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                                                                    EXHIBIT 10.9

                        NEW CENTURY FINANCIAL CORPORATION

                             1995 STOCK OPTION PLAN

                       (Amended and Restated May 30, 1997)

      Composite Plan document reflecting Amendments to the Plan approved by
        shareholders on May 18, 1998, May 17, 1999, May 15, 2000, May 15,
       2001, May 7, 2002, and May 21, 2003, Amendments approved by the
           Board of Directors on November 29, 2000 and March 26, 2002,
                     and the Company's 2003 stock dividend.

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                                TABLE OF CONTENTS

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                                                                                                PAGE

<S>         <C>                                                                                  <C>
I.          THE PLAN..............................................................................1

      1.1                Purpose..................................................................1

      1.2                Administration...........................................................1

      1.3                Participation............................................................2

      1.4                Shares Available Under the Plan..........................................2

      1.5                Grant of Awards..........................................................2

      1.6                Exercise of Awards.......................................................3

      1.7                No Transferability; Limited Exception to Transfer Restrictions...........3

II.         OPTIONS...............................................................................4

      2.1                Grants...................................................................4

      2.2                Option Price.............................................................4

      2.3                Option Period............................................................5

      2.4                Exercise of Options......................................................5

      2.5                Limitations on Grant of Incentive Stock Options..........................5

      2.6                Non-Employee Director Options............................................6

      2.7                No Repricing.............................................................8

III.        STOCK APPRECIATION RIGHTS.............................................................8

      3.1                Grants...................................................................8

      3.2                Exercise of Stock Appreciation Rights....................................8

      3.3                Payment..................................................................9

IV.         RESTRICTED STOCK AWARDS..............................................................10

      4.1                Grants..................................................................10

      4.2                Restrictions............................................................10

V.          PERFORMANCE SHARE AWARDS.............................................................10

      5.1                Grants of Performance Share Awards......................................10

      5.2                Grants of Performance-Based Share Awards................................11
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                                TABLE OF CONTENTS
                                   (continued)

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                                                                                                PAGE
<S>         <C>                                                                                  <C>
VI.         OTHER PROVISIONS.....................................................................12

      6.1                Rights of Eligible Employees, Participants and Beneficiaries............12

      6.2                Adjustments Upon Changes in Capitalization..............................13

      6.3                Termination of Employment...............................................14

      6.4                Acceleration of Awards..................................................16

      6.5                Government Regulations..................................................16

      6.6                Tax Withholding.........................................................16

      6.7                Amendment, Termination and Suspension...................................17

      6.8                Privileges of Stock Ownership...........................................18

      6.9                Effective Date of the Plan..............................................18

      6.10               Term of the Plan........................................................18

      6.11               Governing Law...........................................................18

      6.12               Plan Construction.......................................................18

      6.13               Non-Exclusivity of Plan.................................................19

VII.        DEFINITIONS..........................................................................19

      7.1                Definitions.............................................................19
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                                      -ii-

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                        NEW CENTURY FINANCIAL CORPORATION
                             1995 STOCK OPTION PLAN
                       (Amended and Restated May 30, 1997)

      Composite Plan document reflecting Amendments to the Plan approved by
     shareholders on May 18, 1998, May 17, 1999, May 15, 2000, May 15, 2001,
     May 7, 2002, and May 21, 2003, Amendments approved by the Board of
               Directors on November 29, 2000 and March 26, 2002,
                     and the Company's 2003 stock dividend.

I.      THE PLAN.

        1.1     PURPOSE.

        The purpose of this Plan is to promote the success of the Company by
providing an additional means to attract, motivate and retain key personnel,
consultants, advisors and knowledgeable directors through the grant of Options
and other Awards that provide added long term incentives for high levels of
performance and for significant efforts to improve the financial performance of
the Company. Capitalized terms are defined in Article VII.

        1.2     ADMINISTRATION.

                (a) This Plan shall be administered by the Committee. Action of
        the Committee with respect to the administration of this Plan shall be
        taken pursuant to a majority vote or the unanimous written consent of
        its members. In the event action by the Committee is taken by written
        consent, the action shall be deemed to have been taken at the time
        specified in the consent or, if none is specified, at the time of the
        last signature. The Committee may delegate administrative functions to
        individuals who are officers or employees of the Company.

                (b) Subject to the express provisions of this Plan, the
        Committee shall have the authority to construe and interpret this Plan
        and any agreements defining the rights and obligations of the Company
        and Participants under this Plan, to further define the terms used in
        this Plan, to prescribe, amend and rescind rules and regulations
        relating to the administration of this Plan, to determine the duration
        and purposes of leaves of absence which may be granted to Participants
        without constituting a termination of their employment or consulting
        services for purposes of this Plan, to accelerate or extend the
        exercisability or extend the term of any or all outstanding Awards
        within the maximum term of such Awards required by Section 2.3 or
        applicable law, and to make all other determinations necessary or
        advisable for the administration of this Plan. The determination of the
        Committee on any of the foregoing matters shall be conclusive.

                (c) Any action taken by, or inaction of, the Company, any
        Subsidiary, the Board or the Committee relating to this Plan shall be
        within the absolute discretion of that entity or body. No member of the
        Board or Committee, or

<PAGE>

        officer of the Company or any Subsidiary, shall be liable for any such
        action or inaction.

                (d) In making any determination or in taking or not taking any
        action under this Plan, the Company, any Subsidiary, the Board or the
        Committee may obtain and rely upon the advice of experts, including
        professional advisors to the Company. No member of the Board or
        Committee, or officer of the Company or any Subsidiary, shall be liable
        for any such action or determination made or omitted.

                (e) Subject to the requirements of Section 7.1(h), the Board, at
        any time it so desires, may increase or decrease the number of members
        of the Committee, may remove from membership on the Committee all or any
        portion of its members, and may appoint such person or persons as it
        desires to fill any vacancy existing on the Committee, whether caused by
        removal, resignation or otherwise.

        1.3     PARTICIPATION.

        Awards may be granted only to Eligible Employees. An Eligible Employee
who has been granted an Award may, if otherwise eligible, be granted additional
Awards if the Committee shall so determine. Except as provided in Section 2.6
below, members of the Board who are not officers or employees of the Company
shall not be eligible to receive Awards.

        1.4     SHARES AVAILABLE UNDER THE PLAN.

        Subject to the provisions of Section 6.2, the capital stock that may be
delivered under this Plan shall be shares of the Company's authorized but
unissued Common Stock and any shares of its Common Stock held as treasury
shares. The aggregate maximum number of shares of Common Stock that may be
issued or transferred pursuant to Awards (including Incentive Stock Options)
granted under this Plan shall not exceed 9,750,000 shares. The maximum number of
shares of Common Stock that may be delivered pursuant to options qualified as
Incentive Stock Options granted under the Plan is 9,750,000 shares. The maximum
number of shares that may be subject to Options and Stock Appreciation Rights
that are granted during any calendar year to any individual shall not exceed
750,000 shares. Each of the foregoing numerical limits shall be subject to
adjustment as contemplated by this Section 1.4 and Section 6.2. If any Option
and any related Stock Appreciation Right shall lapse or be cancelled or
terminate without having been exercised in full, or any Common Stock subject to
a Restricted Stock Award shall not vest or any Common Stock subject to a
Performance Share Award shall not have been transferred, the unpurchased,
unvested or nontransferred shares subject thereto shall again be available for
purposes of this Plan.

