SCOTT SIMON, Host:
NPR's Chris Arnold reports.
CHRIS ARNORLD: John Challenger tracks job losses at his consulting firm, Challenger, Gray & Christmas.
JOHN CHALLENGER: This situation is like the airline's industry back after 9/11 that laid off many people, almost a hundred thousand very quickly. It's also like the dot-com collapse, in fact, probably in longer term more like that situation.
ARNOLD: In this case, economists say the layoffs and turmoil are the hangover from an unprecedented lending binge. Along with the historic housing boom came a breakdown in standards. Lenders often never checked people's W2s or other income documents. And the terms of adjustable rate loans were often extreme. Many of these unorthodox loans are now adjusting up sharply to 10 or 11 percents or higher.
CHALLENGER: Things got way out of hand. In retrospect, that's so easy to see that they - loans shouldn't have been made, we shouldn't have seen this run-up, but now we're paying the price of that.
ARNOLD: With home prices falling in many places, a lot of borrowers haven't been able to refinance out of their adjustable rate loans. And record numbers are going into foreclosure. That's roiled the credit markets and it's still unclear just how widespread the problems are.
CHALLENGER: As the credit crunch broke out in early August, all of a sudden, this crazy mortgage arms and no-doc loans began to unravel. And as that happened, it led these companies to lose their access to the money, the capital they needed to finance those mortgages.
ARNOLD: Some working in the industry have been surprised by how quickly the bottom fell out.
AMY WALTZ: I was pretty openmouthed, stammering, flabbergasted.
ARNOLD: Waltz describes what it was like working inside the industry during the subprime lending craze when lenders were loaning people the full value of the house with no money down.
WALTZ: You know, they were making loans at 100 percent where you didn't have to verify income or assets. You know, this was easy money. You know, if you're breathing, we can make you a loan. I mean, heck, you could have been a bartender and brokered loans(ph).
ARNOLD: Chris Arnold, NPR News. Transcript provided by NPR, Copyright NPR.
