Subprime lender New Century Financial Corp. said today it boosted total mortgage loan production in the second quarter to $16.2 billion — a 21 percent increase over the previous quarter and 20 percent better than the same period a year ago.
The Irvine, Calif.-based company’s second-quarter net earnings of $105.5 million, or $1.81 per share, represented an 11 percent increase from second-quarter 2005.
While other lenders have reported falling production and profits in the second quarter, New Century says it had its second-best quarter for loan production in the company’s 11-year history. The growth was partly attributable to the addition of prime and Alt-A loans to the company’s product lineup, said Brad A. Morrice, president and chief executive officer.
“We are pleased with the second quarter’s strong loan production volume, which resulted from modest growth in our core non-prime product coupled with the addition of our Prime and Alt-A products,” Morrice said.
Subprime loans, however, still accounted for 86.9 percent of the company’s loan production during the quarter. Hybrid 30- and 40-year adjustable-rate mortgages, most of which carry fixed rates for two or three years, totaled $8.54 billion for the quarter, or a little more than half of total loan production. Interest-only loans, both fixed-rate and adjustable, constituted 18.1 percent of total loan production. Most of the loans New Century originated — 54.6 percent — were refinances, rather than purchase loans.
New Century, which is organized as a real estate investment trust, said it sold or securitized 82 percent of the loans originated in the second quarter. The allowance for losses on loans held for investment is $209.9 million, or 1.31 percent of the mortgage loan portfolio of $16 billion as of June 30. That’s up from .79 percent at the same point last year, but the company said delinquency rates “continue to be significantly lower than historical experience” at 4.61 percent.
“We are comfortable with our current loan loss reserve levels, which take into consideration not only normal portfolio seasoning but also our higher cumulative loss expectations for the newer vintages,” said Patti M. Dodge, executive vice president and chief financial officer.
New Century originates loans through 246 sales offices operating in 35 states and 33 regional processing centers operating in 19 states, and employs approximately 7,100. Its operating subsidiaries are New Century and Home123 Corp.
Shares in New Century were trading at $43.78 around noon Thursday, down 1.4 percent from Wednesday’s close of $44.40.