Careers vanish after subprime 'free fall'
Kent and Mysti Cope were well-paid executives at subprime lenders who never thought the industry could disappear overnight. Now they're just trying to get by.
SAN CLEMENTE, Calif. (CNNMoney.com) -- Kent and Mysti Cope met and fell in love working for one of the nation's top subprime lenders. Now, their life has been turned upside down after the sudden implosion of the subprime mortgage industry.
Mysti was one of the last people out the door at New Century Financial, once the nation's No. 2 subprime lender. She had been in charge of e-commerce customer service with dozens of employees reporting to her. It was at New Century where the Copes met in 2000.
Kent worked for several of the firms that helped give birth to the industry, which specializes in making loans to people with less-than-perfect credit, in the 1990s. He has been out of work since August when he was laid off by Friedman, Billings, Ramsey Group (FBR) unit First NLC Financial Services.
"We're still both in shock that it could go from something so good to so bad so quick," said Kent, 59. "New Century in 60 days went from top of the heap to out of business."
The two didn't say exactly how much money they made at their last jobs but Kent admitted they each had six-figure incomes.
Today, they're trying to get by on his unemployment benefits of about $450 a week, which covers only about an eighth of the basic payments they owe every month.
Only $1,800 to cover $10,000 in bills
Their home equity line, mortgage, health and life insurance premiums alone cost about $10,000 a month. Still, they are trying to hang onto what they call their dream home with a view of the Pacific Ocean where they live with Mysti's 11-year old son.
Kent estimates the mountainside home in San Clemente, Calif., which they bought in 2005, is worth 20% less than it was a year ago. And in the current market, he said he's not sure he could sell it for even that amount.
"We've used up most of our reserves, cashed in her 401K," said Kent. "We're going Mach 1 into a wall. When we run into it, then we've got to decide what to do next."
Despite their financial problems, the Copes have worked hard to protect their credit rating, staying current on bills. And they've made cutbacks: trading in Kent's Corvette for a Suburban and getting rid of the gardener, for example. But the couple also has learned that it didn't need everything it used to spend money on.
"We used to eat out a lot. Now we are the leftover king and queen," said Kent.
Since he lost his job, Kent has gotten a real estate license and is trying to start a business selling the rapidly increasing inventory of foreclosed homes in Orange County, Calif. Mysti is trying to build an online business selling jewelry and beachwear, some of which she designs herself.
"Is it scary? Yeah," said Kent. "How long do you have to hold on before it starts to turn around? If anything, that piece of it is the most unnerving for us."
For Mysti, 37, all her efforts to find work since she lost her job last May have been futile. She said she believes the attention given to subprime borrowers who have run into trouble paying their mortgages work against her and other former colleagues. It's almost like having "Enron" on your resume.
"The media has somewhat tarnished the subprime industry and all the employees, and portrayed them as being dishonest," she said. "We're not dishonest. Not everybody was a bad borrower. Not every company was a bad lender."
Hopes of hanging on to jobs quickly dashed
Mysti said she and many other employees who survived the early rounds of layoffs at New Century thought they'd be able to ride out the bad times even after the firm stopped taking new mortgage applications in March of last year and filed for bankruptcy in April.
"We were New Century. We were a large corporation. We were the No. 2 subprime lender in the industry," she recalled. "You figured someone would come in and want to invest and take it over."
But the potential buyers soon disappeared as did the remaining jobs. She and her co-workers got word on May 3 that they were being laid off, effective the next day.
Kent's story is similar. Throughout last summer, he tried to keep up the morale of the 150 sales people he had reporting to him. Friedman Billings had a deal to sell First NLC Financial Services to Sun Capital Partners, the private capital firm that had sold it to them only two years before. So there was hope. Or so he thought.
"We knew we're going to lose money, we were just going to try to not hemorrhage," he said. "That's the message we all had to deliver to our troops -- Sun Capital is going to come in, they're behind us, they wouldn't be buying us if they didn't think we could ride out the storm," Kent recalled.
But by August it was apparent that deal was no longer going to happen, and he too was laid off.
For some, getting laid-off is better than still working
The Copes are just two of many in Orange County, formerly the center of the nation's subprime lending industry, now trying to move on. Nearly 9,000 jobs have been lost there in the past year, with more than 4,000 alone in Irvine, where New Century was based.
But the damage extends far beyond those like the Copes who lost their jobs.
"You can't run into someone who isn't impacted by what's going on," said Kent. "It's very expensive to live in Orange County, and you pay a lot for your home and you can't get what it's worth now."
Some of their former colleagues found jobs with other lenders, only to get laid off again when those firms closed up. Kent said some of the sales people he knows who still have jobs are actually the worst off.
"They may be employed by a company for months and months, but they can't close a deal," he said. "They've got the borrowers, but unless that thing is pure gold, it isn't made. It's a commission business. They're to the point frankly where they would rather get laid-off so they can go collect unemployment than be employed and make no money."
The subprime industry in Orange County was a close-knit close cluster of lenders. The industry rapidly expanded as executives at one firm would strike out on their own and setup shop nearby. But the industry fell apart even more quickly.
The Copes and their colleagues tracked the collapse through rumors and Web sites, such as lenderimplode.com.
"You kept looking everyday to see if your company was on there or not," said Kent. "It seemed like every day there was a company going under."