I have to shake my head when I see articles, such as this one in the New York Times, that detail the mortgage industry crisis. It's as if no one remembers the mortgage industry collapse of the early 1990s. I had a front row seat for that one, and it is just like what is happening now.

Back in the late 1980s the mortgage process was still paper driven. Very few companies had remote IT solutions for handling the origination portion of the mortgage process. I worked for Citicorp Mortgage, which is was doing very well at the time. We debuted an online origination system called Mortgage Power Plus. It was a very slick process for the day. We could literally load it on a sales associate's laptop and they would be able to originate loans anywhere with a modem connection.

We would get customers coming and going. They would originate with us and we would keep the servicing, so we made money twice.

This went well for a year or so, but then the real estate industry experienced a let down. It was led by a complete collapse of the Northeast real estate market. We probably could have weathered the storm, but there was a problem with our originations.

As we all found out later there were two problems with our origination process:

Sales associates were paid commissions prior to the loan finalizing. I don't recall the particulars, but a sales associate would collect their commission prior to the loan making it through the originations pipeline. This meant that sales associates had an extra incentive to push bad mortgages.

No doc loans. Again, I am trying to recall, but I think we came up with the no doc or low doc approach to mortgages. This meant you didn't need the mountain of paperwork usually required. This led to the saying, "If you show up in a tie, we'll give you a mortgage." It also led to fraud, the best example of which is the four mortgages on one warehouse. We originated loans for each street address the warehouse faced. 

As you can imagine the rest of Citicorp was going through tough times, and our issues just compounded the problems. Our stock crashed to less than $5 dollars and the layoffs happened. It was the first time I went through the layoff process, which is where I learned it was pretty much arbitrary. We lost over half our team members in the course of two months.

An interesting sidenote ... I remember Joe Cooper from the above article. He was extremely proud of his Corvette; it was yellow if I recall.

So, I am surprised the media hasn't delved deeper into the similarities between the two mortgage crashes. It is true that history tends to repeat itself.