Workers Say They Feel Blindsided by Lender’s Failure

This is the sad reality of the housing bubble. Usually, it doesn't become "real" until people start losing their jobs. Asset bubbles always end this way but this one will be different than most because so many people were connected to housing in so many industries. The exposure is significantly worse than the tech bubble bursting in 2000. You can expect more headlines like this in the coming months.

MELVILLE, N.Y., Aug. 3 — Among the 1,400 or so people who lost their jobs here Friday, there were undoubtedly some who understood the macro and micro factors that led American Home Mortgage Investment Corporation, one of the largest and fastest-growing mortgage companies in the country, to crash in a heap this week, even as it was hiring employees by the dozen.

But most of the workers carrying rubber plants and boxes of family photos out of the company’s headquarters were account clerks, appraisers, computer technicians and loan brokers who said they were stunned to find themselves, some after years of employment, on the street with virtually no notice.

“You don’t think you’re in the slaughterhouse, and then suddenly something hits you on the back of the head and you find yourself rolling down the conveyer belt,” said Frank Caltabellotta, 42, of West Islip, an appraisal specialist who was laid off. “The way this happened was very undignified.”

On Thursday, company officials notified all 7,000 employees in a dozen offices around the country, including the 1,400 here, that all but a skeleton crew of about 750 workers nationwide would be immediately laid off and that loan operations would be shut down.

Michael Strauss, the chief executive, attributed the company’s undoing to the weakening of the real estate market and of the secondary mortgage market, the commerce in financial instruments built from bundled mortgage obligations, which was American Home Mortgage’s specialty.

American Home Mortgage traded in loans that fell into the category between low-risk and high-risk. Many were “stated income” mortgages — variable rate and zero-money-down loans that require no income verification. Borrowers in that group are especially hard hit when market-rate interest payments come due on their loans.

But Blanca Castillo, who worked for three years as a call center coordinator, said the events that may have contributed to her unemployment were no excuse for the sudden and careless shedding of a loyal work force.

“Monday, there were rumors,” Ms. Castillo said as she carried a cardboard box to her car, passing several potted plants that sat on the roof of another employee’s car. “Tuesday, they say not to worry about the rumors. Thursday, we’re finished. They are giving us nothing — no health benefits, no severance package, nothing. We have families, we have mortgages. That’s it? Here’s your last paycheck, goodbye?”

A spokesman for American Home Mortgage could not be reached for comment. E-mail queries and telephone calls were not answered.

Throughout the day, which for just about everyone was spent in a kind of limbo between losing one’s job and actually leaving the building, employees huddled outside, smoking cigarettes, making cellphone calls or reading some of the fliers left on their car windshields. These mainly advertised jobs in the mortgage, debt collection and telephone sales industries. (“Top flight opportunity. We are willing to train bright, assertive persons for full and part-time positions,” said one such flier for Asset Locators and Skip Tracers, a debt collection service.)

Some of the employees seemed dazed, holding thin folders filled with information about unemployment benefits.

Christine Jackson, 25, said that besides the long-term employees — some of them with the company since it was founded in 1998 — the hardest hit among her co-workers seemed to be those who made their work cubicles into “a little home away from home.” The ones who surrounded themselves with family pictures, coffee makers and, in one case near Ms. Jackson’s cubicle, a radio tuned softly to a jazz station.

“There are people here who worked here since the beginning,” Ms. Jackson said. “They felt like this was their family.”

Shawn Nuzzo, 31, a loan sales coordinator, said he sensed a shift in the market late last year.

“Basically, the guy who puts no money down has a big incentive to walk away when interest rates go up,” Mr. Nuzzo said. “That started happening, and we made some adjustments. But obviously it was too little, too late.”