Sunday Read: Where Subprime Lending Began

“We did it here because you had a lot of talent,” said Jon Daurio, an alumnus of Long Beach Savings who co-founded Encore and now runs a company that buys distressed mortgage loans. “You also had the Godfathers of subprime.”

You may not remember Long Beach Savings, but you now know much of the story of what Long Beach Savings has brought forth. Long Beach Savings was one of the first subprime lenders, and in 1997 the company split… And gave birth to Ameriquest, at one time the nation’s largest subprime lender.

Believe it or not, subprime mortgages got their start right here in Orange County. Long before Ameriquest became infamous for its shaky mortgages, outfits like Long Beach Savings were figuring out ways to offer mortgages to people who may have blemishes on their credit reports, but can still be counted upon to pay back the loan. But as soon as these subprime lenders got the attention of Wall Street, things changed. These lenders were no longer just local banks, but national financial players.

So go ahead and read what’s in The Register today. It’ll give you some background on what happened in subprime lending. Who could have ever guessed that one of the biggest economic issues this nation is facing got its start with a few small banks here in OC?

  3 comments for “Sunday Read: Where Subprime Lending Began

  1. Paul Lucas
    December 30, 2007 at 10:54 am

    Can you remember Lincoln Savings and Loan from Irvine and ther guy who ran that institution intot the Ground? His name was Charles Keeting.

    Orange County has a track record of being the setting for boons and busts and the characters and institutions behind them. But then again, Orange County is the place to be. So you your have to expect that a small amount in the least of our local entrepenours are going to be on the shady side and willing to cut some corners without thinking of the consequences.

  2. Andrew Davey
    December 30, 2007 at 11:28 am

    Paul-

    Really??!! I didn’t know that, either. Wow. Who could have guessed that OC would be at the center of so many financial scandals? ;-)

  3. Paul Lucas
    December 30, 2007 at 12:00 pm

    Andrew,
    Orange County is a top tier destination for many in the business world. As such, there are bound to be a few bad apples that come here. That being said, Orange County is the center of some of the most imporatnt and significant technologies, economic centers, ect in the world.

    For example, the World of Warcraft (WoW) was started by a company based in Irvine. These start ups are attarcted tot he area because of world class institutions like UC Irvine for the Biotechnolgy industry, Chapman University for Business, Cal State Fullerton for tech and trades, etc etc.

    The local environment such as our beaches, mountains for hiking, local climate, and high standard of living attract leading companies in order to attract the best and brightest in their respective fields.

    Out of all this, youre bound to come across a few Cahrles Keetings in the world. Subprime Mortgage lending wich may have started as a local cottage industry, has mushroomed across the country because atthe time Im sure it was an inovative and viable technique at the time.

    But the recent sub-prime meltdown shows that too much of a good thing can have negative consequences.

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