Ailing
subprime lender shuts mortgage unit
By Bloomberg News | May 4, 2007
NEW YORK -- New Century Financial Corp., the biggest subprime
mortgage company to declare bankruptcy, will close its home-lending
unit and fire about 2,000 employees after failing to find
a buyer.
Chief executive Brad Morrice informed employees of the
failed search yesterday , said Dan Gagnier, a spokesman
for the Irvine, Calif., firm. A court-administered auction
continues for the company's servicing business, which mails
out monthly statements and handles collections, Gagnier
said.
New Century stopped taking applications from new borrowers
in early March.
House panel votes to expand FHA role in subprime lending.
C3
That was after lenders including Morgan Stanley concerned
about surging borrower defaults and losses, cut off its
credit. The company filed for bankruptcy April 2 and started
trying to sell the origination unit even as several banks
and independent mortgage companies were already seeking
buyers.
New Century, which made about $60 million in loans last
year, rode the housing boom to become the largest independent
subprice mortgage lender, only to collapse as interest rates
rose and home prices fell. Like its rivals, the firm lowered
lending standards to keep business flowing after demand
slumped.
US prosecutors have opened a criminal probe of accounting
errors and trading in securities at New Century, the company
said March 2 in a filing.
2007 Globe Newspaper Company.
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