New Century receives more acceleration notices, cease-and-desist orders

By Caroline Salls

Pittsburgh, March 19 - New Century Financial Corp. received two termination and acceleration notices in connection with alleged events of default on 2005 and 2006 DB Structured Products, Inc. master repurchase agreements, according to an 8-K report filed with the Securities and Exchange Commission.

According to the filing, the notice reiterates DB Structured Products' allegations that events of default have occurred and purports to accelerate the obligation of New Century's subsidiaries to buy back all outstanding mortgage loans financed under the 2005 agreement.

The company said the estimated total repurchase obligation under that agreement was $700 million as of March 12.

The company estimated that the total buyback obligation of its subsidiaries under the 2006 agreement was $200 million as of March 12.

New Century said the repurchase obligations refer to the amount of outstanding mortgage loans financed under these repurchase credit facilities, as opposed to the company's obligation to repurchase whole loans that have been sold to third parties if a payment default by the underlying borrower occurs within a specified period of time following such a whole loan sale or if New Century breaches its representations and warranties made to the purchasers of whole loans under a loan sale agreement.

In total, New Century said it is subject to $8.2 billion of debt under its credit facilities, the vast majority of which are structured as repurchase credit facilities.

In comparison, the company said it has been notified that purchasers of whole loans have submitted claims requesting that New Century buy back about $500 million of whole loans sold to third parties as a result of early payment defaults and breaches of representations and warranties.

The company also received additional cease and desist orders from the States of Connecticut, Maryland, Rhode Island and Tennessee that contain allegations that some of the company's subsidiaries have engaged in violations of applicable state law, including failure to fund mortgage loans after closing. New Century and indirect wholly owned subsidiary Home123 Corp. entered into a consent agreement on March 14 with the Commonwealth of Pennsylvania Department of Banking, Bureau of Supervision and Enforcement.

New Century said it and its subsidiaries are still reviewing the other cease-and-desist orders to determine whether they will be appealed.

In addition, an Ohio state court issued a temporary restraining order against New Century and Home123 in connection with allegations that the defendants have violated state law by failing to fund mortgage loans after closing.

The temporary restraining order keeps the defendants from soliciting applicants and taking new applications for mortgage loans in Ohio and initiating, prosecuting or enforcing foreclosure actions in Ohio.

The temporary restraining order also requires the defendants to confer with the Ohio Attorney General and Division of Commerce by March 22 regarding the treatment of Ohio loans that are more than 60 days delinquent and are held for sale.

New Century said it is reviewing the complaint and the temporary restraining order to decide whether it will file an appeal.

New Century is an Irvine, Calif.-based financial company.

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