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New Century fails to file 10-K report

March 02, 2007|E. Scott Reckard | Times Staff Writer

New Century Financial Corp., struggling to revise last year's financial results after badly miscalculating its losses on risky mortgages, missed a Securities and Exchange Commission deadline for filing its annual report Thursday.

Not filing the 10-K report could trigger a new sell-off in the company's stock, already battered by New Century's disclosure last month that it had not accounted properly for losses on soured mortgages it had to repurchase from loan buyers.

The Irvine-based lender is the largest independent maker of higher-cost sub-prime mortgages to high-risk borrowers in a lending sector that has been rocked by bankruptcies, forced sales and huge losses.

On Wednesday, publicly traded rival Fremont General Corp. of Santa Monica failed to file its annual report as scheduled.

Without quantifying the damage, New Century disclosed Feb. 7 that it had gravely underestimated its losses, sending its stock plunging 36% the next day.

It closed at $15.85 on Thursday, down 69% from an all-time high of $51.22 on April 28. Its shares have declined in value by $1.96 billion since the peak, and by $793 million since it announced it would restate last year's results.

The stock market losses have triggered at least nine federal securities-fraud lawsuits alleging that New Century concealed its problems from investors last year while its officers and directors enriched themselves.

One of the lawsuits, filed by the law firm headed by shareholder-lawsuit attorney William S. Lerach, accused New Century insiders of selling 665,334 shares at inflated prices last year for proceeds of more than $26.6 million.

Laura Oberhelman, a company spokeswoman, said New Century doesn't comment on pending litigation. "We do intend to defend ourselves vigorously," she said.

Separately Thursday, shares of IndyMac Bancorp fell by $2.17, or 6.3%, to $32.16 after the Pasadena-based mortgage specialist said this year's profit would be lower than in 2006.

Most of IndyMac's loans are in the "alt-A" market -- loans to borrowers who don't fully document their income or assets but who have good credit scores.

Expressing disappointment, IndyMac Chairman Michael Perry told shareholders in a letter: "I believe we will emerge from this difficult mortgage environment a stronger and more competitive company."

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