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SEC Files Fraud Charges on Former Subprime Lenders

Rocky road for lender

monopolyAfter several treacherous years in the mortgage industry, a shining example of how the subprime market crashed is New Century Financial Corp who as recently as 2007 had over 7,000 employees and employed Bob Villa as a spokesperson and was a substantial NASCAR sponsor. New Century was at one point one of the largest lenders to those with credit challenges but where they went wrong is when the company began allegedly fudging their numbers for investors.

The now bankrupt lender, New Century has been investigated by the SEC for some time now and the most recent filings come in the form of the SEC seeking civil penalties and disgorgement of funds from the defendants, former CEO Brad Morrice, former CFO Patti Dodge and former Controller David Kenneally.

Is this the Obama Administration seeking to set things right and imply accountability or is it too little too late?

Mortgage Planner James Barath said, “as with anything in life, it is always easier to point the finger than to take responsibility. Because of their failure to recognize the underlying issues that resulted to the financial meltdown the SEC has been under duress by Congress and the general public to right the errors of their oversight.”

Although New Century doesn’t have a pretty record (read more about them here), is this a case of politics or is the SEC doing their job and cleaning up fraud?

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Lani is the COO and News Director at The American Genius, has co-authored a book, co-founded BASHH, Austin Digital Jobs, Remote Digital Jobs, and is a seasoned business writer and editorialist with a penchant for the irreverent.

14 Comments

14 Comments

  1. Brandie Young

    December 8, 2009 at 12:21 am

    I don’t get it. What’s the point? You can’t really point the blame squarely at one person within the organization. And, just what is the suit trying to accomplish? Call me obtuse (it’s ok, do it) but I just don’t get all the focus in the rear view mirror.

  2. Benn Rosales

    December 8, 2009 at 12:37 am

    Brandie, I say let them all get away with murder until you prosecute those in Washington that failed to correct the problem when they were warned. They’re starting at the bottom, because no one will remember the top when the good times are here again.

  3. Brandie Young

    December 8, 2009 at 12:52 am

    Yeah, Benn – but to be prudent, wouldn’t they need to prosecute all the way up the value chain? Weren’t they responding to demand, i.e. developing product to be sold as was demanded by investors? Where oh where are the lawsuits on the rating agencies? Just an over-simpllified thought …

    • Benn Rosales

      December 8, 2009 at 1:35 am

      seriously? you’re an executive, in fact a high level one, sh*t always rolled down hill in my executive days, and as far as I’m aware, they still do. In this case, sh*t is defying the laws of gravity as it seems to have completely bypassed Washington.

  4. Matt Heaton

    December 8, 2009 at 12:55 am

    Both, the SEC doing their jobs and political. What New Century was doing was clearly fraudulent, illegal, and they should have been shut down long before they blew sky high. The SEC and many other regulatory agencies were simply not doing their jobs.

    I think it’s important to go back and not only prosecute the criminals but seriously overhaul the regulatory agencies (including booting a lot of high ranking people that were not doing their job) In some cases I think there are people in Washington that may have acted in a criminally negligent way and that should be investigated too. There was no shortage of warnings given to the regulator agencies about wide spread fraud being committed.

    If you don’t look at what went wrong, and enforce the laws you will just see the same thing happen again. That’s one of the key problems with the S&L crisis, was that with the exception of a few scape goats most of the fraudsters were not prosecuted. Guess what many of them were back and central players in this financial crisis.

  5. Matt Heaton

    December 8, 2009 at 12:59 am

    “Where oh where are the lawsuits on the rating agencies?”

    There more than enough evidence just in public record for a RICO indictments against the many of the ratings agencies, investment banks and subprime lenders. It will never happen because it would result is some very high profile people in DC going down for their involvement in the whole thing too.

  6. Benn Rosales

    December 8, 2009 at 1:37 am

    Matt, you’re preaching and I love it. Where do I become a member of your Church of the Consumer?!

  7. Benn Rosales

    December 8, 2009 at 1:39 am

    BTW! Bernie Madoff ain’t got nothing on the trillions this has cost tax payers! Neglegent doesn’t describe it, it’s capital murder of the economy.

  8. Brandie Young

    December 8, 2009 at 4:35 pm

    Wow, Matt. Awesome comments. Seems we will have plenty to chat about …

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