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<a href="http://money.cnn.com/2008/03/27/news/economy/irvine_subprime/index.htm?postversion=2008032714">Welcome to subprime's ghost town</a>
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.
By Chris Isidore, CNNMoney.com senior writer
Last Updated: March 27, 2008: 3:23 PM EDT
IRVINE, Calif. (CNNMoney.com) -- The subprime mortgage meltdown has shaken the entire U.S. economy. <strong>But nowhere might the impact be as stark as Irvine, California, </strong>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, <strong>4,100 good-paying white collar jobs were gone, or roughly 2% of the city's work force.</strong>
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."
<strong>Many of those who worked in the industry, top executives who had hundreds of people reporting to them, are still struggling to get by.</strong>
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 <strong>9,000 subprime jobs were gone from Orange County</strong>. 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 <strong>one hotel in town has lost $1 million in annual bookings</strong> 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. <strong>The Chamber of Commerce estimates that 20% of the city's Class A office space is empty, a record high.</strong>
"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. To top of page
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.
By Chris Isidore, CNNMoney.com senior writer
Last Updated: March 27, 2008: 3:23 PM EDT
IRVINE, Calif. (CNNMoney.com) -- The subprime mortgage meltdown has shaken the entire U.S. economy. <strong>But nowhere might the impact be as stark as Irvine, California, </strong>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, <strong>4,100 good-paying white collar jobs were gone, or roughly 2% of the city's work force.</strong>
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."
<strong>Many of those who worked in the industry, top executives who had hundreds of people reporting to them, are still struggling to get by.</strong>
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 <strong>9,000 subprime jobs were gone from Orange County</strong>. 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 <strong>one hotel in town has lost $1 million in annual bookings</strong> 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. <strong>The Chamber of Commerce estimates that 20% of the city's Class A office space is empty, a record high.</strong>
"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. To top of page
