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...included ominous reports from the West Coast. Led by an astonishing 799% rise in Los Angeles County, foreclosures in southern California jumped 725% in the second quarter, to a record 9,504, from 1,152 a year ago. The spectacularly bad trend was coupled with news from mega-mortgage lender Countrywide Financial that homeowners with good credit are starting to fall behind on mortgage payments. It has all contributed to a contagiously pessimistic mood. "We thought the upper end of the market was immune," says Steve Johnson, of real estate consulting firm Metrostudy. "But this is now like kudzu...
...seems to me they're paying a lot more than they need to," he says. That's a fine principle. But the reality is that most people still want a 30-year mortgage. So this spring, ING Direct started referring people who insist on one to an outside mortgage lender. "We're probably 90% pure," says Kuhlmann. "Not as pure as I'd like to be." But much better, he supposes, than the alternative. [This article contains charts. Please see hardcopy or pdf.] VIRTUAL BANK, REAL MONEY...
...slipper company hired the team as consultants in January 2004. At that time, the bank wanted two things: another lender and a plan to make Barry profitable within the year. Good and the bankers traveled to Mexico to tour the company's factories and warehouses. They were aghast to see three plants running full throttle in January while the warehouses were bursting with 12 million pairs of slippers. Whoops. Asked to explain, the operations manager declared that inventory was not his responsibility. The bank called in the loan, giving the company five weeks...
Good and Von Lehman now had that much time to come up with a plan to save the company and persuade a lender to advance $1 million a week to keep it afloat. The plan they presented to the board was radical. "We were changing where the product was made, where it was stored and who it was sold to," Von Lehman notes. Among the changes: transfer manufacturing and storage from Mexico to lower-cost China, update marketing, reduce the number of styles and customers, and dump millions of outdated inventory. In addition, the team recommended consolidating company functions...
With Von Lehman installed, the bank agreed to extend the loan to the end of March. That still didn't leave Good much time. "We needed to find a lender with a lot to gain," she explains. "That meant either a high-risk lender at 16% to 17% or a lender who would get more than interest." By the end of March she had finalized a short-term factoring deal with CIT, agreeing to pay 200 basis points above prime and 0.75% of Barry's receivables...