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SEC steps up its probe of New Century

The lender says the agency has elevated an informal investigation to a formal inquiry.

July 06, 2007|E. Scott Reckard | Times Staff Writer

The Securities and Exchange Commission has stepped up its investigation of New Century Financial Corp., the bankrupt sub-prime mortgage firm said Thursday.

Irvine-based New Century, once the largest independent maker of home loans to borrowers with credit problems, said in a regulatory filing that the SEC had elevated an informal probe that began in March, turning it into a formal inquiry. That step, requiring a vote of the five SEC commissioners, enables the federal agency to subpoena documents and witnesses.

The SEC began looking into New Century after Wall Street cut off the lender's funding, several states revoked its licenses and it disclosed a federal criminal investigation of its accounting, which had failed to acknowledge a rising tide of loan defaults.

In April, New Century sought bankruptcy protection from creditors, chiefly the Wall Street firms that had provided the money that New Century lent to its mortgage customers. The Wall Street firms also purchased the company's loans and pooled them to create bonds backed by mortgage payments.

New Century said it was "continuing to cooperate" with the SEC while liquidating its assets in proceedings at the U.S. Bankruptcy Court in Wilmington, Del.

In other developments, New Century said it:

* Closed the sale of its customer service business last week to Carrington Capital and an affiliate for $177.4 million.

* Auctioned its mortgage origination computer systems and programs, agreeing June 22 to sell them to high bidder EquiFirst Corp. for about $8 million.

* Sold a batch of mortgages for $4.4 million to Ellington Capital Management, which previously had paid $58 million for some mortgages and residual interests in mortgage pools.


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