[...]... rechecked appraisals as the loans came in the door Arnall didn’t see the point “I don’t think we need all these appraisers,” he told Schuerman The internal quality-control watchdogs were caught between Arnall at the top and the sales force below The salespeople were men and women who’d mostly learned the loan business at Transamerica and other rough-and-ready consumer-finance shops The watchdogs fought... on the lookout for ways to put their creative financing skills to use, told Jedinak and Lopez they could put together a mortgage-backed bond deal with Guardian’s high-interest loans Mark Schuerman and the other Long Beachers began sifting through loan files at Guardian’s headquarters in December 1987, looking for home-loan deals they’d be willing to take as part of the residential-mortgages-for-commercial-mortgages... owned their houses free and clear, or sold them one by one or in groups on the “secondary market” to investors, who took over the right to collect on the loans This tended to limit the ability of lenders to increase their loan volume They either had to entice customers to deposit savings in the bank to bankroll loans, or they had to go through the paperwork-heavy process of selling loans on the secondary... getting them to take out a new loan before they had paid off the balance on the old one After rolling over customers’ small-scale loans a few times, the finance company often talked them into transferring the escalating debt into a new mortgage against their homes One industry analyst dubbed this process “moving up the food chain.” Consumer lawyers who spent their days suing the companies had another... grade to the securities, investors could get a prediction of expected returns without having to investigate whether each borrower or each lender was on the up-and-up Mortgage-backed securities had first emerged in the 1970s, under the aegis of Ginnie Mae and Fannie Mae, two government-sponsored enterprises created to increase homeownership Then Salomon Brothers, the Wall Street firm immortalized in Michael. .. three years of making B-firsts Long Beach was especially good at wooing the mortgage brokers who brought in the loans It courted brokers with golf outings and coached them on the new push for B-loans Brokers were used to the dowdy A-loans market, a cookie cutter business where the prices were uniform and borrowers either qualified or didn’t B-loans were more labor-intensive because the borrowers’ credit... Wonderful Life The seeds of the destruction of the old building and loan model had been planted in the 1960s Congress had tried to limit the interest rates that thrifts charged homeowners in a roundabout manner, by limiting how much interest they paid to their depositors If S&Ls didn’t have to pay high rates to their depositors, the thinking went, they wouldn’t charge high rates to their borrowers By the late... numbers of years They looked forward to the day when they had paid off their mortgages and owned their homes free and clear Some families held mortgage-burning parties after they’d made the final payment on their house notes The idea of borrowing against the family homestead—taking cash out with a second mortgage—was considered vaguely disreputable, an act of desperation or irresponsibility The second mortgage... another recalled “After that you ended up talking to Becky, who was very attractive but had the warmth of a porcupine.” She liked to say, “I worry about the pennies, and the dollars take care of themselves.” Like Roland Arnall, the Jedinaks started their S&L in the early ’80s in order to finance real-estate development plans That changed when they hired Jude Lopez, an experienced hand in the Southern... Financial, might carry 10 up-front points on top of interest rates of 15 to 18 percent Such price tags allowed the lenders to say, with a straight face, that they were doing customers a favor: they were providing a lower-cost alternative to the hard-money crowd Consumer-finance companies had traditionally focused on making small personal loans By the ’80s they had moved into the home-equity market, often . and saw a coworker do something odd. The guy stood at his desk on the twenty-third floor of downtown Los Angeles’s Union Bank Building. He placed two sheets of paper against the window. Then he. names. It was the new way of Wall Street. The loan on Carolyn Pittman’s one-story house in Atlantic Beach was now part of the great global mortgage machine. It helped swell the portfolios of big-time. consent across the entire stack, and gone home, it was easy enough to peel the fixed-rate documents off the top and throw them in the trash. At the downtown L.A. branch, some of Glover’s coworkers had