LITHIA — Jeff Schaefer has yet to get approval to sell Lotto tickets in his soon-to-open 7-Eleven. But the man from the Florida Lottery already has some advice.
"Rather than tuck the play table behind the Pepsi dispenser,'' he says, "you might want to put it over here.''
"What's a play table?'' Schaefer asks.
It's the desk where lottery fans pencil in the numbers on their play slips. The lingo is new to Schaefer, but with or without the Lotto he is a lucky man.
A year ago this month, his former employer, Lehman Brothers, declared bankruptcy, triggering a financial crisis that nearly crippled the global economy. But Schaefer, a top executive in Lehman's loan subsidiary, had been laid off months before as demand slacked for the company's risky mortgage-backed securities.
His departure turned out to be a blessing. He used some of his severance to move his family from Colorado to eastern Hillsborough County, where he bought a car wash and a Mobil gas station. He also bought a 4.500-square-foot house in nearby FishHawk Ranch, voted Tampa Bay's best new home community.
Its spectacular growth was spurred in part by the same type of subprime loans that Schaefer and his team once helped Lehman Brothers package into securities.
Today, the effects of the real estate bust and panic of '08 remain very much in evidence. Most of Schaefer's customers have seen their homes plunge in value. Nearly 300 of the 3,750 houses in FishHawk Ranch are in foreclosure, including some purchased at the peak of the boom with 100 percent financing from Lehman.
But even in a recession, Americans drive. Schaefer's career change has worked out so well that he recently closed on two more gas stations. The people he comes across these days know him only as the tall, friendly, bearded guy they see at the Mobil place on Fishhawk Boulevard or the Splash Car Wash with its Ladies Day specials.
If anyone asks, he doesn't volunteer much except that he used to work for Wall Street.
"Most people say, 'Oh, you got out at the right time.' ''
No regrets on risk
Schaefer's 25 years in corporate banking took him from Atlanta to Chicago to Dallas to Jacksonville to Littleton, Colo., where he landed in 2001 at Lehman's Aurora Loan Services.
As executive vice president, he supervised 400 employees who worked with banks and mortgage brokers to procure loans that Lehman could package into securities and sell to investors hungry for big returns. Lehman funded some of the loans itself and bought others, but many had a common feature — the borrowers weren't required to document their income.
These "no-doc'' loans would later get part of the blame for the subprime loan debacle. But Schaefer defends the process used to make them.
"A lot of it was risk based on FICO (credit) scores," he says. "While you may have had no-doc loans, people had very high credit scores, which are based on the ability to pay their debt. And because they have been paying, the income they stated is reasonable.''
Schaefer was in daily contact with Lehman's New York trading desk and traveled two or three times a month to its global headquarters in lower Manhattan. Back in Colorado, employees traded their casual garb for coat and tie, reflecting their pride in working for one of the world's venerable financial institutions.
"We bled green,'' Schaefer says, referring to Lehman's corporate color. "We loved Lehman, we loved the culture, we loved the people.''
By 2007, Schaefer had begun to wonder whether real estate prices could sustain their torrid growth. But he thought Aurora Loan Services would continue to expand because it had a small market share compared to giant lenders like Washington Mutual and Countrywide.
As housing prices cooled, though, borrowers began to default on their loans, depressing the value of Lehman's mortgage-backed securities. In early 2008, Schaefer was among hundreds of employees laid off.
"After a couple of months sitting around I figured I could either do something or burn through a lot of cash until the market came back. Finally my wife said, 'What are you going to do?' I said, 'I'm going to buy something. Tell me someplace you'd like to live.' ''
Carol Schaefer, who had two sisters in Florida, suggested the Tampa Bay area. Her husband looked for a business that was easy to run, generated a good cash flow and was somewhat recession-proof. A car wash seemed ideal.
"It's relatively simple — soap and water — and people need to get their cars washed. When was the last time you saw a car wash out of business?''
Though happy with his purchase, he missed the fast pace of his old job, even the stress and pressure. It was "kind of in the DNA,'' as he puts it.
Last September, Schaefer's attention turned from his own business to the nail-biting drama to save Lehman Brothers, whose securities and stock were plummeting in value. He and former co-workers were in constant touch as federal regulators tried to find a buyer for the company and debated whether to bail it out as a last resort.
On Sept. 15, 2008, rescue efforts failed. After 158 years in business, Lehman filed the biggest bankruptcy in history. All the money Schaefer had in company stock was gone.
"It was a large number,'' he says.
Schaefer thinks it was a mistake to let Lehman fail even though the shock of its collapse galvanized Congress into authorizing $700 billion to shore up other financial institutions. He faults Washington for not investigating whether short-selling — betting that stock prices will drop — helped trigger the financial crisis by artificially devaluing Lehman and other companies.
And he still feels that Lehman and Aurora were providing a service for consumers at a time when the federal government was encouraging home ownership.
"People blame Wall Street for what's happening and that really upsets me. It wasn't Wall Street that made up all these loans by themselves. There was loads of supervision and checks and balances by third parties. There was a need and there was a market for these loans.''
Still his customers
Though he has been approached by headhunters about returning to the financial services field, the 51-year-old Schaefer is staying put for now. He has a son at Clemson, majoring in business, and a daughter in high school.
Besides, he has already sold his Colorado house at a loss. Were he to move now, he would also take a beating on his FishHawk Ranch home.
It's not far from a house that Jon Neill, a former mortgage broker, helped one of his in-laws buy with 100 percent financing from Lehman's Aurora subsidiary three years ago. Though the relative had just moved from Ohio to Florida and didn't yet have a job, she got an attractive 6.625 percent interest rate.
Aurora "had the best deal at the time,'' Neill says. "They did subprime (loans), but they had very low interest rates.''
Unfortunately, he adds, "the pricing models did not take into account the level of default these folks would naturally have.''
Neill's relative, divorced and supporting three kids on a teacher's salary, struggled to keep up with the payments. The house went into foreclosure in May. Purchased for $355,000, it's now worth about $200,000.
Neill is working with Aurora, which remains in business, to modify his relative's loan terms. He still admires the company — he once considered working for it himself — and was surprised to learn that a former Aurora-Lehman head honcho now owns the Mobil station where he sometimes fills up.
"It would be interesting to talk with this guy,'' Neill says of Schaefer. "I bet we knew some of the same people at Lehman Brothers.''
Susan Taylor Martin can be contacted at susan@sptimes.com.
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