        1.5     GRANT OF AWARDS.

        Subject to the express provisions of this Plan, the Committee shall
determine from the class of Eligible Employees those individuals to whom Awards
under this Plan shall be granted, the terms of Awards (which need not be
identical) and the number of shares

                                        2

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of Common Stock subject to each Award. Each Award shall be subject to the terms
and conditions set forth in this Plan and such other terms and conditions
established by the Committee as are not inconsistent with the purpose and
provisions of this Plan. The grant of an Award is made on the Award Date.

        1.6     EXERCISE OF AWARDS.

        An Option or Stock Appreciation Right shall be deemed to be exercised
when the Secretary of the Company receives written notice of such exercise from
the Participant, together with payment of the purchase price made in accordance
with Section 2.2(a), except to the extent payment may be permitted to be made
following delivery of written notice of exercise in accordance with Section
2.2(b). Notwithstanding any other provision of this Plan, the Committee may
impose, by rule and in Awards Agreements, such conditions upon the exercise of
Awards (including, without limitation, conditions limiting the time of exercise
to specified periods) as may be required to satisfy applicable regulatory
requirements.

        1.7     NO TRANSFERABILITY; LIMITED EXCEPTION TO TRANSFER RESTRICTIONS.

                (a) Unless otherwise expressly provided below (or pursuant to)
        this Section 1.7, by applicable law and by the Award Agreement, as the
        same may be amended, (i) all Awards are non-transferable and shall not
        be subject in any manner to sale, transfer, anticipation, alienation,
        assignment, pledge, encumbrance or charge; Awards shall be exercised
        only by the Participant; and (ii) amounts payable or shares issuable
        pursuant to an Award shall be delivered only to (or for the account of)
        the Participant.

                (b) The Committee may permit Awards to be exercised by and paid
        to certain persons or entities related to the Participant, including but
        not limited to members of the Participant's immediate family and/or
        charitable institutions, or to such other persons or entities as may be
        approved by the Committee, pursuant to such conditions and procedures as
        the Committee may establish. Any permitted transfer shall be subject to
        the condition that the Committee receive evidence satisfactory to it
        that the transfer is being made for estate and/or tax planning purposes
        on a gratuitous or donative basis and without consideration (other than
        minimal consideration). Notwithstanding the foregoing, Incentive Stock
        Options and Restricted Stock Awards shall be subject to any and all
        additional transfer restrictions under the Code.

                (c) The exercise and transfer restrictions in Section 1.7(a)
        shall not apply to:

                        (i)     transfers to the Company;

                        (ii)    the designation of a beneficiary to receive
                benefits in the event of the Participant's death or, if the
                Participant has died, transfers to or exercise by the
                Participant's beneficiary, or in the absence of a validly

                                        3

<PAGE>

                designated beneficiary, transfers by will or the laws of descent
                and distribution;

                        (iii)   transfers pursuant to a QDRO order if approved
                or ratified by the Committee;

                        (iv)    if the Participant has suffered a Total
                Disability, permitted transfers or exercises on behalf of the
                Participant by his legal representative;

                        (v)     the authorization by the Committee of "cashless
                exercise" procedures with third parties who provide financing
                for the purpose of (or who otherwise facilitate) the exercise of
                Awards consistent with applicable laws and the express
                authorization of the Committee.

II.     OPTIONS.

        2.1     GRANTS.

        One or more Options may be granted to any Eligible Employee. Each Option
so granted shall be designated by the Committee as either a Nonqualified Stock
Option or an Incentive Stock Option; provided, however, that consultants or
advisors may not be granted Incentive Stock Options under the Plan.

        2.2     OPTION PRICE.

                (a) The purchase price per share of Common Stock covered by each
        Option shall be determined by the Committee, but in the case of
        Incentive Stock Options shall not be less than 100% (110% in the case of
        a Participant who owns more than 10% of the total combined voting power
        of all classes of stock of the Company) of the Fair Market Value of the
        Common Stock on the date the Incentive Stock Option is granted. The
        purchase price of any shares purchased shall be paid in full at the time
        of each purchase in one or a combination of the following methods: (i)
        in cash or by check payable to the order of the Company, (ii) if
        authorized by the Committee or specified in the Option being exercised,
        by a promissory note made by the Participant in favor of the Company,
        upon the terms and conditions determined by the Committee, and secured
        by the Common Stock issuable upon exercise in compliance with applicable
        law (including, without limitation, state corporate law and federal
        margin requirements) or (iii) if authorized by the Committee or
        specified in the Option being exercised, by shares of Common Stock of
        the Company already owned by the Participant; provided, however, that
        any shares delivered which were initially acquired upon exercise of a
        stock option must have been owned by the Participant at least six months
        as of the date of delivery. Shares of Common Stock used to satisfy the
        exercise price of an Option shall be valued at their Fair Market Value
        on the date of exercise.

                (b) In addition to the payment methods described in subsection
        (a), the Option may provide that the Option can be exercised and payment
        made by

                                        4

<PAGE>

        delivering a properly executed exercise notice together with irrevocable
        instructions to a bank or broker to promptly deliver to the Company the
        amount of sale or loan proceeds necessary to pay the exercise price and,
        unless otherwise allowed by the Committee, any applicable tax
        withholding under Section 6.6. The Company shall not be obligated to
        deliver certificates for the shares unless and until it receives full
        payment of the exercise price therefor.

        2.3     OPTION PERIOD.

        Each Option and all rights or obligations thereunder shall expire on
such date as shall be determined by the Committee, but not later than 10 years
after the Award Date, and shall be subject to earlier termination as hereinafter
provided.

        2.4     EXERCISE OF OPTIONS.

                (a) Subject to Sections 6.2 and 6.4, an Option may become
        exercisable or vest, in whole or in part, on the date or dates specified
        in the Award Agreement and thereafter shall remain exercisable until the
        expiration or earlier termination of the Option. An Option may be
        exercisable or vest on the Award Date.

                (b) The Committee may, at any time after grant of the Option and
        from time to time, increase the number of shares exercisable at any time
        so long as the total number of shares subject to the Option is not
        increased. No Option shall be exercisable except in respect of whole
        shares, and fractional share interests shall be disregarded. Not less
        than 10 shares of Common Stock may be purchased at one time unless the
        number purchased is the total number at the time available for purchase
        under the terms of the Option.

        2.5     LIMITATIONS ON GRANT OF INCENTIVE STOCK OPTIONS.

                (a) To the extent that the aggregate fair market value of stock
        with respect to which incentive stock options first become exercisable
        by a Participant in any calendar year exceeds $100,000, taking into
        account both Common Stock subject to Incentive Stock Options under this
        Plan and stock subject to incentive stock options under all other plans
        of the Company, such options shall be treated as nonqualified stock
        options. For purposes of determining whether the $100,000 limit is
        exceeded, the fair market value of stock subject to options shall be
        determined as of the date the options are awarded. In reducing the
        number of options treated as incentive stock options to meet the
        $100,000 limit, the most recently granted options shall be reduced
        first. To the extent a reduction of simultaneously granted options is
        necessary to meet the $100,000 limit, the Company may, in the manner and
        to the extent permitted by law, designate which shares of Common Stock
        are to be treated as shares acquired pursuant to the exercise of an
        Incentive Stock Option.

