Wednesday, March 28, 2007

New Century ends Freddie Mac ties

41 minutes ago

New Century Financial Corp. (Other OTC:NEWC - news), the troubled subprime mortgage lender, said on Wednesday it voluntarily terminated its relationship with Freddie Mac (NYSE:FRE - news), and that "several" of its own lenders plan to sell loans that had backed $17.4 billion of credit lines.

The Irvine, California,-based company also said it has entered agreements with regulators in Idaho, Iowa, Michigan and Wyoming to stop lending, following similar agreements with or orders from several other states.

The developments may move New Century closer to bankruptcy, an outcome many analysts already expect.

New Century disclosed the developments in a filing with the U.S. Securities and Exchange Commission. It did not immediately return a call seeking further comment.

The company had been the largest independent U.S. provider of home loans to people with poor credit before running into financial difficulties as delinquencies and defaults mounted.

New Century's decision to end its relationship with Freddie Mac means it cannot sell mortgage loans to or act as the main servicer of any mortgage loans for the mortgage financier.

Fannie Mae (NYSE:FNM - news), another mortgage financier, cut off its own ties with New Century earlier this month.

New Century's own lenders, meanwhile, are moving to preserve their own stakes in case of bankruptcy.

Earlier this month, Barclays Plc (BARC.L) took possession of $900 million of mortgages, while Morgan Stanley (NYSE:MS - news) said it is auctioning $2.48 billion of loans.

In afternoon trading, New Century shares fell 32 cents, or 22.7 percent, to $1.09 on the Pink Sheets.

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