<PAGE>

                                 UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                            WASHINGTON, D.C.  20549

                                   FORM 10-Q

{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

              For the quarterly period ended  September 30, 1999
                                              ------------------

                                      OR

{_} TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to ____________

                      Commission file number   000-22633
                                               ---------

                       NEW CENTURY FINANCIAL CORPORATION
                       ---------------------------------
            (Exact name of registrant as specified in its charter)

       DELAWARE                                    33-0683629
       --------                                    ----------
(State or other jurisdiction of      (I.R.S. Employer Identification No.)
incorporation or organization)

           18400 VON KARMAN, SUITE 1000, IRVINE, CALIFORNIA 92612
           ----------------------------------------------------------
           (Address of principal executive offices)        (Zip code)

Registrant's telephone number, including area code:    (949) 440-7030
                                                       --------------


--------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

     YES    X       NO __________________
        ---------

As of October 31, 1999, 14,664,597 shares of common stock of New Century
Financial Corporation were outstanding.
<PAGE>

               NEW CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
                                   FORM 10-Q
                        QUARTER ENDED SEPTEMBER 30, 1999

                                     INDEX

<TABLE>
<CAPTION>
PART I     -        FINANCIAL INFORMATION                            PAGE
<S>                 <C>                                              <C>
    Item 1.         Financial Statements                               4

    Item 2.         Management's Discussion and Analysis of
                    Financial Condition and Results of Operations     13

    Item 3.         Quantitative and Qualitative Disclosures About
                    Market Risk                                       29

PART II    -        OTHER INFORMATION

    Item 1.         Legal Proceedings                                 30

    Item 2.         Changes in Securities and Use of Proceeds         30

    Item 3.         Defaults Upon Senior Securities                   30

    Item 4.         Submission of Matters to a Vote of
                    Security Holders                                  30

    Item 5.         Other Information                                 30

    Item 6.         Exhibits and Reports on Form 8-K                  30

SIGNATURES                                                            31

EXHIBIT INDEX                                                         32
</TABLE>

                                       2
<PAGE>

Certain information included in this Form 10-Q may include "forward-looking"
statements under federal securities laws, and the Company intends that such
forward-looking statements be subject to the safe-harbor created thereby. Such
statements include the anticipated mix of whole loan sales and securitizations
for the remainder of 1999, the expectations regarding the condition of the whole
loan and securitization markets in the third and fourth quarters, the
assumptions used by the Company to value its residual interests from
securitizations and excess cash flow private placements, the expectations
regarding the effects of interest rate increases in the company's business, the
belief that the Company's current liquidity, credit facilities and capital
resources will be sufficient to fund its operations for the foreseeable future,
the expectation that the proceeds from the U.S. Bancorp investment will give the
Company greater flexibility to pursue a more economically advantageous secondary
marketing strategy, the expectation that the Company will devote significant
financial and human resources to expand its Internet business, the expectations
regarding the timing and extent of the Company's Year 2000-readiness and the
costs of implementing its Y2K Plan and the belief that any liability with
respect to its legal actions, individually or in the aggregate, will not have a
material adverse effect on the Company. There are many important factors that
could cause the Company's actual results to differ materially from expected
results in the forward-looking statements. Such factors include, but are not
limited to, the Company's ability to access funding and capital sources during a
period of tight liquidity in the Company's industry, the Company's limited
operating history, the Company's ability to sustain and manage its rate of
growth, the impact of competition in the subprime mortgage banking industry, the
potential for legislative or regulatory changes affecting the Company's
business, and other risks identified in the Company's Annual Report on Form 10-K
for the year ended December 31, 1998 and its other filings with the Securities
and Exchange Commission.

