1998: A Great Year, With Some Hard Lessons for 1999.

Lenders had plenty to celebrate last year. Mortgage originations for home purchases and refinancings both set records. But the record for refis had a dark underbelly. With loans being drained from portfolios at a record pace, investors were hit hard, and leveraged investors were hit hardest of all, getting caught up in a savage liquidity crisis in the fourth quarter (see article, page 6A).

One canny investor, Redwood Trust, foresaw the liquidity hazards and avoided the crunch (page 6A). Another big investor, IndyMac Holdings, had enough financial capability to fight its way out (see article, page 8A). Both companies, however, were hit hard in the stock market and have …