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The O.C. Mortgage Bust
Jobs Dry Up In Subprime Heartland

By Dina ElBoghdady
Washington Post Staff Writer
Saturday, October 13, 2007

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.

History also played a role. The city and county once had many savings and loans and locally owned banks that disappeared, leaving behind a pool of workers with strong financial services skills and a desire to stay put, Kyser said. Irvine, known for its superb school system and home to a branch of the University of California, has been ranked by the FBI as the safest large city for the past three years.

Those workers jumped at the opportunity to make money in a hot industry with a low barrier to entry. In most states, mortgage brokers need only pass a written test and pay a few hundred dollars for a license, according to Wholesale Access Mortgage Research & Consulting, which does research on the residential mortgage market.

In California, requirements vary according to the job. People who sell loans in-house for a residential lender do not need a license. But brokers must have one. That requires at least two years' full-time experience in real estate sales, taking eight college-level real estate courses and passing a five-hour written exam. Agents who work for these brokers must pass three courses and a three-hour test.

At PC Lending, a family-owned brokerage in Irvine, some of the most skilled agents previously sold cars or time shares. They had lots of drive but rarely a college education, said Brett Brofman, the company's vice president of administration and operations.

Of the 60 agents at her firm, only 15 are actively producing loans now, Brofman said. The rest have left the business or branched out into other jobs.

"One guy quit and is now interviewing for bellman positions at local hotels," Brofman said. "Another lady is selling tickets at a playhouse at night making $10 an hour" to supplement her much-reduced commission at PC Lending.

In a county where the median home price is $642,250, the mortgage salesperson's take-home commission is typically 2 to 4 percent. The county's August home sales were the slowest for any August since 1988, according to DataQuick Information Systems, and lenders are qualifying fewer people for loans. So commissions have dried up.

Brofman does not sell loans or make commission. She draws an annual salary handling her firm's marketing and administrative duties. She agreed to a pay cut in return for a two-day work week when business slowed. Brofman has since returned to work full-time without a pay raise to help keep the firm afloat.

Meanwhile, she's blown through $200,000 in personal savings and amassed $25,000 on her corporate credit card to support a branch office of PC Lending that she and her husband own. The branch, which used to have 16 agents, now has three.

"It used to be that you could come in a few hours a day, enjoy a four-day weekend and make plenty of money," Brofman said. "It's mean to say, but I used to joke that I could get my cat on the phone to sell a loan and a rate: 'Meow, meow, 5 percent.' Done."

Orange County's unemployment rate jumped to 4.2 percent in August from 3.6 a year before, led by losses in the financial services sector. But some economists predict the mortgage industry's job losses won't affect the broader economy in the long term. They say many workers attracted to the mortgage industry have skills that are easier to transfer to other industries than those of manual laborers such as autoworkers. And unlike autoworkers, this workforce is not familiar with the job-for-life concept.

"Many people who took these jobs already had more than one career and exhibited an ability to be flexible," said Diane Swonk, chief economist at the financial services firm Mesirow Financial. "They changed professions to cash in on the housing boom, and they will change professions again because of the housing bust."

Michelle Patterson did exactly that. She left her job at an international recruiting firm about two years ago to join New Century, which filed for bankruptcy protection this year. She took the job while waiting for her non-compete agreement to expire so she could start a recruitment firm.

"I duplicated my earnings and then some," said Patterson, whose job at New Century was to drum up business from mortgage brokers. Around the time New Century's fortunes began to shift, Patterson co-founded the recruiting firm TouchPointe Solutions. Of the 20 people there, about a quarter are from the mortgage industry, she said.

The transition has been rockier for Kelly Markham, who earned $200,000 in commission in 2005 as a loan officer at an Irvine mortgage brokerage. When commissions dried up, she began looking for another job to support her six-month-old baby and hang on to her $600,000 home.

"I've signed up for work at a temp agency, but all I've gotten is five hours of work in the past four weeks stuffing envelopes in some office," said Markham, 34, as she perused Starbucks job listings online one recent afternoon.

Ventimiglio is also struggling to get back on track, although he considers himself lucky because he has enough cash reserves and connections to start his own business. He was offered a lower-level job at Homefield after the 400-person company downsized. But he declined it and left a few months before the firm closed in July. He has formed his own firm, California Mortgage Advisory, to focus on reverse mortgages, an increasingly popular type of loan for elderly homeowners.

He also considers himself prepared because he's been through this before. A Pittsburgh native and the son of an autoworker, Ventimiglio's family suffered through strikes, layoffs and financial struggles familiar to workers in that city's numerous auto and steel plants.

"Out here, there aren't too many who have seen that side of life, where there's no Christmas because Dad's been laid off," Ventimiglio said. "For them, this is emotionally traumatic. Anybody under 40 has not seen a real tough time."

Staff researcher Richard Drezen contributed to this report.

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