New Century

This article is about the corporation. For the bible version see New Century Version

New Century Financial Corporation was a real estate investment trust that originated mortgage loans in the United States through its operating subsidiaries, New Century Mortgage Corporation and Home123 Corporation.

It was founded in 1995 by a trio of formers manager at Option One Mortgage, including former CEO Brad Morrice and was headquartered in Irvine, California. In 2004 it converted to a real estate investment trust and is listed on the New York Stock Exchange NYSE. In that year it originated $42.2 billion in mortgages[1] and its stock reached a high of nearly $64 per share by the end of the year. In Fiscal year 2005 its net income was $417 million.[2] On January 1, 2007, New Century had approximately 7,200 full-time employees[3] and a market capitalization of $1.75 billion. But on March 13, 2007, the NYSE delisted the corporation and by the next day its market capitalization was less than $55 million. New Century is now trading on the over the counter pink sheets, where its stock traded at $0.10 per share in 2007.

Subprime mortgage lending activities

As of January 1, 2007, New Century was the second-biggest subprime mortgage lender in the United States, and was headed by Brad Morrice, President and CEO. Frederic J. Forster, a lead independent director, served as a non-executave Chairman of the Board. Subprime mortgage loans are riskier loans in that they are made to borrowers unable to qualify under traditional, more stringent criteria due to a limited or blemished credit history. Subprime borrowers are generally defined as individuals with limited income or having FICO credit scores between 500 and 620 on a scale that ranges from 300 to 850. Subprime mortgage loans have a much higher rate of default than prime mortgage loans and are priced based on the risk assumed by the lender.

In marketing the company, New Century's Home123 Mortgage division engaged Bob Vila as an advertising spokesman for several years. It also entered into a sponsorship deal with NASCAR, as the Official Mortgage Company of NASCAR and sponsor the Chip Ganassi Racing with Felix Sabates team, in both the Cup and Busch series.

Financial difficulties, bankruptcy and criminal investigation

In the spring of 2007, New Century went into a "death spiral". On March 8 it announced it would stop accepting loan applications. Four days later trading of its stock on the NYSE was halted. On April 2, 2007, it filed for Chapter 11 bankruptcy. In July 2010, three officers of the company agreed to pay $90 million in settlements and were barred from serving as directors of public companies for five years.[4]

While New Century's problems became public news in February & March 2007, primarily as a result of the pullback of more than half of its 11 warehouse lenders, (who funded New Century's loan closings until they could be securitized), mortgage insiders heard rumors of New Century's loss of some of its (wholesale/warehouse) lines of credit as early as the end of the third quarter, 2006. [references needed]

Timeline

March 2008- During the liquidation of New Century Financial Corporation a private company in Northern Illinois acquired only the brand assets in the bankruptcy. New Century Financial held several brands including Home123. The brand Home123 was reintroduced to the market as a real estate marketing and technology firm focused on bringing people, resources, and information together. The marketing and technology platform is intended to allow home service providers, such as real estate professionals, mortgage companies, attorneys and home improvement providers, to work more closely together. Compound marketing and referral based lead sharing are the driving force behind the platform. The New Century brand is currently being positioned for sale.

In Popular Culture

In the The Big Short (2015), young investors Charlie Geller and Jamie Shipley have bet heavily on the failure of sub-prime mortgage bonds, but have to endure an excruciating wait while the spike in defaults seems to leave the housing market unaffected. But on 2 April 2007, they learn of New Century's bankruptcy while watching CNN, and realize the collapse of the market has begun in earnest.

See also

References

  1. Nielsen, Barry. "The Rise And Demise Of New Century Financial". February 26, 2009. Investopedia. Retrieved 5 February 2014.
  2. "NEW: Income Statement for New Century Financial Corp.". Yahoo! Finance. 2007. Retrieved 2007-01-02.
  3. "NEW: Profile for New Century Financial Corp.". Yahoo! Finance. 2007. Retrieved 2007-01-02.
  4. 1 2 New Century ex-leaders to pay $90 million in settlements| E. Scott Reckard |LA Times | July 31, 2010.
  5. Barr, Alistair. "New Century stops accepting loan applications". March 8, 2007. MarketWatch. Retrieved 6 February 2014.
  6. "New Century files for Chapter 11 bankruptcy". April 3, 2007. CNN Money. Retrieved 6 February 2014.
  7. http://biz.yahoo.com/e/070525/newc.pk8-k.html dead link
  8. http://biz.yahoo.com/rb/070524/newcentury.html?.v=3 dead link
  9. LOVLEY, ERIKA (June 11, 2007). "New Century: Computer seizure would imperil liquidation". Orange County Register. Retrieved 6 February 2014.
  10. "Final Report of Michael J. Missal, Bankruptcy Court Examiner" (PDF). The New York Times. February 29, 2008. Retrieved January 20, 2014.
  11. Reckard, E. Scott (December 8, 2009). "SEC sues 3 former officers of Irvine subprime lender New Century Financial". Los Angeles Times. Retrieved May 20, 2010.
  12. SEC SETTLES WITH FORMER OFFICERS OF SUBPRIME LENDER NEW CENTURY| U.S. SECURITIES AND EXCHANGE COMMISSION| Litigation Release No. 21609 | July 30, 2010
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