                (b) There shall be imposed in any Award Agreement relating to
        Incentive Stock Options such terms and conditions as are required in
        order that the Option be an "incentive stock option" as that term is
        defined in Section 422 of the Code.

                                        5

<PAGE>

                (c) No Incentive Stock Option may be granted to any person who,
        at the time the Incentive Stock Option is granted, owns shares of
        outstanding Common Stock possessing more than 10% of the total combined
        voting power of all classes of stock of the Company, unless the exercise
        price of such Option is at least 110% of the Fair Market Value of the
        stock subject to the Option and such Option by its terms is not
        exercisable after the expiration of five years from the date such Option
        is granted.

        2.6     NON-EMPLOYEE DIRECTOR OPTIONS.

                (a) Participation. Options under this Section 2.6 shall be
        granted only to Non-Employee Directors. Options granted pursuant to this
        Section 2.6 will be evidenced by Award Agreements the forms of which
        have been approved by the Board. Option grants contemplated by this
        Section 2.6 shall be made without any further action by the Board or the
        Committee.

                (b) 2001 Option Grants. Upon the date of the Company's annual
        meeting of stockholders in 2001, each Non-Employee Director then in
        office (or elected to office at such meeting) who continues as a
        Non-Employee Director after such meeting shall automatically be granted
        a Nonqualified Stock Option (the Award Date of which shall be the date
        of such meeting) to purchase 25,000 shares of Common Stock.

                (c) Initial Option Grants. Upon an individual's initial election
        to the Board as a Non-Employee Director (or initial appointment to the
        Board as a Non-Employee Director), such Non-Employee Director shall
        automatically be granted a Nonqualified Stock Option (the Award Date of
        which shall be the date of such election or appointment) to purchase
        22,500 shares of Common Stock. Notwithstanding the foregoing, a
        Non-Employee Director whose initial election or appointment to the Board
        as a Non-Employee Director occurs in 2001 and on or before the date of
        the Company's annual meeting of stockholders in 2001 shall be eligible
        to be granted an Option under Section 2.6(b) but shall not be granted an
        Option under this Section 2.6(c) (or the predecessor provision to this
        Section 2.6(c)).

                (d) Annual Option Grants. Each Non-Employee Director then
        continuing in office shall automatically be granted on the day of the
        Company's annual stockholders meeting in each year during the term of
        this Plan commencing in 2002 a Nonqualified Stock Option (the Award Date
        of which shall be the date of such meeting) to purchase 15,000 shares of
        Common Stock. Notwithstanding the foregoing, a Non-Employee Director
        shall not be granted an Option under this Section 2.6(d) if, during the
        same calendar year, he or she had been granted or is then entitled to an
        Option grant under Section 2.6(b) or under Section 2.6(c) (or the
        predecessor provision to Section 2.6(c)).

                (e) Option Price. The purchase price per share of the Common
        Stock covered by each Option granted pursuant to this Section 2.6 shall
        be one hundred

                                        6

<PAGE>

        percent of the Fair Market Value of the Common Stock on the Award Date.
        The purchase price of any shares purchased shall be paid in full at the
        time of each purchase in cash or by check or in shares of Common Stock
        valued at their Fair Market Value on the business day next preceding the
        date of exercise of the Option, or partly in such shares and partly in
        cash.

                (f) Option Period. Each Option granted under this Section 2.6
        and all rights or obligations thereunder shall expire on the tenth
        anniversary of the Award Date and shall be subject to earlier
        termination as provided below.

                (g) Exercise of Options. Except as otherwise provided in the
        applicable Award Agreement and Sections 2.6(h) and 2.6(i), each Option
        granted under this Section 2.6 shall become exercisable according to the
        following schedule: (i) one-third of the total number of shares subject
        to the Option shall become exercisable on the May 1 that occurs in the
        first calendar year following the calendar year in which the Award Date
        occurs, (ii) an additional one-third of the total number of shares
        subject to the Option shall become exercisable on the May 1 that occurs
        in the second calendar year following the calendar year in which the
        Award Date occurs, and (iii) the remaining number of shares subject to
        the Option shall become exercisable on the May 1 that occurs in the
        third calendar year following the calendar year in which the Award Date
        occurs.

                (h) Termination of Directorship. If a Non-Employee Director
        Participant's services as a member of the Board terminate, each Option
        granted pursuant to this Section 2.6 to such Non-Employee Director
        Participant which is not then exercisable shall terminate; provided,
        however, that if a Non-Employee Director Participant's services as a
        member of the Board terminate by reason of death or Total Disability,
        either the Board or the Committee may, in its discretion, consider to be
        exercisable a greater portion of any such Option than would otherwise be
        exercisable, upon such terms as the Board or the Committee shall
        determine. If a Non-Employee Director Participant's services as a member
        of the Board terminate by reason of death or Total Disability, any
        portion of any such Option which is then exercisable may be exercised
        for one year after the date of such termination or the balance of such
        Option's term, whichever period is shorter. If a Non-Employee Director
        Participant's services as a member of the Board terminate for any other
        reason, any portion of any such Option which is then exercisable may be
        exercised for six months after the date of such termination or the
        balance of such Option's term, whichever period is shorter.

                (i) Acceleration Upon an Event. Immediately prior to the
        occurrence of an Event, in order to protect the holders of Options
        granted under this Section 2.6, each Option granted under this Section
        2.6 and then outstanding shall become exercisable in full.

                (j) Adjustments. The specific numbers of shares stated in
        Sections 2.6(b), 2.6(c) and 2.6(d) and the consideration payable for
        such shares shall be subject to adjustment in certain events as provided
        in Section 6.2 of this Plan.

                                        7

<PAGE>

                (k) Prior Option Grants. Options granted under this Section 2.6
        prior to the amendment of this Section 2.6 in 2001 shall be governed by
        the provisions of this Section 2.6 as in effect on the Award Date of the
        respective Option.

                (l) Limits. Option grants under this Section 2.6 that would
        otherwise exceed the maximum number of shares otherwise available for
        Award grants under this Plan shall be prorated within such limitation.

        2.7     NO REPRICING.

        Subject to Section 1.4 and Section 6.7 and the specific limitations on
Options contained in this Plan, the Committee from time to time may authorize,
generally or in specific cases only, for the benefit of any Eligible Employee,
any adjustment in the exercise price, the number of shares subject to or the
term of, an Option granted under this Plan by cancellation of an outstanding
Option and a subsequent regranting of an Option, by amendment, by substitution
of an outstanding Option, by waiver or by other legally valid means; provided,
however, that no such amendment or other action (other than adjustments
contemplated by Section 6.2) shall constitute or result in a repricing of an
outstanding Option to a per share exercise price that is less than the Fair
Market Value of a share of Common Stock on the original Award Date of the
initial Option at issue without stockholder approval of such amendment or other
action.

