Subprime lender New Century Financial Corp. said it has voluntarily severed its ties to Freddie Mac, and will no longer sell or service loans to the government-chartered mortgage repurchaser.
In a Securities and Exchange Commission filing this week, New Century also said it has signed consent agreements with officials in Idaho, Iowa, Michigan and Wyoming formally agreeing that the company will stop lending in those states. Other states including New York and California have also sought such agreements through cease-and-desist orders, and New Century said it is complying with those orders.
New Century disclosed on March 8 that it had stopped funding loans after at least five creditors stopped financing the company’s operations, and another forced a repurchase of loans it originated.
New Century had relied on 15 short-term repurchase agreements and aggregation credit facilities and an asset-backed commercial paper facility that collectively provided $17.4 billion to fund mortgage loan originations and purchases pending their pool and sale to Wall Street investors.
In its latest disclosure, New Century revealed that it has received default and acceleration notices from all of its lenders under its repurchase credit facilities.
“Several of these lenders have further notified the Company of their intent to sell the outstanding mortgage loans that have been financed by the respective lender and offset the proceeds from such sale against the Company’s purported obligations to the lender, while reserving their purported rights to seek recovery of any remaining deficiency from the Company,” the company said.
Reuter reported that New Century lenders taking such steps include Barclays Plc, which last week took possession of $900 million of mortgages; Morgan Stanley, which this week announced it would put $2.48 billion of New Century loans on the auction block; and Natixis, which is auctioning off $800 million in loans.