New Century Financial, the former subprime-lending giant that filed for bankruptcy in April 2007, won permission in May to pay 116 executives and top managers $3.2 million in bonuses. U.S. Bankruptcy Court Judge Kevin Carey reduced the original petition for a bonus plan of $6.3 million.
Once the second-largest provider of mortgages to high-risk borrowers with shaky credit, New Century made billions of dollars before record numbers of mortgage defaults led to greater scrutiny of its lending practices and revealed that the company had been under-reporting the number of bad loans that it made in the first three quarters of 2006. It’s hard to imagine what is being rewarded with the bonus money, given recent revelations about the company’s unscrupulous tactics that included pressure from management on employees to approve even the most questionable applications. According to a May 7 report in the Washington Post by David Cho, baseball-bat wielding salesmen in one New Century branch office routinely terrorized appraisers who scrutinized loan applications too closely. Said one appraiser, “The stress in that place was ungodly. It was like selling your soul.”