New Century Financial Corp. reported a 32% drop in earnings before taxes in the third quarter to $123 million, versus a year ago.
The Irvine-based subprime lender said Thursday that it’s making less profit on loan sales to investors. New Century’s profits from interest charged on mortgages also has dropped.
The company said its cost-cutting measures and increased loan production helped it lower its costs to acquire loans.
New Century became a real estate investment trust last October. The company gets a big tax break in return for paying out at least 90% of its taxable income to shareholders and posted a 12% jump in net income to $120 million in the quarter.
The subprime lender said it plans to buy back 5 million of its shares, or about 9% of the total outstanding.
New Century said it has been raising rates it charges borrowers.
“In October, our weighted-average coupon rate was 7.6%, compared with 7.18% in August,” said Patti Dodge, chief financial officer, in a statement. “While we are now making significant progress, we do not expect to see the positive impact in our results until first quarter of 2006.”
Dodge said interest-only loans are starting to account for less of the company’s overall loan production, as planned.
New Century reaffirmed its dividend guidance for 2006 and said it made a record $16.7 billion in mortgage loans in the third quarter.
