Industry News

New Century moves to tighten underwriting, disclosure standards

Subprime lender responds to new federal guidelines

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Subprime mortgage lender New Century Financial Corp. says it will tighten underwriting and disclosure standards in response to new guidelines from federal regulators. New Century said it will also offer low-fee, 30- and 40-year fixed-rate loans to customers with adjustable-rate mortgages. In the next few months, the company's operating subsidiaries, New Century Mortgage Corp. and Home123 Corp., will tighten underwriting procedures for adjustable-rate loans made to "at-risk" borrowers. Loan officers are being instructed to use the fully indexed rate minus 1 percent as the qualifying rate for those borrowers, the company said. New Century will also use a more rigorous process for verifying income information provided on stated income loans. The company said it will use a front-end confirmation early in the loan process "to assist applicants in better understanding the terms of their loan."  In addition, New Century will introduce plain language disclosures the company says go beyo...