NEW CENTURY MORTGAGE CORPORATION - ORDER TO CEASE AND DESIST
State of New York Banking Department
In the Matter of
NEW CENTURY MORTGAGE CORPORATION
A Licensed Mortgage Banker pursuant
- Respondent -
ORDER TO CEASE AND DESIST
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, the Superintendent hereby finds that New Century Mortgage has defaulted and is likely to default in performing its financial engagements and that there is substantial risk of public harm;
NOW THEREFORE, it is hereby ordered by the Superintendent that:
1. No later than two business days of the effective date of this Order, New Century Mortgage shall establish and maintain an escrow account at a federally insured bank, for the purpose of funding mortgage loans for which New Century Mortgage has a pending application as of the effective date of this Order, including those loans which have closed and have yet to fund and those loans which New Century Mortgage has committed to close and fund in the near future;
2. New Century Mortgage shall adhere to the following guidelines in maintaining the escrow account:
(a) Loans that have cleared to close shall have an amount equal to 100 percent of the loan amount in the escrow account;
(b) Loans that have been approved and such notification of commitment has been sent to the Mortgage Broker shall have an amount equal to 50 percent of the loan amount deposited into the escrow account no later than twenty days prior to the issuance of the closing documents to the closing Agent; and
(c) Loans that have been pre-approved shall have an amount equal to 10 percent of the loan amount immediately deposited into the escrow account.
3. New Century Mortgage shall submit to the Department by 5 p.m. Eastern Standard Time daily, a liquidity report on each of its eleven warehouse lines of credit, and provide such information as will be necessary for the Department to determine that New Century Mortgage will be able to fund current loans in its pipeline, while also maintaining the minimum net worth requirements for licensed mortgage bankers in accordance with the Department’s regulations;
4. New Century Mortgage shall submit to the Department detailed reports as follows:
(a) As soon as possible, but not later than one day after the effective date of this Order, New Century Mortgage shall submit to the Department all information on file as of the date of submission regarding its pipeline of pending mortgage loan applications including but not limited to, the following: the names of all individuals from whom New Century Mortgage has accepted an pplication for a residential mortgage loan; the applicant’s address and telephone numbers; the loan number; the amount of all prepaid loan fees submitted by the applicant; rate lock status; the amount of each loan; application status (i.e. filed, cleared to close, etc.); loan terms, if approved; scheduled closing dates; and the loan purpose (i.e. purchase or refinance); and
(b) By 5 p.m. Eastern Standard Time on each business day following the date of submission of the initial report as set forth in the preceding paragraph, New Century Mortgage shall provide the Department with an updated, written status report of the mortgage loan applications in its pipeline. The form of the status report shall follow the format outlined in the preceding paragraph and shall indicate the final disposition of the loan application and include the final terms under which each approved loan is closed. The reporting requirement shall continue until each of the approved applications is funded by New Century Mortgage, or withdrawn by the applicant(s); and
(c) As soon as possible, but not later than five (5) days after the effective date of this Order, New Century Mortgage shall submit to the Department a balance sheet and year-to-date income statement, prepared as of the date of submission, and attested to by a duly authorized officer of New Century Mortgage. The balance sheet should indicate New Century Mortgage’s cash position at each of its depository banks as well as New Century Mortgage’s bank account numbers.
5. New Century Mortgage shall not pay or declare any dividend or bonus, or otherwise authorize any other material distribution of New Century Mortgage’s assets to any officer, director, or owner of the New Century Mortgage without the prior written approval of the Department. Upon the effective date of this Order, New Century Mortgage shall implement or revise its practices and procedures, as necessary, to ensure that its financial books and records are accurately maintained, in a manner illustrating compliance with the provisions of this paragraph, and are available for reviewby the Department’s examiners upon request.
6. Within five business days after the effective date of this Order, New Century Mortgage shall submit a net worth restoration plan to the Department.
7. The effective date of this Order shall be the date of issuance as set forth below.
Witness, my hand and official seal of the Banking Department at the City of
Rholda L. Ricketts
Deputy Superintendent of Banks