New Century Financial Corp. may be planning to file for bankruptcy protection on Friday, according to sources close to the matter. The Irvine, Calif.-based subprime lender may be faced with a lack of liquidity if its warehouse lenders opt out of providing funds. Rumors are circulating that the top-three lender may be shopping for debtor-in-possession financing, and mortgage brokers are reporting difficulty obtaining funding for mortgage loans set to close.
New Century announced last month that it would be restating earnings for 2006, and it was expecting to post a loss for the fourth quarter. Some analysts speculate the firm will also post a loss for the third quarter -- a factor that would have put a stop to much of its liquidity last year.
