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peter
3188 Posts |
 Posted - 03/27/2008 : 11:10:57 PM
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Welcome to subprime's ghost town
A year ago Irvine, Calif., was still riding high on the subprime boom; then almost overnight the industry and more than 4,000 good paying jobs vanished.
IRVINE, Calif. (CNNMoney.com) -- The subprime mortgage meltdown has shaken the entire U.S. economy. But nowhere might the impact be as stark as Irvine, California, a planned community nestled between Los Angeles and San Diego.
A year ago at this time, Irvine was home to 18 subprime lenders, including many of the leaders in the field, such as New Century Financial and Option One. Then, in what seemed like the blink of an eye, 4,100 good-paying white collar jobs were gone, or roughly 2% of the city's work force.
And while that may not sound like a huge number of jobs lost, the ripple effects of the collapse of what was once a vibrant industry has extended far beyond the mortgage lending arena.
Irvine had become the center of the subprime industry almost by accident. As the business of writing mortgages to riskier borrowers grew rapidly in the middle of the decade, many top employees at the established subprime firms struck out on their own, setting up shop nearby.
There were other major subprime lenders who were also nearby to Irvine, including Ameriquest Mortgage in Orange. Even the lenders in the field that didn't have their headquarters in or near Irvine had offices in the area to try to tap into the talent pool it had to offer.
But the industry imploded even faster than it grew. New Century, which had been the nation's No. 2 subprime lender with $51.6 billion in those loans, filed for bankruptcy last April and essentially halted operations a month later. Option One, a unit of H&R Block (HRB, Fortune 500), closed down late last year once efforts to sell to Cerberus Capital Management fell through.
"Honestly, some people are still sitting here with their jaws dropping, saying 'How did it happen?' It was just so fast," said Jacquie Ellis, CEO of the Irvine Chamber of Commerce. "Typically when you have a downturn, it's a slow decline. That's not what happened here."
Many of those who worked in the industry, top executives who had hundreds of people reporting to them, are still struggling to get by.
Kent Cope, a veteran of the industry, was the senior vice president and director of western sales at First NLC Financial Services until its owner, Friedman, Billings, Ramsey Group (FBR), shut the unit in August. He's still looking for work. His wife Mysti, whom he met when they both worked at New Century, had been vice president of e-commerce customer service until New Century laid off most of its staff last May.
By the end of the year, almost 9,000 subprime jobs were gone from Orange County. Many of these people have been unable to find new jobs. And economic officials say that was only part of the economic pain.
Suppliers and service firms from hotels and restaurants to printers and software developers that had come to depend on the lenders for a bulk of their business have had to cut staff as well.
Ellis said one hotel in town has lost $1 million in annual bookings as a result of the subprime collapse. And small businesses, such as local trophy shops that produced the monthly sales awards, have been hurt.
"Everybody was riding high, it was like fat city," said Ellis. "All of a sudden you look around and think, 'Joe across the street lost his job,' or 'Oh my gosh, Sally next door lost their job.'"
Today, the office towers in central Irvine that used to house lenders like New Century and Option One have floor after floor of empty offices. The Chamber of Commerce estimates that 20% of the city's Class A office space is empty, a record high.
We've had a lot of interest, but my sense is many companies want to wait and see how bad the economy gets before they jump back in," said Gary Bingham, the chamber's vice president of economic development.
But what is clear to everyone is that subprime lenders won't be the ones coming back to fill the void they left, even when the economy picks up.
By Chris Isidore, CNNMoney.com senior writer
Last Updated: March 27, 2008: 3:23 PM EDT
http://money.cnn.com/2008/03/27/news/economy/irvine_subprime/index.htm?cnn=yes
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rtrefflich
1736 Posts |
Posted - 03/27/2008 : 11:31:52 PM
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| It kind of makes me remember what happened to LA and OC in the early 90's when the aerospace jobs and military bases shut down. It took close to eight years for a full recovery from that one. It started in 1991, rock bottom in 1994 and probably in 1998 things started really looking good again. |
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MortgageBoarder
2116 Posts |
Posted - 03/27/2008 : 11:33:48 PM
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LOL. Way to post the same article 5 hours later buddy!! Check out the Livin The OC life post.  |
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darkstar
13777 Posts |
Posted - 03/28/2008 : 05:20:54 AM
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| Just another article saying the same thing...I thought things had picked up for your Pete...From your last posts, all that free marketing you were doing was paying off bigtime, why back on the D&G wagon?!?!? |
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ML
1342 Posts |
Posted - 03/28/2008 : 06:01:12 AM
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quote:
Originally posted by darkstar
Just another article saying the same thing...I thought things had picked up for your Pete...From your last posts, all that free marketing you were doing was paying off bigtime, why back on the D&G wagon?!?!?
the PROZAC wore off!  |
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MisterVA
4529 Posts |
Posted - 03/28/2008 : 07:26:14 AM
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| I closed a subprime loan this week. Just needs a few months to season some collection accounts and we can do a VA refi. Equifirst was the lender. The appraisal review was frustrating. But it got done and now we wait for time to pass. |
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jeff4567
1317 Posts |
Posted - 03/28/2008 : 08:28:04 AM
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| Ghost town? Media hyberbole as usual |
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MisterVA
4529 Posts |
Posted - 03/28/2008 : 09:48:01 AM
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| Peter is afraid of ghosts, so in this case, it would seem appropriate. |
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Jmtgs4u
45 Posts |
Posted - 03/28/2008 : 10:04:20 AM
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| what lenders are still doing subprime? anyone go down to a 540 mid? or do I need to hop in the time machine and go back a couple years for that one? |
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philinpdx
634 Posts |
Posted - 03/28/2008 : 2:34:25 PM
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If the borrower qualifies....Erv what does that mean? You mean in terms of Full Doc income obviously and low LTV? What else? I'm surprised anyone will go that low other than FHA these days.
quote:
Originally posted by Erv
quote:
Originally posted by Jmtgs4u
what lenders are still doing subprime? anyone go down to a 540 mid? or do I need to hop in the time machine and go back a couple years for that one?
If thr borrower qualifies, AMERICAN RESCUE TRUST will take clients with lower than 500 scores.
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cindyhulett
132 Posts |
Posted - 03/28/2008 : 11:06:53 PM
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Criminy, forget the subpirme! It's hard enough just to get A paper borrowers qualified! All of it is a huge task. All of it is daunting! In real time, it is A paper. Subprime, regardless of the avenue, is what got us here. Let it go. I have seen loans on the absolute brink of disaster wherein a borrower could suddenly disclose that, oh gee, I do have more assets, I do have another bank account - if that's what it takes to close. Gone are the days of free loans. We keep beating our heads against a wall that no longer exists. You have got to ream, and research your borrower. You will be surprised just what they have at hand to get a deal closed. They have to change their thought processes just as much as we do. We are looking at homes that are worth less than half of what they were a year ago, and you think there aren't some A paper borrowers out there to take advantage of that fact?
It's very sad to see so many companies fold. To see our AE'S go by the wayside, but things are what they are and this is now. This is where we are. Help yourself and get over the subprime. If you can't make a loan work, then your mantra should be - 'next'... |
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