The O.C. Mortgage Bust

Jobs Dry Up In Subprime Heartland

IRVINE, Calif. -- After more than two decades in the mortgage business, Tony Ventimiglio got his big break in 2001 when he accepted a managerial job with a lender here in the heart of Orange County for $225,000 a year -- more than double what he had made in each of the previous four years.

Ventimiglio nearly doubled his salary again two years later, this time at the now-defunct Homefield Financial, where he supervised 100 workers, including salespeople who routinely made $25,000 a month in commission.

"When I started working there in 2003, I was embarrassed because I was driving a Cadillac and the young office clerks were all driving Mercedes and BMWs," said Ventimiglio, 49. "There were a lot of people who knew nothing about mortgages. They were simply in the right place at the right time."

The good times are over for the get-rich-quick industry that grew up in Orange County and thrived in the first half of the decade, when interest rates hit record lows and home prices surged. Four of the six largest and boldest lenders of risky mortgages were based in this Southern California county back then, and all cashed in on what seemed an insatiable appetite for home loans.

When the housing market soured, those lenders and dozens of others nationwide shut down or scaled back, leaving workers like Ventimiglio in the lurch and contributing to an abrupt drop in mortgage-related jobs. The sector has lost at least 76,000 jobs nationwide since peaking at 500,000 a year ago, according to federal data released this month. And more cuts have been announced.

If the industry's numbers fall back to 2002 levels, when home sales were similar to what they are today, 137,000 jobs would vanish, rivaling the 146,000 jobs lost in the airline industry in the four years following the Sept. 11, 2001, terrorist attacks, said Mark Zandi, chief economist at Moody's Economy.com.

Most of the jobs are not in traditional banks. They are tied to mortgage companies that made loans to subprime borrowers -- people with spotty credit -- using money from Wall Street. During the boom years, these companies prospered by hiring salespeople to aggressively push their loans to potential borrowers, either directly or through mortgage brokers, who match home buyers with lenders.

It is those salespeople, the brokers they worked with and the support staff in their offices -- from financial compliance officers to software engineers -- who were displaced as the mortgage industry's troubles deepened. The fallout has been geographically diffuse because most of the major lenders affected have offices throughout the nation.

"It's going to be a tough transition," Zandi said. "It will take a long time, if ever, for these workers to get the compensation they had in the housing boom. It was a unique period, with the frenzied lending that was going on."

Orange County, just south of Los Angeles, was a center for much of that frenzy. The county is economically diverse, with several blue-collar communities in the north and ultra-affluent coastal communities in the south made famous by the TV hits "Laguna Beach" and "The O.C."

In the middle is Irvine, the location of Ameriquest Mortgage and New Century Financial, two of the six largest subprime lenders in 2005, according to National Mortgage News. Two others, Option One Mortgage and Fremont Investment & Loan, were nearby.

For these lenders, part of Irvine's appeal was cheap and plentiful office space compared with Los Angeles, and an Orange County address that was posh enough to support the high-flying image these lenders cultivated, said Jack Kyser, chief economist at the Los Angeles County Economic Development Corp., who has studied Orange County.