New Century ordered to stop loans in California

From CBS Marketwatch:

SAN FRANCISCO (MarketWatch) -- California ordered New Century Financial to stop taking mortgage applications in the state, according to a regulatory filing by the subprime specialist on Tuesday.

New Century said it got the cease and desist order from California authorities on March 16. It had already received several similar orders from other states, but the company is based in California and has originated more than a third of its loans in that state.

NEW said it hasn't decided whether to appeal the California orders and noted that they will become permanent if there's no appeal.

The company also disclosed that it can't sell mortgage loans directly to Fannie Mae (FNM :
Fannie Mae anymore or act as the primary servicer of any mortgage loans for the industry giant, according to the filing.

New Century shares fell 15% to $1.84 during afternoon trading on Tuesday.

Subprime mortgages are offered to home buyers with spotty credit records, lower income and higher debt. The business has descended into crisis after interest rates climbed and home prices stopped rising quickly.

New Century, the second-largest subprime mortgage lender, has been among the worst hit. It faces a federal criminal probe and has stopped offering loans.

The California orders require New Century subsidiaries to create escrow accounts to hold fees relating to pending mortgage applications and transfer outstanding applications and unfunded mortgages to other lenders, the filing stated.