The three-line newspaper advertisement promised double-digit investment income. Robert Uhl was hooked.
It was 1989, and neither the short track record of Quality Home Loans nor its less-than-impressive one-secretary office in Oxnard could dampen Uhl's enthusiasm -- not after he heard Chief Executive John T. Gaiser speak airily of a coming boom in the real estate market.
"I immediately liked them, and we have been investing with them for the past 18 years. There has been a setback or two, but we just had good luck with them," said Uhl, who did well enough with those investments and his work installing and repairing communications systems to retire just three years later, at the age of 47.
But the ride came to a sudden end Aug. 21, when Quality filed for bankruptcy protection. It is one of a growing number of struggling or failed companies that offered loans to sub-prime borrowers -- those who didn't have good enough credit to qualify for a regular bank mortgage.
Uhl and his wife, Nancy, have $200,000 tied up in the company, and they could lose it all. More than 400 other individual investors, who handed Quality $5,000 to $5 million apiece, are facing the same possibility.
Quality specialized in "hard money" real estate loans, a kind of sub-prime netherworld for borrowers in or near foreclosure but with equity still left in their homes. Such borrowers are charged even higher interest rates than the usual sub-prime candidates.
Quality's website still lists the concessions the company was willing to make to do a home loan: "NO minimum [credit] score! . . . No mortgage or credit history required! . . . Unlimited cash out! . . . Current bankruptcy or 1 day out! . . . In foreclosure allowed!"
Quality and its affiliates were unusual because they made loans with money from individual investors as well as from other lenders. The small investors were promised a rate of return that could reach 14%.
Even now, many investors interviewed by The Times consider Gaiser and other Quality executives honest and shrewd money managers caught up in circumstances beyond their control. Most, stung by their financial mishap, didn't want their names published.
Quality, based these days in Agoura Hills, fell victim to "the recent instability of the national sub-prime market," Gaiser said in a bankruptcy declaration.
As part of the mortgage fallout, lender Countrywide Home Loans Inc. of Calabasas demanded additional collateral to fund Quality's loans, and another company demanded an $11.9-million margin call. A planned sale of 90% of the company to Santa Barbara hedge fund manager Pacificor disintegrated.
Quality, which last year made $461 million in loans and generated $49 million in revenue, continues to operate under Chapter 11 of the U.S. Bankruptcy Code. But on Aug. 23 it laid off 158 of its 191 employees, court records show. The bankruptcy filing listed assets of $222 million and liabilities of $160 million.
Early this month, Quality agreed to be acquired by Pacificor for an undisclosed amount, subject to Bankruptcy Court approval.
Gaiser was replaced as CEO by Alim Kassam, a senior credit analyst at Pacificor, but will remain as a consultant.
When asked whether investors would be made whole, Kassam said in a statement that "this is something we cannot comment on at this time." Efforts to reach Gaiser were unsuccessful.
The transaction will help speed Quality out of Bankruptcy Court, Pacificor principal Michael Klein said in a statement.
"The opportunity for this company has never been greater," Klein said. "The volume of loan applications at Quality is going through the roof as homeowners with significant equity and poor credit have fewer viable lenders to choose from in the current environment."
Quality's investors hope so.
Several of them came to the company through ads such as the one Uhl found in the Ventura County Star. Some stumbled onto Quality's website and decided to attend one of the company's free seminars. Others, including Gary Fasola, learned about the company through friends and relatives.
"Many of the investors were his friends," said Fasola, a 50-year-old mechanical design engineer turned real estate investor who stands to lose more than $600,000. "They had been with John for many years. There was trust."
"We didn't realize the risk," Fasola said. "For 2 1/2 years, the checks came out like clockwork on the first of the month. It was a very well-run company."
But the last checks went out Aug. 1. Some of the investors, scattered across the U.S., weren't even aware of the sudden downturn in the mortgage market.
"They had been sending out letters about how they were expanding and getting into more markets," Uhl said. "They sounded gung ho as recently as six months ago."
Fasola and the Uhls were among the more fortunate. Losing their investment with Quality would be weathered, but painfully, they said.