New Century Financial Corp. said the Securities and Exchange Commission has stepped up its investigation of the Irvine, Calif., subprime mortgage lender, the largest to file for bankruptcy protection.
In a regulatory filing last week, New Century said the SEC told the lender's attorneys June 21 that a preliminary investigation started in March will become a formal one.
The SEC set up a 25-member unit to investigate fraud at subprime mortgage lenders, examining whether they made appropriate disclosures to investors who bought securities backed by the loans.
Federal prosecutors also are examining accounting errors and securities trading at New Century before it filed for protection from creditors in April under Chapter 11 of the federal Bankruptcy Code.
New Century was founded in 1995 and survived an industry shakeout in the late 1990s to become the largest independent mortgage lender to subprime borrowers.
