Fieldstone blames upheaval in the credit markets for its shutdown in bankruptcy filings.
Fieldstone's fall was a surprise to some. Industry analysts regarded the company as more conservative than some of its freewheeling competitors, and the company regularly emphasized what it characterized as rigorous quality control mechanisms. In presentations to Wall Street investors in recent years, executives described the company as the "hardest place to deliver a bad loan."
Even the South Street program had a safety valve: Borrowers needed a hefty down payment. If they defaulted, Fieldstone would be more likely to recover its money in a foreclosure.
But as easy credit flowed and subprime loans grew to account for one-fifth of the market, Fieldstone got caught in the industry's race to the bottom despite signs of trouble, according to former employees. And when the industry collapsed, Fieldstone went with it.
"They were trying to keep up with competitors," said Betty Williams, a former assistant vice president of credit administration at Fieldstone. "Everyone wanted to get into the mortgage industry, just like everyone wanted to get into the computer industry five years earlier. Fieldstone started a lot of new programs to keep up."
Housing bubble
Fieldstone went public in 2005 after 10 years in business and in the midst of a housing bubble that resembled the dot-com craze of the late 1990s. Home sales reached an all-time peak that year and housing prices posted the largest-ever gain, when adjusted for inflation.
After losing money for several years while investing in more workers and facilities to establish a nationwide footprint, Fieldstone saw its profit double in 2002 and 2003. It doubled again in the next two years to about $100 million.
Executives had crafted a new business plan under which they no longer sold all the mortgages they originated but kept a portfolio of subprime loans and financed them by issuing mortgage-backed securities secured by the loans. They sold the first batch of securities for $488 million in October 2003. In a year, the company had sold more than $4 billion of the securities.
Sonnenfeld rang the opening bell at the Nasdaq stock market the month after the stock's debut. The digital sign overlooking New York's Times Square displayed the Fieldstone logo.