III.    STOCK APPRECIATION RIGHTS.

        3.1     GRANTS.

        In its discretion, the Committee may grant Stock Appreciation Rights
concurrently with the grant of Options. A Stock Appreciation Right shall extend
to all or a portion of the shares covered by the related Option. A Stock
Appreciation Right shall entitle the Participant who holds the related Option,
upon exercise of the Stock Appreciation Right and surrender of the related
Option, or portion thereof, to the extent the Stock Appreciation Right and
related Option each were previously unexercised, to receive payment of an amount
determined pursuant to Section 3.3. Any Stock Appreciation Right granted in
connection with an Incentive Stock Option shall contain such terms as may be
required to comply with the provisions of Section 422 of the Code and the
regulations promulgated thereunder. In its discretion, the Committee may also
grant Stock Appreciation Rights independently of any Option subject to such
conditions as the Committee may in its absolute discretion provide.

        3.2     EXERCISE OF STOCK APPRECIATION RIGHTS.

                (a) A Stock Appreciation Right granted concurrently with an
        Option shall be exercisable only at such time or times, and to the
        extent, that the related Option shall be exercisable and only when the
        Fair Market Value of the stock subject to the related Option exceeds the
        exercise price of the related Option.

                (b) In the event that a Stock Appreciation Right granted
        concurrently with an Option is exercised, the number of shares of Common
        Stock subject to the

                                        8

<PAGE>

        related Option shall be charged against the maximum amount of Common
        Stock that may be issued or transferred pursuant to Awards under this
        Plan. The number of shares subject to the Stock Appreciation Right and
        the related Option of the Participant shall also be reduced by such
        number of shares.

                (c) If a Stock Appreciation Right granted concurrently with an
        Option extends to less than all the shares covered by the related Option
        and if a portion of the related Option is thereafter exercised, the
        number of shares subject to the unexercised Stock Appreciation Right
        shall be reduced only if and to the extent that the remaining number of
        shares covered by such related Option is less than the remaining number
        of shares subject to such Stock Appreciation Right.

                (d) A Stock Appreciation Right granted independently of any
        Option shall be exercisable pursuant to the terms of the Award
        Agreement.

        3.3     PAYMENT.

                (a) Upon exercise of a Stock Appreciation Right and surrender of
        an exercisable portion of the related Option, the Participant shall be
        entitled to receive payment of an amount determined by multiplying

                        (i)     the difference obtained by subtracting the
                exercise price per share of Common Stock under the related
                Option from the Fair Market Value of a share of Common Stock on
                the date of exercise of the Stock Appreciation Right, by

                        (ii)    the number of shares with respect to which the
                Stock Appreciation Right shall have been exercised.

                (b) The Committee, in its sole discretion, may settle the amount
        determined under paragraph (a) above solely in cash, solely in shares of
        Common Stock (valued at Fair Market Value on the date of exercise of the
        Stock Appreciation Right), or partly in such shares and partly in cash,
        provided that the Committee shall have determined that such exercise and
        payment are consistent with applicable law. In any event, cash shall be
        paid in lieu of fractional shares. Absent a determination to the
        contrary, all Stock Appreciation Rights shall be settled in cash as soon
        as practicable after exercise. The exercise price for the Stock
        Appreciation Right shall be the exercise price of the related Option.
        Notwithstanding the foregoing, the Committee may, in the Award
        Agreement, determine the maximum amount of cash or stock or a
        combination thereof which may be delivered upon exercise of a Stock
        Appreciation Right.

                (c) Upon exercise of a Stock Appreciation Right granted
        independently of any Option, the Participant shall be entitled to
        receive payment of an amount based on a percentage, specified in the
        Award Agreement, of the difference obtained by subtracting the Fair
        Market Value per share of Common Stock on the Award Date from the Fair
        Market Value per share of Common Stock on the date

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<PAGE>

        of exercise of the Stock Appreciation Right. Such amount shall be paid
        as described in paragraph (b) above.

IV.     RESTRICTED STOCK AWARDS.

        4.1     GRANTS.

        Subject to Section 1.4, the Committee may, in its discretion, grant one
or more Restricted Stock Awards to any Eligible Employee. Each Restricted Stock
Award agreement shall specify the number of shares of Common Stock to be issued
to the Participant, the date of such issuance, the price, if any, to be paid for
such shares by the Participant and the restrictions imposed on such shares,
which restrictions shall not terminate earlier than six months after the Award
Date.

        4.2     RESTRICTIONS.

                (a) Shares of Common Stock included in Restricted Stock Awards
        may not be sold, assigned, transferred, pledged or otherwise disposed of
        or encumbered, either voluntarily or involuntarily, until such shares
        have vested.

                (b) Participants receiving Restricted Stock shall be entitled to
        dividend and voting rights for the shares issued even though they are
        not vested, provided that such rights shall terminate immediately as to
        any forfeited Restricted Stock.

                (c) In the event that the Participant shall have paid cash in
        connection with the Restricted Stock Award, the Award Agreement shall
        specify whether and to what extent such cash shall be returned upon a
        forfeiture (with or without an earnings factor).

V.      PERFORMANCE SHARE AWARDS.

        5.1     GRANTS OF PERFORMANCE SHARE AWARDS.

        The Committee may, in its discretion, grant Performance Share Awards to
Eligible Employees based upon such factors as the Committee shall determine. A
Performance Share Award agreement shall specify the number of shares of Common
Stock (if any) subject to the Performance Share Award, the price, if any, to be
paid for any such shares by the Participant and the conditions upon which
payment or issuance to the Participant shall be based. The amount of cash or
shares or other property that may be deliverable pursuant to a Performance Share
Award shall be based upon the degree of attainment over a specified period of
not more than 10 years (a "performance cycle") as may be established by the
Committee of such measure(s) of the performance of the Company (or any part
thereof) or the Participant as may be established by the Committee. The
Committee may provide for full or partial credit, prior to completion of such
performance cycle or the attainment of the performance achievement specified in
the Award in the event of the Participant's death, Retirement, or Total
Disability, an Event or in such other circumstances as the Committee, consistent
with Section 6.12, may determine.

                                       10

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        5.2     GRANTS OF PERFORMANCE-BASED SHARE AWARDS.

        Without limiting the generality of the foregoing, and in addition to
Options and Stock Appreciation Rights granted under other provisions of this
Plan which are intended to satisfy the exception for "performance-based
compensation" under Section 162(m) of the Code (with such Awards hereinafter
referred to as "Qualifying Options" or "Qualifying Stock Appreciation Rights,"
respectively), other performance-based awards within the meaning of Section
162(m) of the Code ("Performance-Based Awards"), whether in the form of
Cash-Based Awards, restricted stock, performance stock, phantom stock or other
rights, the grant, vesting, exercisability, or payment of which depends on the
degree of achievement of the Performance Goals relative to preestablished
targeted levels for the Company or a consolidated segment, subsidiary, or
division of the Company, may be granted under this Plan. Any Qualifying Option
or Qualifying Stock Appreciation Right shall be subject only to the requirements
of subsections (a) and (c) below in order for such Awards to satisfy the
requirements for Performance-Based Awards under this Section 5.2. With the
exception of any Qualifying Option or Qualifying Stock Appreciation Right, an
Award that is intended to satisfy the requirements of this Section 5.2 shall be
designated as a Performance-Based Award at the time of grant.

                (a) The eligible class of persons for Performance-Based Awards
        under this Section shall be executive officers of the Company.

