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Ailing subprime lender shuts mortgage unit

NEW YORK -- New Century Financial Corp., the biggest subprime mortgage company to declare bankruptcy, will close its home-lending unit and fire about 2,000 employees after failing to find a buyer.

Chief executive Brad Morrice informed employees of the failed search yesterday , said Dan Gagnier, a spokesman for the Irvine, Calif., firm. A court-administered auction continues for the company's servicing business, which mails out monthly statements and handles collections, Gagnier said.

New Century stopped taking applications from new borrowers in early March.

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That was after lenders including Morgan Stanley, concerned about surging borrower defaults and losses, cut off its credit. The company filed for bankruptcy April 2 and started trying to sell the origination unit even as several banks and independent mortgage companies were already seeking buyers.

New Century, which made about $60 million in loans last year, rode the housing boom to become the largest independent subprice mortgage lender, only to collapse as interest rates rose and home prices fell. Like its rivals, the firm lowered lending standards to keep business flowing after demand slumped.

US prosecutors have opened a criminal probe of accounting errors and trading in securities at New Century, the company said March 2 in a filing.

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