Experts saw warning signs

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As a record number of Sonoma County homebuyers were signing up for high-risk loans, experts were warning of trouble ahead.

“Fiscal prudence by investors in the market has been completely thrown out the window as they flock to what seems to be the easiest money around. Unfortunately like any pyramid scheme, this one is bound to end, and those that enter last are the ones that are going to be hurt the most.”

UCLA economist Chris Thornberg, interviewed by The Press Democrat on June 21, 2005

“It’s a gamble. And without a doubt we are seeing people cleaning up. But ultimately some people are not going to. As interest rates rise, as they will, people’s monthly mortgage payment rises. If they’re barely making their mortgage payment now, how are they going to afford a few hundred dollars more a month? We currently are preparing ourselves for an onslaught of defaults.”

Erica Sandberg, an adviser for Consumer Credit Counseling Service, interviewed by The Press Democrat on Aug. 7, 2005

“A long list of novel mortgage products are seen as vehicles that enable marginally qualified, highly leveraged borrowers to purchase homes at inflated prices. In the event of widespread cooling in house prices, these borrowers, and the institutions that service them, could be exposed to significant losses.”

Federal Reserve Chairman Alan Greenspan speaking to the American Bankers Association annual convention, September 26, 2005