                (b) The applicable performance goals for Performance-Based
        Awards (other than Qualifying Options) shall be, on an absolute or
        relative basis, one or more of the Performance Goals, as selected by the
        Committee in its sole discretion. The Committee shall establish in the
        applicable Award Agreement the specific performance targets(s) relative
        to the Performance Goal(s) which must be attained before the
        compensation under the Performance-Based Award becomes payable. The
        specific targets shall be determined within the time period permitted
        under Section 162(m) of the Code (and any regulations issued thereunder)
        so that such targets are considered to be preestablished and so that the
        attainment of such targets is substantially uncertain at the time of
        their establishment. The applicable performance measurement period may
        not be less than one nor more than 10 years.

                (c) Notwithstanding any other provision of the Plan to the
        contrary, the maximum number of shares of Common Stock which may be
        delivered pursuant to Awards qualified as Performance-Based Awards to
        any Participant in any calendar year shall not exceed 750,000 shares,
        either individually or in the aggregate, subject to adjustment as
        provided in Section 6.2. Awards that are cancelled during the year shall
        be counted against this limit to the extent required by Section 162(m)
        of the Code. In addition, the aggregate amount of compensation to be
        paid to any Participant in any calendar year in respect of any
        Cash-Based Awards granted during any calendar year as Performance-Based
        Awards shall not exceed $1,000,000.

                                       11

<PAGE>

                (d) Before any Performance-Based Award under this Section 5.2 is
        paid (other than a Qualifying Option or Qualifying Stock Appreciation
        Right), the Committee must certify in writing that the Performance Goals
        and any other material terms of the Performance-Based Award were
        satisfied; provided, however, that a Performance-Based Award may be paid
        without regard to the satisfaction of the applicable Performance Goal(s)
        with respect to an Event in accordance with Section 6.4.

                (e) The Committee will have discretion to determine the
        restrictions or other limitations of the individual Awards under this
        Section 5.2 (including the authority to reduce Awards, payouts or
        vesting or to pay no Awards, in its sole discretion, if the Committee
        preserves such authority at the time of grant by language to this effect
        in its authorizing resolutions or otherwise).

                (f) In the event of a change in corporate capitalization, such
        as a stock split or stock dividend, or a corporate transaction, such as
        a merger, consolidation, spinoff, reorganization or similar event, or
        any partial or complete liquidation of the Company, or any similar event
        consistent with the regulations issued under Section 162(m) of the Code
        including, without limitation, any material change in accounting
        policies or practices affecting the Company and/or the Performance Goals
        or targets, then the Committee may make adjustments to the Performance
        Goals and targets relating to outstanding Performance-Based Awards to
        the extent such adjustments are made to reflect the occurrence of such
        an event; provided, however, that adjustments described in this
        subsection may be made only to the extent that the occurrence of an
        event described herein was unforeseen at the time the targets for a
        Performance-Based Award were established by the Committee.

VI.     OTHER PROVISIONS.

        6.1     RIGHTS OF ELIGIBLE EMPLOYEES, PARTICIPANTS AND BENEFICIARIES.

                (a) Status as an Eligible Employee shall not be construed as a
        commitment that any Award will be granted under this Plan to any
        Eligible Employee generally.

                (b) Nothing contained in this Plan (or in Award Agreements or in
        any other documents related to this Plan or to Awards) shall confer upon
        any Eligible Employee or Participant any right to continue in the
        service or employ of the Company or a Subsidiary or constitute any
        contract or agreement of service or employment, or interfere in any way
        with the right of the Company or a Subsidiary to reduce such person's
        compensation or other benefits or to terminate the services or
        employment of such Eligible Employee or Participant, with or without
        cause, but nothing contained in this Plan or any document related
        thereto shall affect any independent contractual right of any Eligible
        Employee or Participant. Nothing contained in this Plan or any document
        related hereto shall influence the construction or interpretation of the
        Company's Certificate of Incorporation or Bylaws regarding service on
        the Board.

                                       12

<PAGE>

                (c) Options payable under this Plan shall be payable in shares
        and no special or separate reserve, fund or deposit shall be made to
        assure payment of such Options. No Participant, Beneficiary or other
        person shall have any right, title or interest in any fund or in any
        specific asset (including shares of Common Stock) of the Company by
        reason of any Award granted hereunder. Neither the provisions of this
        Plan (or of any documents related hereto), nor the creation or adoption
        of this Plan, nor any action taken pursuant to the provisions of this
        Plan shall create, or be construed to create, a trust of any kind or a
        fiduciary relationship between the Company (or any Subsidiary) and any
        Participant, Beneficiary or other person. To the extent that a
        Participant, Beneficiary or other person acquires a right to receive an
        Award hereunder, such right shall be no greater than (and will be
        subordinate to) the right of any unsecured general creditor of the
        Company.

        6.2     ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.

                (a) If the outstanding shares of Common Stock are changed into
        or exchanged for cash or a different number or kind of shares or
        securities of the Company or of another issuer, or if additional shares
        or new or different securities are distributed with respect to the
        outstanding shares of the Common Stock, through a reorganization or
        merger to which the Company is a party, or through a combination,
        consolidation, recapitalization, reclassification, stock split, stock
        dividend, reverse stock split, stock consolidation or other capital
        change or adjustment, an appropriate adjustment shall be made in the
        number and kind of shares or other consideration that is subject to or
        may be delivered under this Plan and pursuant to outstanding Awards. A
        corresponding adjustment to the consideration payable with respect to
        Awards granted prior to any such change and to the price, if any, paid
        in connection with Restricted Stock Awards or Performance Share Awards
        shall also be made. Any such adjustment, however, shall be made without
        change in the total payment, if any, applicable to the portion of the
        Award not exercised but with a corresponding adjustment in the price for
        each share. Corresponding adjustments shall be made with respect to
        Stock Appreciation Rights based upon the adjustments made to the Options
        to which they are related or, in the case of Stock Appreciation Rights
        granted independently of any Option, based upon the adjustments made to
        Common Stock.

                (b) Upon the dissolution or liquidation of the Company, or upon
        a reorganization, merger or consolidation of the Company with one or
        more corporations as a result of which the Company is not the surviving
        corporation, the Plan shall terminate. Notwithstanding the foregoing,
        the Committee may provide in writing in connection with, or in
        contemplation of, any such transaction for any or all of the following
        alternatives (separately or in combinations): (i) for the assumption by
        the successor corporation of the Awards theretofore granted or the
        substitution by such corporation for such Awards of Awards covering the
        stock of the successor corporation, or a parent or subsidiary thereof,
        with appropriate adjustments as to the number and kind of shares and
        prices; (ii) for the

                                       13

<PAGE>

        continuance of this Plan by such successor corporation in which event
        this Plan and the Options shall continue in the manner and under the
        terms so provided; or (iii) for the payment in cash or shares of Common
        Stock in lieu of and in complete satisfaction of such Awards.

                (c) In adjusting Awards to reflect the changes described in this
        Section 6.2, or in determining that no such adjustment is necessary, the
        Committee may rely upon the advice of independent counsel and
        accountants of the Company, and the determination of the Committee shall
        be conclusive. No fractional shares of stock shall be issued under this
        Plan on account of any such adjustment.

