New Century to adopt additional lending best practicesMortgagePress.comBest lending practices
New Century Financial Corporation, a real estate investment
trust and mortgage finance company, has announced the first in a
series of additional lending best practices that its operating
subsidiaries, New Century Mortgage Corporation and Home123
Corporation, will adopt in order to continue to provide customers
with fair and informed access to credit.
"In light of recent regulatory guidance and the changing
interest rate and housing environment, we have re evaluated our
programs and practices and developed enhanced policies and
techniques to reinforce our goal of providing fair and informed
access to credit," said Brad Morrice, president and chief executive
officer. "While we believe that our historical practices and
programs have been sound, we recognize that the changing
environment warrants a fresh evaluation of our lending best
practices so that we can best serve our customers, loan buyers and
stockholders during this part of the real estate cycle."
"These changes are the product of hard work and analysis by our
credit, compliance, fair lending and production personnel. We also
benefited from our ongoing dialogue with the leading national fair
housing, community reinvestment, civil rights and consumer advocacy
groups, as well as input from our own distinguished National
Community Advisory Council. Our focus is to provide clear
explanations of key loan terms for the benefit of all borrowers and
to implement policy changes that would assist those borrowers who
are most susceptible to principal and interest repayment issues in
the current interest rate and housing environment—principally
those with weaker credit histories, incomes and fewer financial
The changes that the company plans to adopt consist of
enhancements to disclosures, controls, product design and
underwriting. These changes include:
• Tightening underwriting guidelines for its
adjustable-rate mortgage programs for at-risk borrowers. This
includes using the fully indexed rate minus one percent as the
qualifying rate for these borrowers.
• Offering existing adjustable-rate-mortgage and
interest-only customers who qualify the option of refinancing into
a low fee 30- or 40-year fixed-rate mortgage.
• Implementing plain-language disclosures that go beyond
legal requirements in explaining terms such as prepayment charges,
interest-only features, adjustable payment features, escrows for
insurance and taxes and other key features of a loan.
• Enhancing its processes for confirming the income
information provided on stated income loans.
In addition to the closing certification currently employed, the
company will introduce a new front-end confirmation early in the
loan process, to assist applicants in better understanding the
terms of their loan.
The company will implement these changes over the next few
months and expects to announce further enhancements to its lending
For more information, visit www.ncen.com.