Mortgage Excesses: The New Century Story

At a Mortgage Lender,Rapid Rise, Faster Fall
Wall Street Fueled Growth at New Century;
A Party-Hard Culture

By JAMES R. HAGERTY, RUTH SIMON, MICHAEL CORKERY and GREGORY ZUCKERMAN
March 12, 2007;
Wasll Street Journal, Page A1

Ruthie Hillery was struggling to make the $952 monthly mortgage payment for her three-bedroom home in Pittsburg, Calif., last summer when a mortgage broker called. The broker persuaded the 70-year-old Ms. Hillery to refinance into a "senior citizen's" loan from New Century Financial Corp. that she thought would eliminate the need to make any payments for several years, according to her lawyer.

Instead, the $336,000 adjustable-rate loan started out with payments of $2,200 a month, more than double her income. In December, Ms. Hillery received notice that New Century intended to foreclose on the property. Then, earlier this month, after a formal demand by the lawyer, New Century agreed to refund all its fees and cancel the loan once Ms. Hillery gets refinancing elsewhere.

The lawyer, Alan Ramos, says the loan never should have been made. "You have a loan application where the income section is blank," Mr. Ramos says. "How does it even get past the first person who looks at it?"

New Century, an 11-year-old company that billed itself as "a new shade of blue chip," has become a symbol of excess in lending to subprime borrowers, people with weak credit records or high debt in relation to their income. The company has imploded over the past few months as defaults surged and accounting misdeeds surfaced. New Century's share price last week dropped 78% to $3.21 as some traders bet a bankruptcy-court filing is near.

MORE