        6.3     TERMINATION OF EMPLOYMENT.

                (a) If the Participant's service to or employment by the Company
        and its Subsidiaries terminates for any reason other than Retirement,
        death or Total Disability, the Participant shall have, subject to
        earlier termination pursuant to or as contemplated by Section 2.3,
        thirty days or such shorter period as is provided in the Award
        Agreements from the date of termination of services or employment to
        exercise any Option to the extent it shall have become exercisable on
        the date of termination of employment, and any Option not exercisable on
        that date shall terminate. Notwithstanding the preceding sentence, in
        the event the Participant is discharged for cause as determined by the
        Committee in its sole discretion, all Options shall lapse immediately
        upon such termination of services or employment.

                (b) If the Participant's service to or employment by the Company
        and its Subsidiaries terminates as a result of Retirement or Total
        Disability, the Participant or Participant's Personal Representative, as
        the case may be, shall have, subject to earlier termination pursuant to
        or as contemplated by Section 2.3, 3 months or such shorter period as is
        provided in the Award Agreements from the date of termination of
        services or employment to exercise any Option to the extent it shall
        have become exercisable by the date of termination of services or
        employment and any Option not exercisable on that date shall terminate.

                (c) If the Participant's service to or employment by the Company
        and its Subsidiaries terminates as a result of death while the
        Participant is rendering services to the Company (or a Subsidiary) or is
        employed by the Company (or a Subsidiary) or during the 3 month period
        referred to in subsection (b) above, the Participant's Option shall be
        exercisable by the Participant's Beneficiary, subject to earlier
        termination pursuant to or as contemplated by Section 2.3, during the 3
        month period or such shorter period as is provided in the Award
        Agreements following the Participant's death, as to all or any part of
        the shares of Common Stock covered thereby to the extent exercisable on
        the date of death (or earlier termination).

                (d) Each Stock Appreciation Right granted concurrently with an
        Option shall have the same termination provisions and exercisability
        periods as the

                                       14

<PAGE>

        Option to which it relates. The termination provisions and
        exercisability periods of any Stock Appreciation Right granted
        independently of an Option shall be established in accordance with
        Section 3.2(d). The exercisability period of a Stock Appreciation Right
        shall not exceed that provided in Section 2.3 or in the related Award
        Agreement and the Stock Appreciation Right shall expire at the end of
        such exercisability period.

                (e) In the event of termination of services to or employment
        with the Company and its Subsidiaries for any reason, (i) shares of
        Common Stock subject to the Participant's Restricted Stock Award shall
        be forfeited in accordance with the provisions of the related Award
        Agreement to the extent such shares have not become vested on that date;
        and (ii) shares of Common Stock subject to the Participant's Performance
        Share Award shall be forfeited in accordance with the provisions of the
        related Award Agreement to the extent such shares have not been issued
        or become issuable on that date.

                (f) In the event of termination of services to or employment
        with the Company and its Subsidiaries for any reason, other than
        discharge for cause, the Committee may, in its discretion, increase the
        portion of the Participant's Award available to the Participant, or
        Participant's Beneficiary or Personal Representative, as the case may
        be, upon such terms as the Committee shall determine.

                (g) If an entity ceases to be a Subsidiary, such action shall be
        deemed for purposes of this Section 6.3 to be a termination of services
        or employment of each consultant or employee of that entity who does not
        continue as a consultant or as an employee of another entity within the
        Company.

                (h) Upon forfeiture of a Restricted Stock Award pursuant to this
        Section 6.3, the Participant, or his or her Beneficiary or Personal
        Representative, as the case may be, shall transfer to the Company the
        portion of the Restricted Stock Award not vested at the date of
        termination of services or employment, without payment of any
        consideration by the Company for such transfer unless the Participant
        paid a purchase price in which case repayment, if any, of that price
        shall be governed by the Award Agreement. Notwithstanding any such
        transfer to the Company, or failure, refusal or neglect to transfer, by
        the Participant, or his or her Beneficiary or Personal Representative,
        as the case may be, such nonvested portion of any Restricted Stock Award
        shall be deemed transferred automatically to the Company on the date of
        termination of services or employment. The Participant's original
        acceptance of the Restricted Stock Award shall constitute his or her
        appointment of the Company and each of its authorized representatives as
        attorney(s)-in-fact to effect such transfer and to execute such
        documents as the Company or such representatives deem necessary or
        advisable in connection with such transfer.

                                       15

<PAGE>

        6.4     ACCELERATION OF AWARDS.

                (a) Unless prior to an Event the Board determines that, upon its
        occurrence, there shall be no acceleration of Awards or determines those
        selected Awards which shall be accelerated and the extent to which they
        shall be accelerated, upon the occurrence of an Event (i) each Option
        and each related Stock Appreciation Right shall become immediately
        exercisable to the full extent theretofore not exercisable, (ii)
        Restricted Stock shall immediately vest free of restrictions and (iii)
        the number of shares covered by each Performance Share Award shall be
        issued to the Participant; subject, however, to compliance with
        applicable regulatory requirements, including without limitation Section
        422 of the Code. For purposes of this section only, the Board shall mean
        the Board as constituted immediately prior to the Event.

                (b) If any Option or other right to acquire Common Stock under
        this Plan has been fully accelerated as permitted by Section 6.4(a) but
        is not exercised prior to (i) a dissolution of the Corporation, or (ii)
        an event described in Section 6.2 that the Corporation does not survive,
        such Option or right shall thereupon terminate, subject to any provision
        that has been expressly made by the Committee pursuant to Section 6.2(b)
        for the survival, substitution, exchange or other settlement of such
        Option or right.

        6.5     GOVERNMENT REGULATIONS.

        This Plan, the granting and vesting of Awards under this Plan and the
issuance or transfer of shares of Common Stock (and/or the payment of money)
pursuant thereto are subject to compliance with all applicable federal and state
laws, rules and regulations (including but not limited to state and federal
securities law and federal margin requirements) and to such approvals by any
listing, regulatory or governmental authority as may, in the opinion of counsel
for the Company, be necessary or advisable in connection therewith. Any
securities delivered under this Plan shall be subject to such restrictions, and
the person acquiring such securities shall, if requested by the Company, provide
such assurances and representations to the Company as the Company may deem
necessary or desirable to assure compliance with all applicable legal
requirements.

        6.6     TAX WITHHOLDING.

                (a) Upon the disposition by a Participant or other person of
        shares of Common Stock acquired pursuant to the exercise of an Incentive
        Stock Option prior to satisfaction of the holding period requirements of
        Section 422 of the Code, or upon the exercise of a Nonqualified Stock
        Option, the exercise of a Stock Appreciation Right, the vesting of a
        Restricted Stock Award or the payment of a Performance Share Award the
        Company shall have the right at its option to (i) require such
        Participant or such other person to pay by cash or check payable to the
        Company, the amount of any taxes which the Company or a Subsidiary may
        be required to withhold with respect to such transactions or (ii) deduct
        from amounts paid in cash the amount of any taxes which the Company or a
        Subsidiary

                                       16

<PAGE>

        may be required to withhold with respect to such cash amounts. The above
        notwithstanding, in any case where a tax is required to be withheld in
        connection with the issuance or transfer of shares of Common Stock under
        this Plan, the Participant may elect, pursuant to such rules as the
        Committee may establish, to have the Company reduce the number of such
        shares issued or transferred by the appropriate number of shares to
        accomplish such withholding.

