{"id":55156,"date":"2011-08-05T23:52:12","date_gmt":"2011-08-06T03:52:12","guid":{"rendered":"https:\/\/friendburst.com\/blog-new\/55156\/began\/"},"modified":"2011-08-05T23:52:12","modified_gmt":"2011-08-06T03:52:12","slug":"began","status":"publish","type":"post","link":"https:\/\/friendburst.com\/blog-new\/55156\/began\/","title":{"rendered":"I Was There When It All Began"},"content":{"rendered":"

\"\"I was there when it all started.\u00a0 It was the autumn of 2006.\u00a0 I was working as a subprime loan officer with the nation\u2019s largest mortgage lender, Countrywide Home Loans.\u00a0 I was working on a deal to refinance multiple rental properties in California\u2019s Central Valley that belonged to the personal friend of one of my referral sources.\u00a0 It was an important deal and could have netted me quite a bit of money.<\/font><\/p>\n

Then, the appraisals came back.\u00a0 The values of these\u00a0 properties were not only less than we had expected them to be, but they were less than what even a conservative valuation would have assessed them at just a couple months prior.<\/font><\/p>\n

The values of these properties had actually decreased<\/strong><\/em>.\u00a0 This was unheard of and shocking.\u00a0 It was also big news at my office.\u00a0 I remembered asking my boss a couple months before that as we looked at where our business was going in relation to potential levels of increase in property values.\u00a0 We were coming out of two consecutive years where values had increased by 25% per year; none of us really thought it would continue at that rate.\"\" We were thinking values would increase at an annual 5 to 6% rate, as they had historically over the previous 30 years.\u00a0\u00a0 \u201cWhat happens if property values actually go down?\u201d\u00a0 I asked my boss, a professional veteran of many years in the business.<\/p>\n

\u201cWell,\u201d she responded stoically, \u201cthen we starve.\u201d<\/p>\n

If you didn\u2019t catch last week\u2019s episode of NOVA on PBS, it\u2019s worth trying to catch the repeat.\u00a0 It was all about bubbles and the effects of emotions on markets, as opposed to the rational actor model that has been the underpinning of the science of economics for 200 years.\u00a0 In the times when the works of John Maynard Keynes, \"\"who posited 70 years ago that markets are NOT always rational, that their flaws can destroy an economy without being regulated for the public good, i.e., the government,\u00a0 are being attacked, let us not forget what just happened a couple years ago.<\/p>\n

Standard and Poors gave high ratings to subprime mortgage derivatives as a safe investment, and when this turned out not the be true, the stock market lost 40% of its value in one day, our economy teetered on the edge of collapse and we fell into the Great Recession that we are still struggling to emerge from.<\/p>\n

What happened?\u00a0 The bubble burst.\u00a0 Some saw it coming.\u00a0 Standard and Poors didn\u2019t.\u00a0 This company made some assertions today about our nation\u2019s creditworthiness.\u00a0 Keep in mind their recent failings when we consider the significance of this.<\/p>\n

Back in the mid 2000\u2019s, we in the mortgage business in California worked hard to try and help middle class families, say, making $100K per year as a household, qualify for the loans that would make it possible for them to fulfill the basic desire to buy a home.\u00a0 It was obvious to me anyways that when the average family cannot afford to buy the average home because that average home costs half a million dollars, that situation is not tenable.<\/p>\n

There I was looking at these appraisals showing, for the first time in decades, a decreasing property value market, I didn\u2019t realize I was holding the beginning of the financial mess we\u2019ve found ourselves in for the last 4 years or so.<\/p>\n

Over the next few weeks, more and more appraisals from the Central Valley started coming in short.\u00a0 This phenomenon had not yet migrated down into the SF Bay Area where most of our business was, but it was just a matter of time.\u00a0 Las Vegas.\u00a0 Florida.\u00a0 San Diego.\u00a0 These had been the fastest growing markets in the country, and they became in \u201806-07, the fastest decreasing.\u00a0 By the time I left the business in the Spring of \u201807, I was closing quite a few deals in Mississippi, because it was the last place in the country where property values were still increasing.\u00a0 Ooo\u2026 Your house went from being worth $50K to $55K\u2026 these weren\u2019t huge deals.<\/p>\n

<\/font><\/p>\n

Looking at these appraisals, I remember really feeling bad because the deals that I were working on were now going to be impossible.\u00a0 This meant I wasn;t going to get paid, but my referral source would for whatever reason, blame ME for these light appraisals.\u00a0 He was going to have to go to the property owner and tell him what no one wants to hear: “What you own isn’t worth as much as you thought”.\u00a0 We didn’t realize at the time that what these appraisals REALLY meant was “your property is now beginning a huge slide which will effect everyone in the country and cause major trauma in the global economy.” <\/font><\/p>\n

\"\"I was there when it all started in California’s Central Valley.\u00a0 I saw the first slip in value that eventually became a landslide. I was holding the opening of the Gates Of Hell in my hands in that appraisal.\u00a0 I had no idea.
\n<\/font><\/p>\n

I was only a loan officer for a couple years, but they were the most important years, in the most important segment (subprime), in the history of US banking.\u00a0 What I occasionally think of as a weird sidestep in my career as an appliance salesman was actually an opportunity to witness history. <\/font><\/p>\n


\n<\/font><\/p>\n

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I was there when it all started.\u00a0 It was the autumn of 2006.\u00a0 I was working as a subprime loan officer with the nation\u2019s largest mortgage lender, Countrywide Home Loans.\u00a0 I was working on a deal to refinance multiple rental properties in California\u2019s Central Valley that belonged to the personal friend of one of my […]<\/p>\n","protected":false},"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[15,17,1428],"tags":[895,81,3992],"class_list":["post-55156","post","type-post","status-publish","format-standard","hentry","category-business","category-home","category-politics-2","tag-business-2","tag-joko","tag-mortgage"],"_links":{"self":[{"href":"https:\/\/friendburst.com\/blog-new\/wp-json\/wp\/v2\/posts\/55156","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/friendburst.com\/blog-new\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/friendburst.com\/blog-new\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/friendburst.com\/blog-new\/wp-json\/wp\/v2\/comments?post=55156"}],"version-history":[{"count":0,"href":"https:\/\/friendburst.com\/blog-new\/wp-json\/wp\/v2\/posts\/55156\/revisions"}],"wp:attachment":[{"href":"https:\/\/friendburst.com\/blog-new\/wp-json\/wp\/v2\/media?parent=55156"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/friendburst.com\/blog-new\/wp-json\/wp\/v2\/categories?post=55156"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/friendburst.com\/blog-new\/wp-json\/wp\/v2\/tags?post=55156"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}