And Then the Roof Caved In

Chapter 3

The Subprime Machine

 

 

 

The center of the subprime mortgage universe in this country is Irvine, California. In one small group of nondescript office complexes, companies that had survived the late 1990s and ones that were just getting their start were housed in such close proximity that everyone knew everyone else’s business. And they were all becoming aware that a nationwide boom was taking shape. These lenders, while based in Southern California, would dole out subprime mortgages from coast to coast.

Lou Pacific, a big-armed, straight-talking Vietnam veteran with a resonant voice who fancies Hawaiian shirts and Neil Young songs, has been giving people mortgages for 30 years. Pacific was brokering mortgages when interest rates were 18 percent and he was brokering mortgages when they were 5 percent.

Lou Pacific is a cynical soul, but he wasn’t born that way. He’s just seen too many people do too many stupid things for it not to leave a mark. And he’s seen his share of housing booms, though he admits there’s not likely to be anything that ever will compare to what happened in Southern California from 2002 until 2006. We had lunch at what had been the central watering hole for brokers from New Century, a firm that was one of the largest players in the nation’s subprime market.

Lou Pacific

Photo courtesy of CNBC.

Pacific began reminiscing:

 

As the prices started going up ...