Am I Next? Mortgage Bubble?

One of the proximate causes of the 2008 mortgage meltdown and resulting near collapse of the financial industry can be related to the Wall Street Wizards and their need to create additional mortgage products for sale in the secondary marketplace.

Essentially there came a time when the pool of the well-qualified borrowers was satisfied and new originations stagnated. The mortgage industry, in conjunction with key politicians, decided the answer was to loosen the underwriting criteria used for new mortgage applications and refinancing opportunities.

Thus the alt-a marketplace was encouraged until that market stagnated.

Enter the subprime era of the so-called NINJA-loan (No Income, No Job, and no Assets) were required for underwriting. Including zero-down payment schemes or deferrals of fully-amortized “teaser” loans.

The sales pitch was simple, in a rising real estate market, nothing could go wrong and that an increase in home equity could be used to pay off credit cards, take a vacation, or simply let the rise in equity pay-off your loan when you were ready to sell and move on to another property.

And the pattern seems to be repeating itself…

One look at previous blog posts and you can see a number of financial firms downsizing and laying off employees. Part of this is due to increasing automation and self-serving web sites, part due to increasing interest rates, and part due to rising property values and the lack of refinancing activity.

So it should come as no surprise that the industry has responded again with relaxed underwriting criteria, low credit score, little or no down payments, interest rates a little below market, but with the added twist of “borrower education.” Especially community-based organizations who offer the lead generation and educational component while securing funds from tie-ups with major financial institutions.

Consider the programs being offered by NACA, the nonprofit, Boston-based brokerage Neighborhood Assistance Corporation of America, whose educational programs may be back-ended with low-credit score loans, relaxed documentation, and zero-down subprime mortgages that might be just below the advertised (and inflated) market rate.

 Am I Next? Mortgage Meltdown?

And ask yourself, how am I prepared if the unthinkable happens again and there is a significant downturn in the economy? Are you depending on the pundits to explain why this time it is different?

Are you wondering, Am I Next?


 Am I Next? JD Norman lays off 130 and closes Muncie, Indiana factory.

Addison, Illinois-based JD Norman Industries, manufacturer of cast, formed, and machined metal components, has announced that it will be closing its 37,000-square-foot Muncie, Indiana factory facility acquired from Henman Engineering & Machine in January 2016. Approximately 130 employees will be permanently laid off as the production of metal products is shifted to other facilities.

At the time of the original acquisition, company President and CEO Justin D. Norman said, “The vision of JD Norman is to build an organization with world class manufacturing, product leadership, geographic reach and customer diversification. The acquisition of Henman Engineering & Machine moves us closer to this vision. Henman’s product portfolio, plant locations and customers are key additions to our company and a strong strategic fit within our machined metals business unit. Henman Engineering & Machine will be fully integrated within the JD Norman business operating system. We believe our history of integrating acquisitions and operating as one company has best positioned JD Norman to perform for our customer. I am honored to welcome the highly skilled employees of Henman Engineering & Machine to the JD Norman team.”

Because the company’s customers include Tier-1 automotive manufacturers, there is some speculation that an aging facility and cut-backs in the company’s client base may have influenced the timing of this decision.

Are you wondering, Am I Next?


 Am I Next? Aerojet Rocketdyne Layoff - 120 positions in Rancho Cordova, California.

According to Lynn Machon, the Director of Corporate Communications, Sacramento, California-based Aerojet Rocketdyne, the iconic aerospace and defense systems manufacturer of rocket propulsion systems will be eliminating 120 positions in its Rancho Cordova, California facility. The company has filed the requisite WARN (Worker Adjustment and Retraining Notification) notice with the State of California.

“This reduction in workforce is part of what we previously announced publicly in April 2017 as a result of a consolidation of our sites across the country. The majority of these positions are related to manufacturing activities that we will no longer be handling at this site. The company will provide the affected employees outplacement assistance and transition support.”

The handwriting was on the wall since 2016 when the announced that it was moving its corporate headquarters from Rancho Cordova, California to El Segundo, California and suggested that a restructuring would eliminate design and manufacturing jobs that would transferred from Rancho Cordova to other Aerojet Rocketdyne facilities in Huntsville, Alabama and elsewhere. The purpose of relocating the company’s headquarters was to move closer to the company’s major customers and contractors located nearby in Southern California.

Are you wondering, Am I Next?