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.

Video labeled #12(2)

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.

Jean H. Telfort's Print Version of Final Projet on Impact of Subprime Mortgage Crisis in Nassau County

The Impact of the Subprime Mortgage Crisis in Nassau County, NY

Saturday April 12, 2008

By Jean H. Telfort

The subprime mortgage crisis can be traced back to the real-estate boom of the late nineties. A decade long housing boom fueled by low interest rates and excess liquidity finally caught up to homeowners who were pushed into loans outside of their means. Mortgage loans that conventional lenders such as Chase Manhattan Bank N.A., and Citibank N.A. would have otherwise declined.

Aggressive mortgage brokers enticed by the lure of big commissions, talked buyers with poor credits into accepting home loans with little or no down payment, mostly without proper documentation and credit checks hence setting the stage for the current mortgage meltdown. http://money.cnn.com/2008/01/29/news/companies/boyd_countrywide.fortune/index.htm?postversion=2008012913

Usually, adjustable rate mortgages (ARMs), interest only (IOs), are known as subprime mortgages. They typically cost two or three points above conventional loans, and carry interest rates with low teaser rates for the first couple of years, followed by a reset to much higher rates. The reset frequently results in raising the borrower’s monthly payment by as much as 100 to 150 percent and thereby making it impossible to handle monthly payments.

Suffolk and Nassau Counties, according to a latest report released by the Empire Justice Center, a non-profit law firm that advocates for low-income families, account for a third of the state’s 2006 subprime loans in foreclosure. Subprime mortgage lending jumped to almost 20% of all loans (by number) from 9% in 2003.

Population growth, overcrowding, and the aforementioned real estate boom pushed many families to Nassau County, due to its proximity to New York City, to grab hold of the “American Dream”. The high demands increased home values and prices at the median level, which explained the high level of disparity in median home prices between Nassau County and Suffolk County http://ny.therealdeal.com/articles/suburban-slowdown.

New homeowners saw a rising value of their homes during the initial year of their mortgages. With the equity rise many homeowners no longer think of their home as just a place to live. Instead, it's a cash machine that can be used to satisfy other debts in the form of consolidation for high rate credit cards, student loans, medical bills, home improvements, and frequently took out home equity loans for extra cash. http://money.cnn.com/2006/11/03/real_estate/home_equity/index.htm?postversion=2006110617. http://money.cnn.com/2006/11/01/real_estate/cash_out_refis_peak/index.htm?postversion=2006110111.

The decline in home values, a weak economy and the reset of those subprime mortgages result in foreclosures. Many borrowers want to sell their homes to pay off their mortgages, but they are unable to find offers that would cover their loan pay-off amounts. Low to middle income population are affected the most as thousands of families are being forced to walk away from homes being repossessed by banks.

The fallout from the subprime mortgages has affected the housing market, financial markets and the entire US economy. Experts are predicting that things will get worse before they get better. The International Monetary Fund or IMF said that the US subprime mortgage crisis could hit $945 billion dollars worldwide.

Jean H. Telfort's Production Memo

Saturday April 12, 2008.

Jean H. Telfort’s Production Memo

Title: Impact of Subprime Mortgage Crisis in Nassau County, Long Island, New York.

By Jean H. Telfort

From the onset, I pitched two stories to Professor Krochmal for my final class project. During class presentation on Wednesday March 4, 2008 I elected to pursue the current Subprime mortgage crisis. Indeed a mammoth project for a two minute presentation, but a challenge that I welcomed with unabated breath.

The progress report implementation from Professor Krochmal and the application of William Blundell’s story blocks (six elements) allowed kept me focused on the project. I used the six elements as a platform to organize my project.

I chose the Mortgage crisis because of its potential effect on the global economy. Moreover as a citizen of the world I felt compelled to embrace a story relatable to everybody.

Once I received approval from Professor Krochmal on my final project topic, I launched an in-depth research plan on-line from respectable news organizations archives; collected newspaper and magazine articles on mortgage issues; began monitoring foreclosure websites organic to Nassau County, Long Island, NY; searched for experts in the mortgage industry specifically subprime area for possible interviews.

The more research I conducted, the more drawn and passionate I felt to my topic. My break came in when I received a call from two individuals on Monday March 24, 2008 from an Independent Broker (Jason Levy) and a Mortgage Analyst (Ivan Brathwaite) agreeing to be interviewed for my project. It was not easy at first, but after a couple of dialogues they both agreed to lend a helping hand.

Once again the initial story board, progress reports, and Blundell’s elements came in handy for the series of interviews I conducted with Levy and Brathwaite. I was able to focus on specific questions to paint the history, scope, and central reasons behind the crisis.

I am forever indebted to my interviewees for their support, knowledge, sacrifices they made to accommodate me. The interviews were conducted late in the evenings in neutral locations due to competing family demands and other priorities. I completed all my interviews on Sunday April 6, 2008; however, some poor audio forced me to conduct additional interviews late Friday April 11, 2008.

Now that I have everything required for the final project, putting it together in a presentable package gave rise to new challenges. Working together with fellow classmate Rich Forestano and Guru Marcus Vanderberg alleviated those challenges.

By far the most challenging project I have endeavored in my entire life. The unknown, the uncertainty loomed at every corner. I second-guessed myself throughout the entire project, but my never say die attitude and thirst for knowledge kept me grounded when doubts kept in.

On the same breath, this project was immensely rewarding. The researches and interviews I conducted along with lessons learned yielded scores of invaluable information. Information on not only the impact of the Mortgage crisis on Nassau County, Long Island, NY but the global impact on the economy worldwide.

To future students I will say the following, start your project early, stay focus when facing challenges and doubts, remain connected with fellow classmates, take advantage of seminars as they are meant to refine your skills, and ask for help whenever necessary.