1287286--3/16/2006--NEW_CENTURY_FINANCIAL

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{loss, insurance, financial}

{investment, property, distribution}

{financial, litigation, operation}

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Risks Related to Our Business We are dependent on external sources of financing, and if we are unable to maintain adequate financing sources, our earnings and our financial position will suffer and jeopardize our ability to continue operations. We face intense competition that could harm our market share and our revenues. A prolonged economic slowdown or a lengthy or severe recession could harm our operations, particularly if it results in a decline in the real estate market. Our earnings may decrease because of increases or decreases in interest rates. Our reliance on cash-out refinancings as a significant source of our origination volume increases the risk that our earnings will be harmed if the demand for this type of refinancing declines. Our accounting policies and methods are fundamental to how we report our financial condition and results of operations, and they may require management to make estimates about matters that are inherently uncertain. Our hedging strategies may not be successful in mitigating our risks associated with interest rates. An increase in mortgage loan prepayments may negatively affect the yields on our assets. The mortgage loans that we hold are subject to the risks of delinquency and foreclosure loss, which could result in losses to us. The geographic concentration of our mortgage loan originations increases our exposure to economic and natural hazard risks specific to those areas. An interruption or reduction in the securitization and whole loan markets would harm our financial position. We may not realize all of the expected benefits of, and we may incur additional costs related to, the acquisition of a mortgage origination platform from RBC Mortgage. If we make any additional acquisitions, we will incur a variety of costs and may never realize the anticipated benefits. Our earnings from holding mortgage-backed securities or government securities may be harmed by changes in the level of interest rates, changes to the difference between short- and longer- term interest rates, changes to the difference between interest rates for these securities compared to other debt instruments, and an absence of or reduction in the availability, at favorable terms, of repurchase financing and other liquidity sources typically utilized by mortgage REITs. A material difference between the assumptions used in the determination of the value of our residual interests and our actual experience could harm our financial position. We may be required to conform to the standards of the recent Ameriquest settlement, which could harm our business. New legislation could restrict our ability to make mortgage loans, which could harm our earnings. Lawsuits challenging our business practices, our competitors and other companies are pending and more may be filed in the future. The scope of our lending and servicing operations exposes us to risks of noncompliance with an increasing and inconsistent body of complex laws and regulations at the federal, state and local levels. Our interest-only mortgage loans may have a higher risk of default than our fully-amortizing mortgage loans and, therefore, may be considered less valuable than other types of mortgage loans in the sales and securitization process. We may incur losses on our mortgage loans even if the mortgage loans are insured by the Federal Housing Administration or guaranteed by the Veterans Administration. The loss of our exemption under the Investment Company Act would harm us and the market price of our shares of common stock and our ability to make distributions to our stockholders. Our inability to realize cash proceeds from mortgage loan sales and securitizations in excess of the loan acquisition cost could harm our financial position. Our credit facilities are subject to margin calls based on the lender s opinion of the value of our mortgage loan collateral. An unanticipated large margin call could harm our liquidity. Our origination and servicing systems depend significantly on automated controls and any failure of these systems could harm our business. Our efforts to increase our servicing activities may be unsuccessful and a decline in the quality of servicing could lower the value of our residual interests and our ability to sell or securitize mortgage loans and could harm the cash flows from our securitizations structured as financings. We are subject to losses due to fraudulent and negligent acts on the part of mortgage loan applicants, mortgage brokers, other vendors and our employees. We may be subject to fines or other penalties based upon the conduct of our independent brokers. We are dependent upon third parties for many of our significant administrative and financial processes. Changes in the volume and cost of mortgage loans originated by our Wholesale Division may decrease our mortgage loan production and decrease our earnings. If many of our borrowers become subject to the Servicemembers Civil Relief Act of 2003, our cash flows from our residual securities and our securitizations structured as financings may be harmed. The inability to attract and retain qualified employees could significantly harm our business. An interruption in or breach of our information systems may result in lost business. The success and growth of our business will depend upon our ability to adapt to and implement technological changes. We may be required to repurchase mortgage loans or indemnify investors if we breach representations and warranties, which could harm our earnings. We are exposed to risk of environmental liabilities with respect to properties to which we take title. If we do not manage our growth effectively, our financial performance could be harmed. We may change our policies in ways that harm our financial condition or results of operations. Compliance with the Sarbanes-Oxley Act of 2002 and proposed and recently enacted changes in securities laws and regulations are likely to increase our costs. Risks Related to New Century Securities The stock price and trading volume of New Century common stock may be volatile, which could result in substantial losses for stockholders and harm our ability to access the capital markets in the future. Future sales of shares of New Century common stock, including shares of common stock by our insiders, may depress the price of New Century common stock. Our board of directors may authorize the issuance of additional securities that may cause dilution and may depress the price of New Century securities. Future offerings of debt securities, which would be senior to New Century common stock and preferred stock in liquidation, or equity securities, which would dilute our existing stockholders interests and may be senior to New Century common stock or existing preferred stock for the purposes of distributions, may harm the market price of New Century securities. The stock ownership limit imposed by our charter may inhibit market activity in our stock and may restrict our business combination opportunities. Certain provisions of Maryland law and our charter and bylaws could hinder, delay or prevent a change in control. We may be contractually prohibited from paying dividends. Federal Income Tax Risks and Risks Associated with Being a REIT If we fail to qualify as a REIT, it could adversely affect our stockholders. REIT distribution requirements could adversely affect our stockholders. Complying with REIT requirements may cause us to forego otherwise attractive opportunities, including certain acquisitions. The tax imposed on REITs engaging in prohibited transactions will limit our ability to engage in transactions, including certain methods of securitizing mortgage loans, that would be treated as sales for federal income tax purposes. We will incur excess inclusion income that will increase the tax liability of our stockholders. Even if we continue to qualify as a REIT, the income earned by our taxable REIT subsidiaries will be subject to federal income tax and we could be subject to an excise tax on non-arm s-length transactions with our taxable REIT subsidiaries.

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1287286--3/16/2006--NEW_CENTURY_FINANCIAL_CORP