                                       3
<PAGE>

                         Item 1.  Financial Statements

              New Century Financial Corporation and Subsidiaries
                     Condensed Consolidated Balance Sheets
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                                 (Dollars in thousands)
                                                                                         September 30,             December 31,
                                                                                             1999                      1998
                                                                                         --------------------------------------
<S>                                                                                      <C>                      <C>
ASSETS:
Cash and cash equivalents..............................................................  $      8,384             $      30,875
Loans receivable held for sale, net (notes 2 and 5)....................................       373,733                   356,975
Residual interests in securitizations (note 3).........................................       306,836                   205,395
Mortgage servicing assets (note 4).....................................................        19,818                     8,665
Accrued interest receivable............................................................         3,311                     1,536
Office property and equipment..........................................................         2,642                     3,644
Prepaid expenses and other assets......................................................        18,743                    17,637
                                                                                         --------------------------------------

TOTAL ASSETS...........................................................................  $    733,467             $     624,727
                                                                                         ======================================
LIABILITIES AND STOCKHOLDERS' EQUITY:

Warehouse and aggregation lines of credit (note 5).....................................  $    356,042             $     345,843
Residual financing.....................................................................       146,903                   122,298
Notes payable..........................................................................         2,638                     3,985
Income taxes payable...................................................................         6,434                     1,690
Accounts payable and accrued liabilities...............................................        27,306                    16,056
Deferred income taxes..................................................................        27,740                    20,242
                                                                                         --------------------------------------
        Total liabilities..............................................................       567,063                   510,114

Stockholders' equity:
Preferred stock, $.01 par value.  Authorized 7,500,000 shares;
    40,000 shares issued and outstanding...............................................             -                         -
Common stock, $.01 par value.  Authorized 45,000,000 shares;
    issued and outstanding 14,644,944 shares at September 30, 1999
    and 14,473,566 shares at December 31, 1998.........................................           146                       145
Additional paid-in capital.............................................................        85,320                    65,241
Retained earnings, restricted..........................................................        81,189                    49,953
                                                                                         --------------------------------------
                                                                                              166,655                   115,339
Deferred compensation costs............................................................          (251)                     (726)
                                                                                         --------------------------------------
        Total stockholders' equity.....................................................       166,404                   114,613
                                                                                         --------------------------------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                               $    733,467             $     624,727
                                                                                         ======================================
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements.

                                       4
<PAGE>

              New Century Financial Corporation and Subsidiaries
                 Condensed Consolidated Statements of Earnings
                     (In thousands, except per share data)
                                  (Unaudited)
<TABLE>
<CAPTION>

                                                             Nine Months Ended September 30,  Three Months Ended September 30,
                                                            ------------------------------------------------------------------
                                                                 1999               1998              1999           1998
                                                            ------------------------------------------------------------------
<S>                                                         <C>                 <C>              <C>              <C>
Revenues:
  Gain on sale of loans.................................    $     94,890        $    82,657      $     35,275     $     30,557
  Interest income.......................................          44,988             34,531            16,014           11,152
  Servicing income......................................          33,327             15,068            11,747            6,593
                                                            ------------------------------------------------------------------
    Total revenues......................................         173,205            132,256            63,036           48,302
                                                            ------------------------------------------------------------------

Expenses:
  Personnel.............................................          38,757             34,021            13,964           12,949
  Interest..............................................          36,992             29,275            13,640            9,685
  General and administrative............................          27,522             20,869             9,591            7,710
  Advertising and promotion.............................           8,593              6,662             3,466            2,368
  Servicing.............................................           2,435              1,341             1,131               30
  Professional services.................................           3,392              1,314               956              626
                                                            ------------------------------------------------------------------
    Total expenses......................................         117,691             93,482            42,748           33,368
                                                            ------------------------------------------------------------------

Earnings before income taxes............................          55,514             38,774            20,288           14,934

Income taxes............................................          22,895             16,441             8,360            6,326
                                                            ------------------------------------------------------------------

Net earnings............................................    $     32,619        $    22,333      $     11,928     $      8,608
                                                            ==================================================================

Basic earnings per share................................    $       2.27        $      1.58      $       0.82     $       0.61
                                                            ==================================================================

Diluted earnings per share..............................    $       1.77        $      1.48      $       0.62     $       0.57
                                                            ==================================================================
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements.

