New Century Financial Corp. (OTC: NEWC) one of the largest companies offering subprime loans, disclosed Tuesday that it will no longer be allowed to sell mortgage loans directly to Fannie Mae or act as the primary servicer of any mortgage loans for the financier.
New Century stated in an 8-K SEC filing that Fannie Mae would terminate its Mortgage Selling and Servicing Contract with New Century Mortgage Corp. (NCMC) â€œfor cause,â€ based on alleged breaches of the Fannie Mae contract as well as alleged breaches of the NCMC under other contracts with Fannie Mae.
In addition, the company said that it had received cease and desist orders from the State of California. The state alleges that New Century violated state law and took new applications for mortgage loans.
At least 10 other states have already asked that the company stop its operations. It expects to receive additional orders from other states.
Shares of New Century closed 48 cents, or 22 percent, to $1.69 in Tuesday trading in over-the-counter trading.