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outfits that found customers, advised them on which types of loans were available, and collected fees for handling the initial processing of the mortgages. Brokers favored lenders like New Century that made loans quickly, and didn’t always insist on the most accurate appraisals.
    A revolution in home buying was under way: The same borrowers who once saw banks turn up their noses at them now found it easy to borrow money for a home. With immigrants rushing into Southern California, and those with heavy debt or limited or dented credit history trying to keep up with rising home prices, Morrice and his partners enjoyed a gold rush.
    As profits rolled in, New Century’s executives chose a black-glass tower in Irvine, California, as their headquarters, and treated their sales force of two thousand to chartered cruises in the Bahamas. Later, they held a bash in a train station in Barcelona and offered top mortgage producers trips to a Porsche driving school. A “culture of excess” was created, says a former computer specialist at the company.
    Lenders like New Century relaxed their lending standards, a sharp break with past norms in the business. Regulators gave New Century and its rivals leeway, and New Century became the nation’s second-largest subprime lender, competing head-to-head with older rivals like Countrywide and HSBC Holdings PLC. Wall Street was impressed; David Einhorn, a hedge-fund investor with a stellar record, became a big shareholder and joined the company’s board of directors.
    By 2005, almost 30 percent of New Century’s loans were interest-only, requiring borrowers to initially pay only the interest part of the mortgage, rather than principal plus interest. But such loans exposed borrowers to drastic payment hikes when the principal came due. Moreover, more than 40 percent of New Century’s mortgages were based on the borrowers’ stated income, with no documentation required.
    Some employees, like Karen Waheed, began having qualms about whether customers would be able to make their payments. She worried that some colleagues weren’t following the company’s rule that borrowers had to have at least $1,000 in income left over each month, after paying the mortgage and taxes.
    “It got to a point where I literally got sick to my stomach,” she recalls. “Every day I got home and would think to myself, I helped set someone up for failure.” 7
    By 2005, “nonprime” mortgages made up nearly 25 percent of loans in the country, up from 1 percent a decade earlier. One-third of new mortgages and home-equity loans were interest-only, up from less than 1 percent in 2000, while 43 percent of first-time home buyers put no money down at all.
    Rather than rein it all in, regulators gave the market encouragement, thrilled that a record 69 percent of Americans owned their own homes, up from 64 percent a decade earlier. In a 2004 speech, Federal Reserve chairman Alan Greenspan said that borrowers would benefit from using adjustable-rate mortgages, which had seemed risky to some, and were a type of loan the Bank of England was campaigning against. Greenspan clarified his comments eight days later, saying he wasn’t disparaging more conservative, fixed-rate mortgages, but his comments were interpreted as a sign that he was unconcerned with the housing market. In the fall of 2004, Greenspan told an annual convention of community bankers that “a national severe price distortion seems most unlikely.”
    The Fed also chose not to crack down on the growing subprime-lending industry, even as some home loans were signed on the hoods of cars. In many states, electricians and beauticians were given more scrutiny and training than those hawking mortgages. Several years later, Greenspan said, “I did not forecast a significant decline because we had never had a significant decline in prices.”
    Lenders ramped up their activity only because a pipeline of cash was pumping hard, dumping money right in front of their