The Story of Success and Failures of New Century Financial

New Century Financial Corporation was established in 1995. The company was dealing in real estate investment. Till start of 2007, New Century had 7,200 employees. The company once was the second largest provider of subprime mortgages. The crushing of subprime has resulted in bankruptcy of several mortgage lenders.

Subprime Mortgage

Subprime Mortgage

Till the start of 2007, New Century was the second largest subprime mortgage lender in the country. Subprime mortgage is made to the borrowers who may not qualify for the traditional borrower, due to which subprime is more risky loans as compare to normal loans. As they are more risky due to which subprime mortgage loans have a higher rate of interest than normal mortgage loans.

Financial Hardships

Due to current deficit in funding, the company choose to stop accepting loan applications from the borrowers. In March, 2007, The Company said that they are failed to meet minimum financial criteria. Moreover New Century further indicated that they do not have the enough amounts to pay their creditors.

As a result of above mentioned problems, on March 13th 2007, the legal authorities start preliminary investigations against the company because of their liquidity problems. After that New Century Financial Corporation and its related companies files partitions in the court.

As per company record, they have liabilities of more than $ 100 millions. The company record also revealed that they have cut down 3200 jobs which is almost half of their work force.



In June 2007, the company indicated that they may be failed to liquidate their assets if GE Capital allowed to seize their important data, record and other equipment. As per sources of GE Capital, a sum of $8.7 million on leased equipment has been owed by the New Century. New Century stated that most of their data regarding information about assets as well as business operations is stored in the computers.

In March, 2008, a report from bankruptcy court examiner pointed out many improper practices regarding loan originations, business operations, the process involves in financial reporting processes. The same report also accused some audit officials for helping the company in their improper practices.

In the end of 2009, Federal authorities charged three former officers of the company, made them responsible of misleading the prospects of the company and misguide the  investors. As per report of Los Angeles Times on 31st July 2010 the settlement between Securities and Exchange Commission and former officers and directors of New Century has been reached. The newspaper also reported that as per settlement those officers are bared them for five years to serve as directors of any public company, and also imposed fines on accused officers.

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