                                       5
<PAGE>

              New Century Financial Corporation and Subsidiaries
                Condensed Consolidated Statements of Cash Flows
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                    (In thousands)
                                                                            Nine Months Ended September 30,
                                                                                 1999             1998
                                                                            -------------------------------
<S>                                                                         <C>               <C>
Cash flows from operating activities:
Net earnings.......................................................         $     32,619      $     22,333
Adjustments to reconcile net earnings to net cash used in
    operating activities:
  Depreciation and amortization....................................                4,333             3,413
  Deferred income taxes............................................                7,498             7,500
  NIR gains........................................................             (126,425)         (101,655)
  Servicing gains..................................................              (12,940)           (2,693)
  Initial deposits to over-collateralization accounts..............              (60,742)          (23,175)
  Deposits to over-collateralization accounts......................              (21,333)          (18,731)
  Release of cash from over-collateralization accounts.............               18,372            16,808
  Net proceeds from NIMS transaction...............................               76,098            53,819
  Amortization (accretion) of NIRs/I/O's...........................                4,615             8,854
  General valuation provision for NIRs.............................               13,000             7,500
  Provision for losses.............................................                5,787            10,096
  Loans originated or acquired for sale............................           (3,011,864)       (2,392,162)
  Loan sales, net..................................................            2,988,492         2,287,516
  Principal payments on loans receivable held for sale.............                4,397            30,392
  Net change in other assets and liabilities.......................                4,062            (5,469)
  Increase in warehouse and aggregation lines of
    credit.........................................................               10,199            83,806
                                                                            -------------------------------
Net cash used in operating activities.............................              (63,832)          (11,848)
                                                                            -------------------------------

Cash flows from investing activities:
  Purchase of office property and equipment........................                 (508)           (2,585)
  Purchase of interest-only (I/O) certificates.....................                   -             (5,756)
  Acquisition of Primewest.........................................                   -             (1,500)
                                                                            -------------------------------
Net cash used in investing activities..............................                 (508)           (9,841)

Cash flows from financing activities:
  Net proceeds from (repayments of) notes payable..................               (1,347)              609
  Net proceeds from residual financing.............................               24,605            31,565
  Payment of dividends on convertible preferred stock..............               (1,383)                -
  Net proceeds from issuance of stock/purchase of treasury stock...               19,974                56
                                                                            -------------------------------
Net cash provided by financing activities..........................               41,849            32,230
                                                                            -------------------------------

Net increase (decrease) in cash and cash equivalents...............              (22,491)           10,541
Cash and cash equivalents, beginning of period.....................               30,875            12,701
                                                                            -------------------------------
Cash and cash equivalents, end of period...........................         $      8,384      $     23,242
                                                                            ===============================

Supplemental cash flow disclosure:
  Interest paid....................................................         $     36,857      $     29,069
  Income taxes paid................................................         $     10,653      $      9,071
Supplemental non-cash financing activity:
  Stock issued in connection with acquisition of Primewest.........         $         -       $      2,000
  Restricted stock issued..........................................         $         -       $        173
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements.

                                       6
s
<PAGE>

              NEW CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

                          September 30, 1999 and 1998

1.   Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information.  Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.  In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included.  Operating results for the nine months ended September 30, 1999
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1999.

Recent Accounting Developments - In June 1998, the FASB issued Statement of
Financial Accounting Standards No. 133 (SFAS No. 133), "Accounting for
Derivative Securities and Hedging Activities."  SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments imbedded in other contracts (collectively referred to as
derivatives) and for hedging activities.  It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value.  If certain conditions are
met, a derivative may be specifically designated as (i) a hedge of the exposure
to changes in the fair value of a recognized asset or liability or an
unrecognized firm commitment, (ii) a hedge of the exposure to variable cash
flows of a forecasted transaction, or (iii) a hedge of the foreign currency
exposure of a net investment in a foreign operation, an unrecognized firm
commitment, an available for sale security, or a foreign currency-denominated
forecasted transaction.

