Ryan Knott knew the end was near. The co-founder and chief executive of FlexPoint Funding, an Irvine (Calif.) mortgage company, saw the funding for his own business disappear last summer, after Wall Street all but stopped buying loans from independent lenders. Knott folded FlexPoint in June. "The chain just fell off the bicycle," he recalls.
But the 36-year-old entrepreneur already had his eyes on a new bike. In August he launched National Home Auction, which runs public auctions of foreclosed property on behalf of big lenders such as Citibank (C), GMAC (GM), and Wachovia (WB). In founding the new business, Knott relied on contacts he'd made during his decade in the mortgage business. He also brought along 10 people from his former company. And once again, business is booming. "Banks are being overrun by the assets coming in," he says.
Plenty of Résumés
Across the country, key players in the real estate boom are adapting to the new reality of the marketplace. Some former mortgage brokers have become credit counselors, trying to help homeowners avoid foreclosure on the loans they previously sold them. Others, like Knott, have started up new real estate-related businesses. On Mar. 24, in one of the highest-profile startups, Stanford Kurland, the former president of Countrywide Financial (CFC), launched a new company, Private National Mortgage Acceptance, or PennyMac, to buy troubled loans from banks.
The latest housing data suggest there will be plenty of loans to buy. On Mar. 25 the widely followed Standard & Poor's/Case-Shiller home price index reported that U.S. home prices fell nearly 11% in January, the steepest decline in the two-decade history of the index. Half of the 20 cities the index follows showed double-digit declines over the past 12 months. Las Vegas and Miami led the way with declines of more than 19% each. The National Association of Realtors (NAR), which tracks its own data, reported on Mar. 24 that the average home price fell 8% in February, to a median of $195,000.
There is also plenty of surplus labor available. Brian Koss, a former New England area regional manager for Countrywide, figures that unemployment rates for the many mortgage-industry workers who specialized in buying and selling big portfolios of loans—what the industry calls its wholesale business—is approaching 70%. "Not a day goes by that I don't get a résumé via e-mail," Koss says. "When the tide goes out you have to feed yourself."