U.S. Bancorp took a step into the subprime mortgage business on Monday, saying it will buy 17% of a California company that caters to homebuyers with tarnished credit.

The Minneapolis banking company said it would pay $20 million for preferred stock in New Century Financial Corp. of Irvine, which originated $914 million in the third quarter. The deal is expected to close in early December, pending regulatory approval.

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