Irvine Lender Facing FTC Inquiry
The Federal Trade Commission is investigating whether New Century Financial Corp.’s solicitation of new customers through direct mail violated federal credit reporting regulations, the Irvine mortgage lender said.
In its annual report filed Monday with the Securities and Exchange Commission, New Century said it was notified of the investigation last August.
The FTC is looking into whether the company’s credit solicitations violated the Fair Credit Reporting Act. The company is cooperating with the investigation and has been given no specific reason for it, Chairman Robert Cole said Wednesday.
“We believe we’ve been consistent in following the laws and the FTC guidelines,” Cole said.
The company also said it was named last October as a defendant in an amended class-action complaint brought on behalf of Ohio customers whose credit transactions were brokered by Equibanc and Central Mortgage. New Century, which specializes in home loans for people with bad credit or low income, said it wasn’t named in the original complaint.
The complaint alleges breaches of the Federal Fair Housing Act, Equal Credit Opportunity Act, Truth in Lending Act, gender discrimination, fraud, civil conspiracy and other charges. The complaint also names Century 21 Home Improvements and Incredible Exteriors Inc.
The company said it filed a motion to dismiss last December, and intends to defend itself vigorously.
New Century’s stock closed Wednesday at $7, down $1.63 cents a share.
In its annual report, New Century said its objective this year is to achieve positive cash flow from operations by selling a significant portion of its loan production for cash through whole loan sales, improving the credit quality of its loan production, and concentrating on originating higher-value loans and reducing low-margin production.
In March, the company sold a servicing portfolio containing $4.8 billion in loans to Ocwen Federal Bank FSB for $19.7 million. The company also agreed to sell to Ocwen servicing rights on up to $3 billion in mortgage loans between March 2001 and December 2002 at a price to be determined. Servicing is the billing and collecting of mortgage payments.
