E. Robert Levy: the mortgage crisis explained

Transcribed interview for the Philadelphia Business Journal, as published in February. As, the mortgage crisis weighs on, I thought some might be interested to learn a bit more from an industry expert.

Name: E. Robert LevyE. Robert Levy
Title: Executive director and counsel & executive director of legislative and regulatory information & legislative regulatory counsel
Organization: Mortgage Bankers Association of New Jersey & Mortgage Bankers Association of Pennsylvania & Pennsylvania Association of Mortgage Brokers
Education: Rutgers School of Law in York, Boston University (started undergrad) and Farleigh Dickinson (graduated undergrad),
Career History (most recent first): Private practice in law; deputy commissioner to New Jersey state Department of Banking and Insurance; Attorney general and counsel to New Jersey state Department of Banking and Insurance
Home: Livingston, N.J.

1) What are the major differences in the mortgage crisis between New Jersey and Pennsylvania?

Well, the differences are probably fairly negligible, depending upon what data you look at. Overall, the negative impact on both states, or on either state, is far less than what you find in other parts of the country, California, Florida, Nevada. As far as foreclosure rates are concerned, they are affected by the nature of the urban parts of the state, which get hit harder than others as there is some evidence that non prime lending was more prevalent in those markets.

2) How are the state legislatures and executive branches in each state approaching the problem differently?

Not substantially differently. The legislatures in both states are very concerned with the market and consumers. Frankly, I think both are acting responsibly. Legislators have expressed concern but don’t want to overact and hurt the market and the very consumers they’re trying to help. There are bills to license loan solicitors – requiring pre license education and continuing education – in both states. All the organizations I represent are fully supportive of those bills, and I have participated in drafting them. We’re hoping to get those bills passed some time in 2008.

3) Do you see product offerings, particularly in the sub prime and Alt A areas, from lenders changing? If so, can you give examples?

There are a lot of changes in the sense that certain products are now available to only the most worthy consumers, with a lot higher interest rates being required by some lenders. Really, the market has returned to the standards of a few years ago. For another, a second example, it’s very difficult to do a piggyback, second mortgage today because no one wants to purchase those. These nontraditional mortgage products, all the exotic products, so called, are pretty much unavailable now.

4) A lot of banks have predicted 4Q financials will be down due to their investments in the sub prime market. How do you see the overall effect of this on the economy in 2008?

Well, there’s no question that this is going to have a negative impact on the economy in the incoming year. It will obviously weaken the economy. Some think a recession. It is hard to predict, but to the extent that you can do it, I think it is going to be a period of six to nine months, more write downs, more foreclosures, of course housing prices coming down some what. Then, at that point six to nine months from now, we’re going to see a bottoming out and it might resurge.

5) Mortgage bankers dropped more than a quarter of their licenses in Pennsylvania in 2007. Is that a trend you see continuing this year or have lenders completed their cutbacks?

I think there will be an easing of that trend, but there will be a continuation of it for some time. You’re gonna have some failures yet to come about, also some firms searching for niches in the market, consolidating, mergers and some general downsizing for a period of time. Probably mid-year, we’ll see a stabilization, then from there we can move forward and see a better market in 2009.

6) Is the foreclosure crisis and the so-called predatory lending that some think had a hand in precipitating it having a negative impact on how the industry is perceived?

I don’t think there is any question that the industry, that the image of the industry has been harmed by the media attention given to these issues, some of which is justified, a lot of it not, the result of just a lack of understanding of how it all functions.

7) Are the mortgage bankers associations or individual banks doing things to combat negative perceptions?

The first stage of our work is to deal with regulatory and legislative proposals that are out there, not dealing with negaitve perceptions. I think it‘s pretty clear we have a pretty good system so let’s not muddy it up with needless legislation. That’s the primary responsibility we have to our members, to deal with those regulatory and legislative concerns. It’s not to get focused on how the public perceives the industry because, well, the public is what it is, and no amount of money is worth a media campaign to say, ‘disregard all this folks, we’re really nice guys.’

See other examples of my reporting here.