So you want to know why there is a subprime crisis

Lax lending standards, that is why there is a subprime crisis. Lenders ignored risks, and concentrated on increasing volumes.

(THE ORANGE COUNTY REGISTER )Just five years ago he was selling cars. Then, in January 2002, he anted up $250 for a state lender license and started selling home loans through his company, Quick Loan Funding. Over the next five years, Quick Loan wrote $3.8 billion in mortgages, lending money fast – and often on onerous terms – to people with shaky credit.

Boosted by high fees and interest rates – high even for the subprime industry – Quick Loan's after-tax profits averaged 29 percent of revenue. In 2005, Quick Loan's biggest year, profit topped $37 million. Sadek used the earnings to live the high life, buying a fleet of Ferraris, Lamborghinis and Porsches, dating a soap opera starlet and producing movies. He flew private jets to Las Vegas, where he gambled with high rollers at the Bellagio Resort.

He cultivated a rebel image, wearing a beard and hair to his shoulders, dressing in T-shirts and flip-flops, eschewing the typical mortgage banker's pinstripes. "How many thieves are wearing a suit?" he asks, sitting in the kitchen of his $4 million Newport Coast mansion.

Quick Loan Funding's name still crowns a Costa Mesa office tower. But Sadek, like the subprime lending industry, is holding a bad hand. His staff, once 700 strong, has shriveled to about 125. Monthly loan volume plunged to $30 million from a record $218 million in December 2005.

"I've sold all my cars to keep the company going," says Sadek, 38. "Every property I own is mortgaged to the max." Sadek is more than a poster child for the riches produced in the Orange County-centered subprime industry. His career arc shows how:

In California, almost anyone could open a lending business. It's harder to get a barber's license. Subprime lenders reaped billions in profits by charging high fees and interest rates. For the most part, these practices are legal. Borrowers often either misunderstood, were misinformed or simply paid no attention to the loan terms. Thousands would lose their homes.
State oversight is almost non-existent, with 58 examiners to oversee 5,000 lenders, some doing billions in business. Quick Loan has been accused of predatory lending, deceptive underwriting and fraud in at least eight lawsuits. In addition, Department of Corporations records show 33 complaints against Quick Loan, most alleging unfair business practices. Most of the lawsuits were settled out of court. And state regulators have never disciplined Quick Loan.

Sadek denies that Quick Loan ever broke the law or engaged in unfair business practices.

"I work very hard to do the best I can, to keep the mortgage company as clean as possible," he says. "Simple as that. I can't say it to you any better."