Tuesday, May 22, 2007

MEWPEE: It's Not Just For Ferraris Any More

by Tanta on 5/22/2007 11:25:00 AM

You will not find the term "MEWPEE" in serious literature published by the Federal Reserve, more's the pity. I just made it up. It stands for Mortgage Equity Withdrawal Profit Extraction Expenditures.

From the OC Register via commenter Curious:

Daniel Sadek played Orange County's subprime lending boom like a card shark dealt the ace and jack of spades.

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. . . .

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."

Thus MEW creates MEWPEE which converts to MEW, which suggests we need a term for the financial position of whoever mortgaged every property Sadek owns. Go for it.