Under SFAS No. 133, an entity that elects to apply hedge accounting is required
to establish at the inception of the hedge the method it will use for assessing
the effectiveness of the hedging derivative and the measurement approach for
determining the ineffective aspect of the hedge.  Those methods must be
consistent with the entity's approach to managing risk.  Management is in the
process of assessing the impact of implementing SFAS No. 133, which was to be
effective for all fiscal quarters of fiscal years beginning after June 15, 1999.
The FASB subsequently issued SFAS No. 137, delaying implementation of SFAS No.
133 for one year.

Residual interests in securitizations - Residual interests in securitizations
(Residuals) are recorded as a result of the sale of loans through
securitizations and the sale of residual interests in securitizations through
what are sometimes referred to as net interest margin securities (NIMS).

                                       7
<PAGE>

The loan securitizations are generally structured as follows: First, the Company
sells a portfolio of mortgage loans to a special purpose entity (SPE) which has
been established for the limited purpose of buying and reselling mortgage loans.
The SPE then transfers the same mortgage loans to a Real Estate Mortgage
Investment Conduit or Owners Trust (the REMIC or Trust), and the Trust in turn
issues interest-bearing asset-backed securities (the Certificates) generally in
an amount equal to the aggregate principal balance of the mortgage loans. The
Certificates are typically sold at face value and without recourse except that
representations and warranties customary to the mortgage banking industry are
provided by the Company to the Trust. One or more investors purchase these
Certificates for cash. The Trust uses the cash proceeds to pay the Company the
cash portion of the purchase price for the mortgage loans. The Trust also issues
a certificate representing a residual interest in the payments on the
securitized loans. In addition, the Company may provide a credit enhancement for
the benefit of the investors in the form of additional collateral (over-
collateralization account or OC Account) held by the Trust. The OC Account is
required by the servicing agreement to be maintained at certain levels.

At the closing of each securitization, the Company removes from its consolidated
balance sheet the mortgage loans held for sale and adds to its consolidated
balance sheet (i) the cash received, (ii) the estimated fair value of the
interest in the mortgage loans retained from the securitizations (Residuals),
which consist of (a) the OC Account and (b) the net interest receivable (NIR)
and (iii) the estimated fair value of the servicing asset.  The NIR represents
the discounted estimated cash flows to be received by the Company in the future.
The excess of the cash received and the assets retained by the Company over the
carrying value of the loans sold, less transaction costs, equals the net gain on
sale of mortgage loans recorded by the Company.

The NIMS are generally structured as follows.  First, the Company sells or
contributes the Residuals to an SPE which has been established for the limited
purpose of receiving and selling asset-backed residual interests in
securitization certificates.  Next, the SPE transfers the Residuals to an owner
trust (the Trust) and the Trust in turn issues interest-bearing asset-backed
securities (the bonds and certificates).  The Company sells these Residuals
without recourse except that normal representations and warranties are provided
by the Company to the Trust.  One or more investors purchase the bonds and
certificates and the proceeds from the sale of the bonds and certificates, along
with a residual interest certificate that is subordinate to the bonds and
certificates, represent the consideration to the Company for the sale of the
Residuals.

At the closing of each NIMS, the Company removes from its consolidated balance
sheet the carrying value of the Residuals sold and adds to its consolidated
balance sheet (i) the cash received, and (ii) the estimated fair value of the
portion of the Residuals retained, which consists of the net interest receivable
(NIR) and the OC account.  The excess of the cash received and assets retained
over the carrying value of the Residuals sold, less transaction costs, equals
the net gain or loss on the sale of Residuals recorded by the Company.

The Company allocates its basis in the mortgage loans and residual interests
between the portion of the mortgage loans and residual interests sold through
the Certificates and the

                                       8
<PAGE>

portion retained (the Residuals and servicing assets) based on the relative fair
values of those portions on the date of sale. The Company may recognize gains or
losses attributable to the changes in the fair value of the Residuals, which are
recorded at estimated fair value and accounted for as "held-for-trading"
securities. The Company is not aware of an active market for the purchase or
sale of Residuals and, accordingly, the Company determines the estimated fair
value of the Residuals by discounting the expected cash flows released from the
OC Account (the cash out method) using a discount rate commensurate with the
risks involved. The Company has utilized an effective discount rate of
approximately 12% on the estimated cash flows released from the OC Account to
value the Residuals through securitization and approximately 14% on the
estimated cash flows released from the Trust to value Residuals through NIMS
transactions.

