Troubled California Mortgage Lender Sees Probe Deepen
New Century Financial Corp., based in Irvine, Calif., said Wednesday it has received cease-and-desist orders from banking regulators in four states, claiming some subsidiaries of the troubled subprime mortgage lender have violated state laws.
Regulators from New York, New Hampshire, Massachusetts and New Jersey each sent notices Tuesday to the mortgage company, according to its filing Wednesday with the Securities and Exchange Commission.
The state regulators claim New Century subsidiaries have failed to fund mortgages that closed and did not notify the states in a timely manner of its financial woes.
Several of New Century’s creditors have cut or halted financing in recent days and demanded the bad credit mortgage company buy back loans recently sold to them.
New Century, which lends money to home buyers with poor credit histories, has said that it doesn’t have enough capital to satisfy its subsidiaries’ outstanding home loan repurchase obligations.
The California mortgage company has stopped accepting loan applications.
The state regulators demanded that the company create escrow accounts to hold fees from pending mortgage applications and from the transfer of outstanding mortgage applications to other lenders.
In the letters, the regulators also sought to keep New Century from paying dividends or bonuses to its officers, directors or shareholders.
The regulators also asked the home mortgage lender to turn over information on its subsidiaries’ businesses, including the status of outstanding mortgage loan applications and unfunded mortgage loans in each state.
New Jersey’s Department of Banking and Insurance said that New Century has closed 59 home loans in the state that are not funded, while subsidiary Home123 has closed on eight such home loans.
“We are working aggressively to refer consumers to the appropriate industry associations in an effort to assist consumers in reaching other lenders and will pursue every possible remedy for borrowers who have applications pending with these companies,” Commissioner Steven M. Goldman said in a statement.
New Hampshire state Banking Commissioner Peter Hildreth said New Century had failed to fund four mortgage transactions after closing on them.
New Century said it was reviewing the states’ requests and had not yet determined whether to appeal but planned to comply. The bad credit mortgage provider also expects to receive similar orders from other states.
In its filing, New Century also said that one of its creditors, Barclays Bank PLC, has demanded it buy back about $900 million in mortgage loans.
SOURCE: Daily Breeze