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NEW CENTURY MORTGAGE CORPORATION - SUSPENSION ORDER

State of New York Banking Department


In the Matter of

NEW CENTURY MORTGAGE CORPORATION

A Licensed Mortgage Banker pursuant
to Article XII-D of the Banking Law

- Respondent -

SUSPENSION ORDER

 


WHEREAS, NEW CENTURY MORTGAGE CORPORATION ("New Century Mortgage") was granted a license on July 13, 1999, to engage in business as a mortgage banker pursuant to Article XII-D of the New York Banking Law (the "Banking Law") and currently maintains a principal office at 18400 Von Karman, Suite 1000, Irvine, California 92612; and

WHEREAS, on February 7, 2007, New Century Financial Corporation, the parent of New Century Mortgage, issued a press release stating its intention to restate earnings for the first, second, and third quarters of 2006.  New Century Financial also indicated that it would report a loss for the fourth quarter of 2006;

WHEREAS, on February 9, 2007, the Department became aware, through media reports, of a decline in New Century Financial Corporation’s stock price from $30.16 to $19.24 per share between the period February 7, 2007 and February 8, 2007;

WHEREAS, on March 5, 2007, the Department became aware, through media reports, of a 60 percent decline in New Century Financial Corporation’s stock price;

WHEREAS, on March 8, 2007, the Department sent a letter via facsimile to New Century Mortgage, requesting detailed pipeline and warehouse activity reports. Additionally, a teleconference was held with the general counsel of New Century Mortgage to discuss the company’s ongoing financial problems;

WHEREAS, in response to the Department’s March 8 letter and telephone discussion, New Century Mortgage emailed the Department the unfunded loan and pipeline reports listing 121 unfunded closed New York loans totaling $39,927,131.92 and an application pipeline report listing 1994 New York applications totaling $647, 410,132.27;

WHEREAS, New Century Mortgage continued to accept applications, despite its deteriorating financial condition, until the close of business March 8, 2007;

WHEREAS, on March 9, 2007, New Century Mortgage notified the Department that its warehouse line providers suspended the company’s use of their credit facilities;

WHEREAS, on March 12, 2007, New Century Mortgage notified the Department, via teleconference, that it only had sufficient funding for one day and that without additional financing it would not be able to fund loans on March 13, 2007, and possibly thereafter;

WHEREAS, based on the foregoing, New Century Mortgage is in violation of Part 38.7(a)(8) of the General Regulations of the Banking Board for its failure to disburse loan funds on loans closed on New York property;

WHEREAS, New Century Mortgage’s failure to disburse funds may be considered a default of its financial engagements, which may result in substantial harm to the persons afforded the protection of Article 12-D;

WHEREAS, New Century Mortgage is unable to demonstrate that it is maintaining the minimum net worth requirement for a mortgage banker pursuant to Part 410.1(b)(1) of the Superintendent’s Regulations;

WHEREAS, New Century Mortgage is in violation of Part 410.1(b)(2) of the Superintendent’s Regulations for its failure to maintain an existing line of credit of not less than $1,000,000;

WHEREAS, Section 592 of the Banking Law provides that the Superintendent may license an applicant as a mortgage banker if the Superintendent shall find that the applicant’s financial responsibility, experience, character, and general fitness are such to command the confidence of the community that the applicant’s business will be operated honestly, fairly, and efficiently within the purpose of Article 12-D of the Banking Law;

WHEREAS, pursuant to Section 595(1)(a) of the Banking Law, the Superintendent may revoke a mortgage banker’s license after a determination that the mortgage banker, through a course of conduct, violated any provisions of Article 12-D of the Banking Law or any rule or regulation promulgated by the Banking Board, or any rule or regulation prescribed by the Superintendent under and within the authority of Article 12-D or of any law, rule or regulation of this state or the federal government; and

WHEREAS, pursuant to Section 595(1)(b) of the Banking Law, the Superintendent may revoke a mortgage banker’s license if it is found that any fact or condition exists which, if it had existed at the time of original application for such license or registration, would have warranted the Superintendent in originally refusing to issue such license.  New Century Mortgage’s current inability to utilize its warehouse credit line to fund the outstanding unfunded closed loans demonstrates that it does not have the financial wherewithal to command the confidence of the community pursuant to Section 592 of the Banking Law;

WHEREAS, pursuant to Section 595(2) of the Banking Law, the Superintendent may, for good cause shown, or where there is substantial risk of public harm, suspend New Century Mortgage’s mortgage banking license for a period not exceeding 30 days, pending investigation;

WHEREAS, pursuant to Section 595(5) of the Banking Law, the suspension of a mortgage banker license shall not impair or affect the obligation of any pre-existing lawful contract between New Century Mortgage and any person; and

WHEREAS, New Century Mortgage’s aforementioned actions constitute grounds for suspension or revocation of its license under Sections 595(1)(a) and (b) and 595(2),

NOW THEREFORE, the Superintendent hereby finds that New Century Mortgage has defaulted and is likely to default in performing its financial engagements and that good cause exists to suspend its mortgage banking license and the Superintendent further finds that there is a substantial risk of public harm.  Consequently, the Superintendent hereby immediately suspends New Century Mortgage’s mortgage banker license for a period not exceeding 30 days from the date of this Order pending investigation.

Witness, my hand and official seal of the Banking Department at the City of New York, this 13th day of March in the Year two thousand seven.

 

____________________________

Rholda L. Ricketts

Deputy Superintendent of Banks

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