The Company receives periodic servicing fees for the servicing and collection of
the mortgage loans as master servicer of the securitized loans.  In addition,
the Company is entitled to the cash flows from the Residuals that represent
collections on the mortgage loans in excess of the amounts required to pay the
Certificate principal and interest, the servicing fees and certain other fees
such as trustee and custodial fees.  At the end of each collection period, the
aggregate cash collections from the mortgage loans are allocated first to the
base servicing fees and certain other fees such as trustee and custodial fees
for the period, then to the Certificateholders for interest at the pass-through
rate on the Certificates plus principal as defined in the servicing agreements.
If the amount of cash required for the above allocations exceeds the amount
collected during the collection period, the shortfall is drawn from the OC
Account.  If the cash collected during the period exceeds the amount necessary
for the above allocations, and there is no shortfall in the related OC Account,
the excess is released to the Company.  If the OC Account balance is not at the
required credit enhancement level, the excess cash collected is retained in the
OC Account until the specified level is achieved.  The cash and collateral in
the OC Account is restricted from use by the Company.  Pursuant to certain
servicing agreements, cash held in the OC Accounts may be used to make
accelerated principal paydowns on the Certificates to create additional excess
collateral in the OC Account which is held by the Trusts on behalf of the
Company as the Residual holder.  The specified credit enhancement levels are
defined in the servicing agreements as the OC Account balance expressed
generally as a percentage of the current collateral principal balance.

The Annual Percentage Rate (APR) on the mortgage loans is relatively high in
comparison to the pass-through rate on the Certificates.  Accordingly, the
Residuals described above are a significant asset of the Company.  In
determining the value of the Residuals, the Company must estimate the future
rates of prepayments, prepayment penalties to be received by the Company,
delinquencies, defaults and default loss severity as they affect the amount and
timing of the estimated cash flows.  The Company uses an annual default rate
estimate of 0.60% to 1.50% for adjustable rate first trust deeds, 0.38% to 0.75%
for fixed rate first trust deeds and 0.75% to 1.25% for second trust deeds.  The
Company's default rate estimates result in cumulative loss estimates as a
percentage of the original principal balance of the mortgage loans of 2.17% to
2.79% for adjustable rate first trust deeds, 1.56% to 2.83% for fixed rate first
trust deeds and 3.66% for second trust deeds.  These estimates are based on
current pool performance, historical loss data for

                                       9
<PAGE>

comparable loans and the specific characteristics of the loans originated by the
Company. The Company estimates prepayments by evaluating historical prepayment
performance of comparable mortgage loans and the impact of trends in the
industry. The Company has used a prepayment curve to estimate the prepayment
characteristics of the mortgage loans. The rate of increase, duration, severity
and decrease of the curve depends on the age and nature of the mortgage loans,
primarily whether the mortgage loans are fixed or adjustable and the interest
rate adjustment characteristics of the mortgage loans (6 month, 1 year, 2 year,
3 year or 5 year adjustment periods). The Company's prepayment curve and default
estimates have resulted in weighted average lives of between 2.21 to 3.00 years
for its adjustable mortgage loans and 3.74 to 3.94 years for its fixed rate
mortgage loans.

Due to the uncertainty associated with estimating future cash flows caused by
the lack of historical performance data on the mortgage loans and the absence of
an active market for the purchase and sale of Residuals, the Company established
a general valuation allowance of $3.0 million for the Residuals during the year
ended December 31, 1997, added $7.5 million to the allowance during 1998, and
added $13.0 million to the allowance in the first nine months of 1999.  The
general valuation allowance is based on the Company's periodic evaluation of the
Residuals, which takes into consideration trends in actual cash flow
performance, industry and economic developments, as well as other relevant
factors. During the nine months ended September 30, 1999, the Company allocated
$13.0 million of its allowance to write down the carrying value of its May 1998
Net Interest Margin Security.

