Financial difficulties
Loans began to slow in the second half of 2006.[6]
In the spring of 2007, New Century went into a "death spiral". On March 8 it announced it would stop accepting loan applications. Four days later trading of its stock on the NYSE was halted.
On March 2, 2007, it announced it was the subject of two criminal probes[5] by the federal government, and that its auditor KPMG had worries about the company's ability to stay solvent. Over the subsequent week, the company lost 78% of its stock value.[5]
In early March, it reported that it had failed to meet certain financial requirements of its lenders.
While New Century's problems became public news in February & March 2007, primarily as a result of the pullback of more than half of its 11 warehouse lenders, (who funded New Century's loan closings until they could be securitized), mortgage insiders heard rumors of New Century's loss of some of its (wholesale/warehouse) lines of credit as early as the end of the third quarter, 2006. On March 8, 2007, New Century Financial Corporation announced that it was stopping new loans while it sought new funding.[5][8] Early on March 12, it said that its financing had been cut off from most creditors, or that most planned to do so, and warned that many of its loan obligations were in default.[5] New Century Financial Corporation also said that one of its financial backers had demanded that the company repurchase some loans pursuant to repurchase provisions contained in loan purchase agreements. In a filing on March 12, 2007, it said that its lenders could demand $8.4 billion in loan repayments which it couldn't fulfill.[6] It was announced that the $8.4 billion in obligations which could come due immediately, with the company considered close to bankruptcy, as it did not have the cash to do so. On March 12, 2007, the New York Stock Exchange halted trading of the New Century Financial Corporation, delisting the company.[9] Beforehand, the company's shares had plunged 89% that month.[9] But on March 13, 2007, the NYSE delisted the corporation and by the next day its market capitalization was less than $55 million. New Century was now trading on the over the counter pink sheets, where its stock traded at $0.10 per share in 2007. On March 13, 2007, New Century Financial Corporation reported in a regulatory filing that it has received a grand jury subpoena from the U.S. Attorney's Office for the Central District of California as well as a letter from the Securities and Exchange Commission notifying the company of a preliminary investigation. The filing stated that the U.S. Attorney's office indicated in a letter dated February 28, 2007 that it was conducting a criminal inquiry in connection with trading in the company's securities as well as accounting errors regarding the company's allowance for repurchase losses. The filing further stated that the Securities and Exchange Commission has requested a meeting with the company to discuss the company's previous announcement that it would restate certain financial statement.
On March 14, 2007, it was reported that Barclays had demanded that New Century immediately pay back $900 million of mortgage loans.[10] Just days before, New Century had said it had less than $60 million of cash on hand.[10]
New Century Financial Corporation and Home123 Corporation received a cease and desist notice on March 14, 2007, from Connecticut Banking Commissioner Howard F. Pitkin, for failing to meet agreements.[11] That day it was also blocked from making loans in New Hampshire, on the grounds that it hadn't informed the state of its financial difficulties.[12] New Jersey did the same that day.[13] New Century said it intended to comply with the orders, pending any appeals.[10] The company received cease and desist orders from the states of Connecticut, Maryland, Rhode Island and Tennessee on March 14 and 15, and by March 19, it was under such orders in eight states total, including Pennsylvania.[14] California followed on March 16.[15] On March 20, 2007, New Century Financial Corporation said that it could no longer sell mortgage loans to Fannie Mae or act as the primary servicer of mortgage loans for the