                (b) The Committee may, in its discretion, permit a loan from the
        Company to a Participant in the amount of any taxes which the Company or
        a Subsidiary may be required to withhold with respect to shares of
        Common Stock received pursuant to a transaction described in subsection
        (a) above. Such a loan will be for a term, at a rate of interest and
        pursuant to such other terms and rules as the Committee may establish.

        6.7     AMENDMENT, TERMINATION AND SUSPENSION.

                (a) The Board may, at any time, terminate or, from time to time,
        amend, modify or suspend this Plan (or any part hereof). In addition,
        the Committee may, from time to time, amend or modify any provision of
        this Plan except Section 6.4 and, with the consent of the Participant,
        make such modifications of the terms and conditions of such
        Participant's Award as it shall deem advisable. The Committee, with the
        consent of the Participant, may also amend the terms of any Option to
        provide that the Option price of the shares remaining subject to the
        original Award shall be reestablished at a price not less than 100% of
        the Fair Market Value of the Common Stock on the effective date of the
        amendment. No modification of any other term or provision of any Option
        which is amended in accordance with the foregoing shall be required,
        although the Committee may, in its discretion, make such further
        modifications of any such Option as are not inconsistent with or
        prohibited by this Plan. No Awards may be granted during any suspension
        of this Plan or after its termination.

                (b) If an amendment would materially (i) increase the benefits
        accruing to Participants, (ii) increase the aggregate number of shares
        which may be issued under this Plan, or (iii) modify the requirements of
        eligibility for participation in this Plan, the amendment shall be
        approved by the Board and, to the extent then required by applicable law
        or deemed necessary or desirable by the Board, by a majority of the
        shareholders.

                (c) In the case of Awards issued before the effective date of
        any amendment, suspension or termination of this Plan, such amendment,
        suspension or termination of the Plan shall not, without specific action
        of the Board or the Committee and the consent of the Participant, in any
        way modify, amend, alter or impair any rights or obligations under any
        Award previously granted under the Plan.

                                       17

<PAGE>

        6.8     PRIVILEGES OF STOCK OWNERSHIP.

        Except as otherwise expressly authorized by the Committee or under this
Plan, a Participant shall not be entitled to any privilege of stock ownership as
to any shares of Common Stock not actually delivered to and held of record by
him or her. No adjustment will be made for dividends or other rights as a
shareholder for which a record date is prior to such date of delivery.

        6.9     EFFECTIVE DATE OF THE PLAN.

        This Plan shall be effective upon its approval by the Board, subject to
approval by the shareholders of the Company within twelve months from the date
of such Board approval.

        6.10    TERM OF THE PLAN.

        Unless previously terminated by the Board, this Plan shall terminate ten
years after the Effective Date of the Plan, and no Awards shall be granted under
it thereafter, but such termination shall not affect any Award theretofore
granted.

        6.11    GOVERNING LAW.

        This Plan and the documents evidencing Awards and all other related
documents shall be governed by, and construed in accordance with, the laws of
the State of California. If any provision shall be held by a court of competent
jurisdiction to be invalid and unenforceable, the remaining provisions of this
Plan shall continue to be fully effective.

        6.12    PLAN CONSTRUCTION.

                (a) It is the intent of the Company that transactions in and
        affecting Awards in the case of Participants who are or may be subject
        to Section 16 of the Exchange Act satisfy any then applicable
        requirements of Rule 16b-3 so that such persons (unless they otherwise
        agree) will be entitled to the benefits of such rule or other exemptive
        rules under Section 16 of the Exchange Act in respect of those
        transactions and will not be subjected to avoidable liability
        thereunder. If any provision of the Plan or of any Award would frustrate
        or otherwise conflict with the intent expressed above, that provision to
        the extent possible shall be interpreted as to avoid such conflict. If
        the conflict remains irreconcilable, the Committee may disregard the
        provision if it concludes that to do so furthers the interest of the
        Company and is consistent with the purposes of the Plan as to such
        persons in the circumstances.

                (b) It is the further intent of the Company that Options and
        Stock Appreciation Rights with an exercise or base price not less than
        Fair Market Value on the date of grant and Performance Share Awards
        under Section 5.2 of this Plan that are granted to or held by a person
        subject to Section 16 of the

                                       18

<PAGE>

        Exchange Act shall qualify as performance-based compensation under
        Section 162(m) of the Code, and this Plan shall be interpreted
        consistent with such intent.

        6.13    NON-EXCLUSIVITY OF PLAN.

        Nothing in this plan shall limit or be deemed to limit the authority of
the Board to grant options, stock awards or authorize any other compensations
under any other plan or authority.

VII.    DEFINITIONS.

        7.1     DEFINITIONS.

                (a) "Award" means an Option, which may be designated as a
        Nonqualified Stock Option or an Incentive Stock Option, a Stock
        Appreciation Right, Restricted Stock Award, Performance Share Award or
        Performance-Based Award.

                (b) "Award Agreement" means a written agreement setting forth
        the terms of an Award.

                (c) "Award Date" means the date upon which the Committee took
        the action granting an Award or such later date as is prescribed by the
        Committee or, in the case of Options granted under Section 2.6, the date
        specified in such Section 2.6.

                (d) "Beneficiary" means the person, persons, trust or trusts
        entitled by will or the laws of descent and distribution to receive the
        benefits specified under this Plan in the event of a Participant's
        death.

                (e) "Board" means the Board of Directors of the Company.

                (f) "Cash-Based Awards" mean Awards that, if paid, must be paid
        in cash and that are neither denominated in nor have derived the value
        of, nor an exercise or conversion privilege at a price related to,
        shares of Common Stock.

                (g) "Cash Flow" shall mean cash and cash equivalents derived
        from either (i) net cash flow from operations, or (ii) net cash flow
        from operations, financings and investing activities, as determined by
        the Committee at the time the Award is granted.

                (h) "Code" means the Internal Revenue Code of 1986, as amended
        from time to time.

                (i) "Commission" means the Securities and Exchange Commission.

                                       19

<PAGE>

                (j) "Committee" means the Board or a committee appointed by the
        Board to administer this Plan, which committee shall be comprised only
        of two or more directors or such greater number of directors as may be
        required under applicable law, each of whom (i) in respect of any
        transaction at a time when the affected Participant may be subject to
        Section 162(m) of the Code, shall be an "outside director" within the
        meaning of Section 162(m) of the Code, and (ii) in respect of any
        transaction at a time when the affected Participant may be subject to
        Section 16 of the Exchange Act, shall be a "Non-Employee Director"
        within the meaning of Rule 16b-3(b)(3) under the Exchange Act.

                (k) "Common Stock" means the Common Stock of the Company.

                (l) "Company" means New Century Financial Corporation, a
        Delaware corporation, and its successors.

                (m) "Director" means member of the board of Directors of the
        Company or any person performing similar functions with respect to the
        Company.

                (n) "Earnings Per Share" shall mean earnings per share of Common
        Stock on a fully diluted basis determined by dividing (i) net earnings,
        less dividends on any preferred stock of the Company, by (ii) the
        weighted average number of common shares and common share equivalents
        outstanding.

                (o) "Eligible Employee" means (i) an officer or key employee of
        the Company or a Subsidiary and (ii) any individual consultant or
        advisor who renders or has rendered bona fide services (other than
        services in connection with the offering or sale of securities of the
        Company in a capital raising transaction) to the Company, and who is
        selected to participate in this Plan by the Committee.