2.  Loans Receivable Held for Sale

A summary of loans receivable held for sale, at the lower of cost or market at
September 30, 1999 and December 31, 1998 follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                        September 30,  December 31,
                                                            1999          1998
                                                        -------------  -----------
     <S>                                                <C>            <C>
     Mortgage loans receivable..........................     $372,883     $355,875
     Net deferred origination costs.....................         850        1,100
                                                             --------     --------
                                                             $373,733     $356,975
                                                             ========     ========
</TABLE>

3.  Residual Interests in Securitizations

Residual interests in securitizations consist of the following components at
September 30, 1999 and December 31, 1998 (dollars in thousands):

<TABLE>
<CAPTION>
                                                                       September 30,  December 31,
                                                                           1999          1998
                                                                       -------------  -----------
     <S>                                                               <C>            <C>
     Over-collateralization amount..................................        $153,495     $ 89,792
     Net interest receivable (NIR)..................................         163,841      126,103
                                                                             317,336      215,895
                                                                            --------     --------
     General valuation allowance....................................         (10,500)     (10,500)
                                                                            --------     --------
                                                                           $ 306,836     $205,395
                                                                           =========     ========
</TABLE>

                                       10
<PAGE>

The following table summarizes activity in the NIR amounts for the nine months
ended September 30, 1999 and  1998 (dollars in thousands):

<TABLE>
<CAPTION>
                                                          1999         1998
                                                          ----         ----
     <S>                                               <C>          <C>
     Balance, beginning of period...................   $126,103     $ 79,036
     Sale of NIR through NIMS.......................    (71,156)     (53,819)
     NIR gains......................................    126,425      101,655
     Write-down of NIR..............................    (13,000)         ---
     NIR accretion (amortization)...................     (4,531)      (8,854)
                                                       --------     --------
     Balance, end of period.........................   $163,841     $118,018
                                                       ========     ========
</TABLE>

The following table summarizes activity in the OC accounts for the nine months
ended September 30, 1999 and  1998 (dollars in thousands):

<TABLE>
<CAPTION>
                                                          1999         1998
                                                          ----         ----
     <S>                                               <C>          <C>
     Balance, beginning of period...................   $ 89,792     $ 21,224
     Initial deposits to OC accounts................     60,742       23,175
     Additional deposits to OC accounts.............     21,333       18,731
     Release of cash from OC accounts...............    (18,372)     (16,808)
                                                       --------     --------
     Balance, end of period.........................   $153,495     $ 46,322
                                                       ========     ========
</TABLE>

The following table summarizes activity in the allowance for NIR losses for the
nine months ended September 30, 1999 and  1998 (dollars in thousands):

<TABLE>
<CAPTION>
                                                          1999        1998
                                                          ----        ----
     <S>                                               <C>          <C>
     Balance, beginning of period...................   $ 10,500     $ 3,000
     Provision for NIR losses.......................     13,000       7,500
     Charge-offs of NIR.............................    (13,000)       ---
                                                       --------     -------
     Balance, end of period.........................   $ 10,500     $10,500
                                                       ========     =======
</TABLE>

4.   Mortgage Servicing Assets

Mortgage servicing assets represent the carrying value of the Company's
servicing portfolio.  The following table summarizes activity in mortgage
servicing assets for the nine months ended September 30, 1999 and 1998 (dollars
in thousands):

<TABLE>
<CAPTION>
                                                          1999        1998
                                                          ----        ----
     <S>                                               <C>          <C>
     Balance, beginning of period...................   $  8,665     $   ---
     Additions......................................     12,940       2,693
     Amortization...................................     (1,787)        ---
                                                       --------     -------
     Balance, end of period.........................   $ 19,818     $ 2,693
                                                       ========     =======
</TABLE>

The table below summarizes activity in the Company's mortgage loan servicing
portfolio for the nine months ended September 30, 1999 and 1998 (dollars in
millions):

