable mortgage it’s the most affordable mortgage for him. In Nassau County you have to account for high taxes, house can have taxes from 6 to 12 thousand dollars. He gets his house, he probably can’t afford but he’ll make it work; he’ll probably take out a second job, maybe his wife will get a second job as well. What they’ll do is pay the mortgage for a few years, just barely making their payments, put a lot on credit cards, maybe they want to fix up the house a little also, they’ll probably need a new kitchen or a new bathroom.

They’ll receive five to 10 calls per day from different brokers everyday they’ll be offered the best deals they can whether it’s fixed rate, an adjustable rate, maybe it’s a negative amortization loan where they are actually paying partial interest and the principal is actually going up on the loan; they’ll take the best deal that they can get.

Trace it back to 2004, 2005 rates were low, house values were high

Your typical subprime buyer after a few years in his house is going to want to refinance

This crisis dates back to the real estate boom of the nineties; homes were affordable on false pretenses.

However the serious meltdown was triggered in June 2007 by the fall out of two Bear Stearns hedge funds collapsed, and the drop of interest rates

While homeowners continued to incur debts

Homes are seen as investments (savings account)

Borrowers overextended themselves to

The typical subprime borrower usually refinances a lot for better rates since the original mortgage rate is usually higher than conventional rate.

They refinance for debt consolidation, higher rate credit card pay-offs, home improvements, additional cash out

Ivan Brathwaite: Mortgage Analyst

In my personal opinion the mortgage crisis stems from a variety of different factors, first being the real estate boom we had back in the nineties, second being Mortgage Brokers, and quite frankly I think it also stems from homebuyers who were pretty much uneducated and did not take time to read the fine prints in these loans that they were taking and just signing papers before they were too sure of what was happening.

Mortgage Brokers pretty much like everybody else; they are looking to get paid however we have a personal responsibility to explain to our clients what it is they are getting into.

For instance adjustable rates, all of us know that adjustable rates have a tendency to increase after either two or three years; but speaking to a typical client, they have no idea. It’s only after they come to someone like myself who is looking to help them refinance out of one of those programs then tell them to look at the paperwork you signed prior they realize all these different things they had no idea about when they took the loan originally.

One of the major things that people don’t know about is what we call in the business a negative amortization loan that’s pretty much a loan where you don’t even pay interest on it. A typical loan when you pay it month to month your balance is supposed to go down, a neg. am. loan you pay it month to month, your actual principal balance goes up that means you are eating up whatever little equity you have left in the property. If you did a subprime loan 100 percent financing no money down out of pocket you pretty much went in the property with no equity; then when you try to refinance guess what you can’t because not only do you not have equity, you ate up whatever little you had which means that you owe more on the home than it’s actually worth, that’s the number one way to foreclosure.

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Why do people refinance?

To be honest with you, the reasons are still the same cash out for home improvement, debt consolidation, start out a savings account that was not there prior, but it’s pretty much the same. Except that it is a lot more difficult to qualify for these people. Now rather than a few years back everything is based off of income, they have to prove their income and that’s hard for a lot of people now.,

Is there anything in the works to alleviate this problem?

Well yes, the government for a time did sort of lower the standards for government backed loans. However, we are seeing in the past couple of months that the trend is actually going away before there was no minimum score for government backed loan. Within the last four months they raised the credit limit to 530, at the beginning of this month they raised it to 580, and there are rumors that within a couple of months it will be raised to 620. The fact that they have cut the Federal Reserve rate has helped a little, but raising the credit score does not help at all.

Who are the most affected by this crisis?

I would say the most affected individuals are the middle to lower class income families. It really has no color line.