                (p) "Event" means any of the following:

                        (i)     Approval by the shareholders of the Company of
                the dissolution or liquidation of the Company;

                        (ii)    Approval by the shareholders of the Company of
                an agreement to merge or consolidate, or otherwise reorganize,
                with or into one or more entities other than Subsidiaries, as a
                result of which less than 50% of the outstanding voting
                securities of the surviving or resulting entity are, or are to
                be, owned by former shareholders of the Company; or

                        (iii)   Approval by the shareholders of the Company of
                the sale of substantially all of the Company's business assets
                to a person or entity which is not a Subsidiary.

                (q) "Exchange Act" means the Securities Exchange Act of 1934, as
        amended.

                                       20

<PAGE>

                (r) "Fair Market Value" means (i) if the stock is listed or
        admitted to trade on a national securities exchange, the closing price
        of the stock on the Composite Tape, as published in the Western Edition
        of The Wall Street Journal, of the principal national securities
        exchange on which the stock is so listed or admitted to trade, on such
        date, or, if there is no trading of the stock on such date, then the
        closing price of the stock as quoted on such Composite Tape on the next
        preceding date on which there was trading in such shares; (ii) if the
        stock is not listed or admitted to trade on a national securities
        exchange, the last price for the stock on such date, as furnished by the
        National Association of Securities Dealers, Inc. ("NASD") through the
        NASDAQ National Market Reporting System or a similar organization if the
        NASD is no longer reporting such information; (iii) if the stock is not
        listed or admitted to trade on a national securities exchange and is not
        reported on the National Market Reporting System, the mean between the
        bid and asked price for the stock on such date, as furnished by the
        NASD; or (iv) if the stock is not listed or admitted to trade on a
        national securities exchange, is not reported on the National Market
        Reporting System and if bid and asked prices for the stock are not
        furnished by the NASD or a similar organization, the values established
        by the Committee for purposes of the Plan.

                (s) "Gain on Sale of Loans" means the total gain recognized on
        loans sold through whole loan transactions or through securitizations,
        net of premiums paid to acquire such loans and net of expenses
        associated with the sale of such loans, as reported in the Company's
        quarterly and/or annual financial statements.

                (t) "Incentive Stock Option" means an option which is designated
        as an incentive stock option within the meaning of Section 422 of the
        Code, the award of which contains such provisions as are necessary to
        comply with that section.

                (u) "Loan Production Volume" means loans funded during any given
        period as reported in the Company's quarterly and/or annual financial
        statements.

                (v) "Loan Quality" means the number of loans originated in
        accordance with the Company's underwriting policies and procedures and
        is measured as loans sold, either individually, through bulk sales
        transactions, or through securitizations, at a premium price as a
        percentage of total loans sold, based on information as reported in the
        Company's quarterly and/or annual financial statements.

                (w) "Non-Employee Director" means a member of the Board who is
        not an officer or employee of the Company or a Subsidiary.

                (x) "Non-Employee Director Participant" means a Non-Employee
        Director who has been granted an Option under Section 2.6.

                (y) "Nonqualified Stock Option" means an option which is
        designated as a Nonqualified Stock Option and shall include any Option
        intended as an Incentive Stock Option that fails to meet applicable
        legal requirements thereof. Any Option

                                       21

<PAGE>

        granted hereunder that is not designated as an Incentive Stock Option
        shall be deemed to be designated a Nonqualified Stock Option under this
        Plan and not an incentive stock option under the Code.

                (z) "Officer" means a president, vice-president, secretary,
        treasurer or principal financial officer, comptroller or principal
        accounting officer and any person routinely performing corresponding
        functions with respect to the Company.

                (aa) "Option" means an option to purchase Common Stock under
        this Plan. An Option shall be designated by the Committee as a
        Nonqualified Stock Option or an Incentive Stock Option.

                (bb) "Participant" means an Eligible Employee who has been
        granted an Award or a Non-Employee Director Participant.

                (cc) "Performance-Based Award" means an Award of a right to
        receive shares of Common Stock or other compensation (including cash)
        under Section 5.2, the issuance or payment of which is contingent upon,
        among other conditions, the attainment of performance objectives
        specified by the Committee.

                (dd) "Performance Goal" shall mean Cash Flow, Earnings Per
        Share, Gain on Sale of Loans, Loan Production Volume, Loan Quality,
        Return on Equity, Total Stockholder Return, or any combination thereof.

                (ee) "Performance Share Award" means an award of a right to
        receive shares of cash or Common Stock under Section 5.1, or to receive
        shares of Common Stock or other compensation (including cash) under
        Section 5.2, the issuance or payment of which is contingent upon, among
        other things, the attainment of performance objectives specified by the
        Committee.

                (ff) "Personal Representative" means the person or persons who,
        upon the disability or incompetence of a Participant, shall have
        acquired on behalf of the Participant by legal proceeding or otherwise
        the power to exercise the rights and receive the benefits specified in
        this Plan.

                (gg) "Plan" means the New Century Financial Corporation 1995
        Stock Option Plan, as amended.

                (hh) "QDRO" means an order requiring the transfer of an Award or
        portion thereof pursuant to a state domestic relations law to the
        spouse, former spouse, child or other dependent of a Participant. Such
        order must be in a form substantially identical to a qualified domestic
        relations order as defined by the Code or Title I of the Employee
        Retirement Income Security Act of 1974, as amended.

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                (ii) "Restricted Stock" means those shares of Common Stock
        issued pursuant to a Restricted Stock Award which are subject to the
        restrictions set forth in the related Award Agreement.

                (jj) "Restricted Stock Award" means an award of a fixed number
        of shares of Common Stock to the Participant subject, however, to
        payment of such consideration, if any, and such forfeiture provisions,
        as are set forth in the Award Agreement.

                (kk) "Retirement" means retirement from employment by or
        providing services to the Company or any Subsidiary after age 65 and, in
        the case of employees, in accordance with the retirement policies of the
        Company then in effect.

                (ll) "Return on Equity" means consolidated net income of the
        Company (less any preferred dividends), divided by the average
        consolidated common shareholders equity.

                (mm) "Rule 16b-3" means Rule 16b-3 as promulgated by the
        Commission pursuant to the Exchange Act as amended from time to time.

                (nn) "Securities Act" means the Securities Act of 1933, as
        amended.

                (oo) "Stock Appreciation Right" means a right to receive a
        number of shares of Common Stock or an amount of cash, or a combination
        of shares and cash, determined as provided in Section 3.3 (a).

                (pp) "Subsidiary" means any corporation or other entity a
        majority or more of whose outstanding voting stock or voting power is
        beneficially owned directly or indirectly by the Company.

                (qq) "Total Disability" means a "permanent and total disability"
        within the meaning of Section 22(e)(3) of the Code.

                (rr) "Total Stockholder Return" means, with respect to the
        Company or other entities (if measured on a relative basis), the (i)
        change in the market price of its Common Stock (as quoted on the
        principal market on which it is traded as of the beginning and ending of
        the period) plus dividends and other distributions paid, divided by (ii)
        the beginning quoted market price, all of which is adjusted for any
        changes in equity structure, including but not limited to stock splits
        and stock dividends.

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