New Century Financial Common Stock is a Zero

NEW CENTURY FINANCIAL CORP filed this Form 8-K on 12/14/07:

"Based on a preliminary review of the claims against the Company received by the claim bar date, the Company currently believes that there will be no recovery in respect of the Company’s outstanding common stock under the Debtors’ plan of liquidation."

You've come a long way, baby!

Incentive Incompatibility at Mortgage Brokers

From a recent Washington Post:

"Maggie Hardiman cringed as she heard the salesmen knocking the sides of desks with a baseball bat as they walked through her office. Bang! Bang!

'You cut my [expletive] deal!' she recalls one man yelling at her. 'You can't do that.' Bang! The bat whacked the top of her desk. As an appraiser for a company called New Century Financial, Hardiman was supposed to weed out bad mortgage applications. Most of the mortgage applications Hardiman reviewed had problems, she said.

But 'you didn't want to turn away a loan because all hell would break loose,' she recounted in interviews. When she did, her bosses often overruled her and found another appraiser to sign off on it.

'There was instant notification to everyone as soon as you rejected a loan. And you dreaded doing it because you paid for it. Two guys would come with a bat, and they were all [ticked] off because you cut their deals.'

This sounds like something out of The Sopranos, except it was happening at the nation's third largest subprime lender, which wrote tens of billions in loans.

It's really not that surprising. This story could have come from a book about S&L Crisis I.

DSL vs NEW Comparison

Most of the NEW stats are 2005 data; DSL stats are from the previous filing as reported on this blog.

NEW stock price vs Markit 2006 BBB- ABX index

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