Page last updated at 09:18 GMT, Tuesday, 3 June 2008 10:18 UK

Credit crunch victims await final bill

By Dumeetha Luthra
BBC News, New York

Watch Dumeetha Luthra's Newsnight report

It was a climate of "anything goes, everything goes up and we won't ask too closely if it'll ever come down" that brought on the credit crunch.

Inside Wall Street's cathedrals to finance, bankers forgot the basic ground rules, lending with little restraint and very few questions.

Unsurprisingly, consumers joined the frenzy. There was easy access to credit. It seemed like a short cut to the American dream.

The only problem is, it wasn't built to last.

Foreclosures have gone up in New York by 40%. There is a new poor underclass: these are not people who don't have jobs. They're people who are in full-time employment, but simply can't keep pace with rising costs.

Martha Espinoza thought she had managed it all. She was an orphan who literally pulled herself up from nothing. She was brought up in the foster care system, and was scarred by the experience, but didn't let that deter her.

They lied to me - the attorney that was supposed to be representing, my real estate agent, the man at the bank
Martha Espinoza

"It's sad to say this, but I felt I'd accomplished so much in my life because I grew up without parents," she says. "I grew up in the foster care system, where I was raped, abused, not educated."

Her grand achievement was buying a house of her own. Her neighbourhood in Queens is not rich; there are a few boarded-up homes along the street, but there are also several well-tended front porches. Hers is one.

She bought the house in 2005. It was a proud moment.

"Wow, little old me owns a home. It's like you really can't believe it," she says.

"It just made me feel, wow, if you're really determined and you work hard, things really pay off and I just felt like I'd accomplished so much, considering what I'd already been through."

Taken advantage of

The triumph was short-lived. She thought she was buying a newly-renovated home. Instead, she got an overvalued dump.

There's asbestos in the basement and dangerous wiring. The walls are crumbling because of leaky windows and bad plumbing.

It's a nightmare and an expensive one. She borrowed 12 times her salary of $25,000 for the wreck.

"They lied to me - the attorney that was supposed to be representing, my real estate agent, the man at the bank.

"They said, 'Don't worry, you'll get a loan, your credit will look great after a year of payment, your credit will shoot through the roof,' and I said really, like a kid in the store."

Martha Espinoza
Martha Espinoza feels betrayed by people she trusted

She says she didn't know better and the money-men took advantage of her naivety and ignorance.

"Does that make me an idiot that I don't know about mortgages and banks? That's what you have those for."

So now her monthly repayments have soared by 60% with the banks' rise in interest rates.

She's facing foreclosure and her spirit is fraying.

The woman who raised two children and put herself through college is struggling to keep the roof over their heads. She's working more than 100 hours a week in four different jobs.

"How do you think I feel every day, knowing that I took my children from an apartment that was in good condition, had the government helping me pay for it, and I've put them in this? When you as the parent are supposed to make the right decision on behalf of your family?"

Boom and bust

On the other side of this coin is Joel Oberlander. He watched the mortgage companies spread the money.

"Every lender was, like, throwing money out the window. I mean, it was the easiest thing to get approved for a mortgage," he says. "You didn't even need to have good credit or even documentation of your income."

Joel Oberlander at the breakfast table with his family
Things may get worse for Joel Oberlander before they get better

And he rode high off the back of it. His company carries out land searches for the mortgage companies.

The boom years were good to him - he was able to buy his own house with a small loan from the bank.

"You would rush to the county court to be here nine o'clock," he says.

"There would be a line, almost like a fistfight to get to the computer, just get the work done."

That was only a year ago, but now he remembers it as a golden age.

The corridors at Nassau County court are empty now. There's no-one fighting for the computers. In fact, some haven't even been switched on.

His own business has plummeted by more than 75%. Now he's the one taking risks. He's borrowing against his home to keep his company afloat. He's already put in tens of thousands of dollars.

I should have seen it, should have been more careful
Joel Oberlander

"I took my own credit to make ends meet, to pay expenses, to pay the payroll, pay all the necessary stuff.

"It would be disastrous when I sit down and look at the numbers. I'm hesitant to sit down and do it."

Just a month after business started to go down, his five-year-old son Lazar was diagnosed with leukaemia. Joel is relying on credit, but he hasn't told his family the extent of his gamble.

"I'm even going as far as using up my home equity and credit line to put into my life, so it wouldn't affect us personally. Because now especially, my wife and children, they need my support. I don't want to show them that they're missing out on something in this time of need."

He says he should have prepared better. He smiles nervously as he admits his home is now his only back-up.

"I should have seen it, should have been more careful - I did one good investment, I bought my own condo, and hopefully it'll stay mine, even though I'm using my own credit line.

"I'm trying, trying and I'm not at the bottom end yet with that situation."

Nest-egg fears

At the wealthier end of the spectrum is Danita Branam. She owns an apartment on the upper east side of Manhattan. She is a former banker turned consultant who has had a successful life.

But even so, at 64, choosing retirement is a scary decision. She's not sure she can afford it. She watched her savings shrink with the downturn in the markets.

Danita Branam
Danita Branam thinks she may not be rich enough to stop working

"I literally was watching my accounts everyday, and the news was more and more frightful. You get to retirement and if you can't do the things you'd like to do, then I think you've sort of missed the boat."

In her spare time, she mentors children from deprived backgrounds. She wants to do more of this when she retires - if she retires.

It's a difficult decision, but one she is not alone in. More than a quarter of Americans are from the baby boomer generation. Rising prices have shrunk the value of their savings. So the question they face is, will their nest-egg last a lifetime?

"The dilemma is whether to stay in the market and continue to work, or pull out and just retire, and let the chips fall where they may. That's the dilemma."

Martha, Joel, and Danita all have very different experiences, very different levels of anxiety. However, that's the point. The fallout from this crisis is not for a specific group of people.

Whether you fell for the hype, were careful with your money, or even in the industry, the differences have been levelled, and a final bill is still being calculated.

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