Shady Practices Led to New Century Financial's Fall
RENEE MONTAGNE, host:
And a new report slams the accounting practices of a company that used to be one of the country's biggest subprime mortgage lenders, until it went bankrupt. The report says New Century Financial took risky products and made them riskier. All in the name of making more loans.
NPR's Carrie Kahn has details.
The 550-page report was unsealed yesterday and paints a poor picture of New Century Financial, at one time the country's second largest subprime mortgage lender. Examiner Michael Mizell, a former senior counsel at the Security and Exchange Commission, authored the report.
Mr. MICHAEL MIZELL (Security and Exchange Commission): What we found was it really shows the embryo of the credit crisis and how easy it was to originate very risky loans and put them into the financial system.
KAHN: He says New Century had a brazen obsession with making loans. It would let applicants just declare income without asking for proof, and frequently used deficient appraisals to value homes.
Mr. MIZELL: While I don't disagree that a goal of any mortgage company should be to increase sales, you need to do that in a way in which you manage the risk, and that wasn't done here.
KAHN: Mizell also faults New Century's auditor, KPMG, with lax oversight, a charge the accounting firm denies. A New Century spokesman would only say that it is pleased that the examiner's report is completed and looks forward to concluding the company's bankruptcy process.
Carrie Kahn, NPR News.
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