<TABLE>
<CAPTION>
                                                          1999        1998
                                                          ----        ----
     <S>                                               <C>          <C>
     Balance, beginning of period...................   $  3,786     $ 1,323
     Loans funded...................................      3,008       2,388
     Payoffs/servicing released sales...............     (1,391)       (644
                                                       --------     -------
     Balance, end of period.........................   $  5,403     $ 3,067
                                                       ========     =======
</TABLE>

                                       11
<PAGE>

5.   Warehouse and Aggregation Lines of Credit

Warehouse and aggregation lines of credit consist of the following at September
30, 1999 and December 31, 1998 (dollars in thousands):

<TABLE>
<CAPTION>
                                                                 September 30,  December 31,
                                                                     1999           1998
                                                                 -------------  ------------
     <S>                                                         <C>            <C>
     A $290 million line of credit expiring in May 2000
     secured by loans receivable held for sale, bearing
     interest based on one month LIBOR (5.40% at
     September 30, 1999)...................................           $225,636      $191,931

     A $603 million master repurchase agreement bearing
     interest based on one month LIBOR (5.40% at
     September 30, 1999), secured by loans receivable held
     for sale.  The agreement may be terminated
     by the lender giving 28 days written notice...........             96,586       153,912

     A $300 million loan and security agreement bearing
     interest based on one month LIBOR (5.40% at
     September 30, 1999), secured by loans receivable held
     for sale, expiring in June 2000.......................                ---          ---

     A $300 million loan and security agreement bearing
     interest based on one month LIBOR (5.40% at
     September 30, 1999), secured by loans receivable held
     for sale.  This facility renews automatically for
     successive 12-month periods starting in August
     2000, but is uncommitted..............................             33,820           ---
                                                                      --------      --------
                                                                      $356,042      $345,843
                                                                      ========      ========
</TABLE>

The warehouse and aggregation line of credit agreements contain certain
restrictive financial and other covenants which require the Company to, among
other things, restrict dividends, maintain certain net worth and liquidity
levels, remain below specified debt-to-net-worth ratios and comply with
regulatory and investor requirements.  At September 30, 1999, the Company was in
compliance with these financial and other covenants.

                                       12
<PAGE>

Item 2.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations

General

New Century Financial Corporation (the Company) is a specialty finance company
engaged in the business of originating, purchasing, selling and servicing sub-
prime mortgage loans secured primarily by first mortgages on single family
residences.  The Company originates and purchases loans through its Wholesale
and Retail Divisions and through its Primewest subsidiary.  The Company's
borrowers generally have substantial equity in the property securing the loan,
but have impaired or limited credit profiles or higher debt-to-income ratios
than traditional mortgage lenders allow.  The Company's borrowers also include
individuals who, due to self-employment or other circumstances, have difficulty
verifying their income, as well as individuals who prefer the prompt and
personalized service provided by the Company.

Loan Originations and Purchases

As of September 30, 1999, the Company's Wholesale Division was operating through
five regional operating centers and 66 additional sales offices located in 35
states. The number of account executives in the Wholesale Division decreased
slightly to 184 at September 30, 1999, compared to 188 at September 30, 1998.
The Wholesale Division funded $2.1 billion in loans during the nine months ended
September 30, 1999.

As of September 30, 1999, the Company's Retail Division was operating through 80
sales offices located in 29 states. The Retail Division funded $757.1 million in
loans during the nine months ended September 30, 1999. The Company's Primewest
subsidiary closed $113.1 million in loans during the nine months ended September
30, 1999. The number of loan officers in the Retail Division and Primewest
decreased to 344 at September 30, 1999, from 405 at September 30, 1998.

Loan Sales and Securitizations

Loan Sale Strategy.  The Company's loan sale strategy includes both
securitizations and whole loan sales in order to advance the Company's goal of
enhancing profits while managing cash flows.  Loan sales through securitizations
permit the Company to enhance operating profits and to benefit from future cash
flows generated by the residual interests retained by the Company.  Whole loan
sale transactions enable the Company to generate current cash flow, protect
against the potential volatility of the securitization market and reduce the
risks inherent in retaining residual interests in securitizations.

