Thursday, March 15, 2007

Four states ordered New Century to stop doing business

State regulators from Massachusetts, New Hampshire, New Jersey and New York have sent letters to New Century, asking the lender to stop business operations. The notices said New Century has violated state laws by failing to fund mortgages that closed and by not notifying authorities of its financial crisis. The lender said it is unable to satisfy its subsidiaries’ loan repurchase obligations and expects to receive cease-and-desist notices from other states, too. Regulators also asked New Century not to pay dividends and bonuses to its executives. Shares of New Century, which has already stopped originating new loans, dropped more than 20% to close at 67 cents on the over-the-counter Bulletin Board. What an ugly situation for New Century – and its employees, shareholders, and investors. So what, are they going to wait for all the states to ask them to stop business operations before they admit they’re finally, totally and unequivocably broke?

The mortgage lender also revealed that it has defaulted on a loan agreement with Barclays Bank PLC and is required to buy back $900 million’ worth of mortgage loans. This seems to go on forever – every two or three days New Century announces that yet another of its lenders has asked it to repay its obligations or refused to provide additional financing. They must have truly overstretched themselves.

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