summaryofadamningdissectionofkpmgsfailuresat.docVIP

Summary of A damning dissection of KPMGs failures at New Century and a veritable road map of what went wrong in the subprime industry. By: Shuai Wang Yan Wang Shuxue Zhang San Francisco State University ACCT 804 Professor R. Daniels December 4, 2008 REFERENCES: FINAL REPORT OF MICHAEL J.MISSAL BANKRUPTCY COURT EXAMINER /ca/newcentury01_0327.pdf /ca/newcentury02_0327.pdf Background of New Century New Century Financial Corporation was founded in 1995 by a trio of former managers at Option One Mortgage, including former Chief Executive Officer Brad. New Century Financial Corporation was a real estate investment trust that originated mortgage loans in the United States through its operating subsidiaries. The company enjoyed a rapid growth since its founding, from $357 million mortgage loans in 1996 to approximately $60 billion in 2006.New Century’s Equity securities started to trade on New York Stock Exchange from 1997. In 2004, New Century changed its corporate structure to REIT for income tax purposes. As of January 1, 2007, New Century Financial Corporation was the second-biggest subprime mortgage lender in the United States, with a market capitalization of over $1 billion and credit facilities of $17.4 billion. On March 8, 2007, New Century Financial Corporation said that it has stopped accepting loan applications because some of its financial backers are refusing to provide access to financing. On March 9, 2007, New Century Financial Corporation reported that it had failed to meet certain minimum financial targets required by its warehouse lenders and disclosed that it is the subject of a federal criminal investigation. New Century Financial Corporation further indicated that it does not have the cash to pay creditors who are demanding their money. On March 14, 2007, the day after the New York Stock Exchange delisted New Century Financial Corporation, the market capitalization value of its stock was