Welcome to subprime's ghost town

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.

EMAIL  |   PRINT  |   SHARE  |   RSS
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Chris Isidore, CNNMoney.com senior writer

America's Money: In their own words America's Money: In their own words America's Money: In their own words
Everyday folks tell their stories about hard economic times. Check back frequently for new stories.
Mortgage Rates
30 yr fixed 3.80%
15 yr fixed 3.20%
5/1 ARM 3.84%
30 yr refi 3.82%
15 yr refi 3.20%

Find personalized rates:

Rates provided by Bankrate.com.

IRVINE, Calif. (CNNMoney.com) -- The subprime mortgage meltdown has shaken the entire U.S. economy. But nowhere might the impact be as stark as Irvine, California, 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, 4,100 good-paying white collar jobs were gone, or roughly 2% of the city's work force.

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), 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."

Many of those who worked in the industry, top executives who had hundreds of people reporting to them, are still struggling to get by.

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 9,000 subprime jobs were gone from Orange County. 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 one hotel in town has lost $1 million in annual bookings 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. The Chamber of Commerce estimates that 20% of the city's Class A office space is empty, a record high.

"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

They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.