The Company's primary source of revenue is the recognition of gains from the
sale of its loans through whole loan sales and securitizations.  In a whole loan
sale, the Company recognizes and receives a cash gain upon sale.  In a
securitization, the Company recognizes a gain on sale at the time the loans are
sold, but receives corresponding cash flows, represented by the over-
collateralization amount (OC) and the Net Interest Receivable (NIR) (combined,
the Residuals), over the actual life of the loans.  As a result of timing
differences in receiving cash from whole loan sales versus securitizations, the
relative percentage of whole loan sales to securitizations will affect the
Company's operating cash flow.  For the quarter ended September 30, 1999, $1.0
billion, or 84.7%, of the Company's loan sales were in the form of
securitizations.  Based on current liquidity and profit projections and current
market conditions, the Company anticipates

                                       13

<PAGE>

the percentage of securitizations versus whole loan sales to remain high for the
remainder of 1999.

The Company has, to date, elected to fund the required OC at the closing of most
of its securitizations.  The over-collateralization requirement ranges from two
to five percent of the initial securitization bond debt principal balance or
four to nine percent of the remaining principal balance after thirty to thirty-
six months of principal amortization.  When funding all of the OC Account up
front, the Company begins to receive cash flow from the Residual immediately.
In those cases where only a portion of the OC Account is funded up front, the
Company will begin to receive cash flow from the Residual more quickly than in
cases where no initial funding is undertaken.  Cash flows from the Residuals are
subject to certain delinquency or credit loss tests, as defined by the rating
agencies or the bond insurance companies.  Over time, the Company will also
receive the OC, subject to the performance of the mortgage loans in each
securitization.

In connection with the origination and purchase of loans, the Company may either
receive or pay origination fees.  These fees, referred to as "points" or
"premiums" in the mortgage industry, are dependent on the source of loan
production.  Typically, they correspond to the amount of further processing
required for a loan to be funded and are determined as a percentage of the loan
amount.  The points received from the origination of loans and the premiums paid
to originate and acquire loans are included in the gain recognized from the sale
of loans in the income statement when the loans are sold.

The following table sets forth loan sales for the periods indicated (dollars in
thousands):

<TABLE>
<CAPTION>
                                                For the Nine Months     For the Three Months
                                                 Ended September 30,     Ended September 30,
                                             -------------------------------------------------
                                                 1999        1998          1999         1998
                                             -------------------------------------------------
<S>                                          <C>          <C>           <C>           <C>
Securitizations.........................     $2,187,470   $1,276,483    $1,046,836    $596,472
Whole loan sales........................        862,334    1,011,033       189,705     248,200
                                             -------------------------------------------------
Subtotal................................      3,049,804    2,287,516     1,236,541     844,672
                                             -------------------------------------------------
Less:  Loans acquired to securitize(1)..        (61,312)          --       (61,312)         --
                                             -------------------------------------------------
Net loan sales..........................     $2,988,492   $2,287,516    $1,175,229    $844,672
                                             =================================================

(1)  Loans acquired to securitize represent loans acquired by the Company from
     its whole loan investors. These loans are acquired by the Company at
     current market prices for such loans.

</TABLE>

Condition of Secondary Market. For the past year, whole loan prices have
remained at levels significantly lower than the prices received by the Company
in earlier periods. The Company believes that there are indications that these
lower prices will persist through the fourth quarter of 1999. In addition, more
buyers in the whole loan market are confining their purchases to loans having
very specific attributes. Unlike 1997 and early 1998, the Company has found it
to be more difficult to identify buyers willing to purchase a pool of loans
representing a cross section of the Company's entire loan production.
Consequently, in the second quarter, the Company's whole loan sales were
characterized by smaller pools of more narrow characteristics sold to a larger
number of buyers. In the third quarter, the Company elected to securitize a
larger percentage of its production than in previous quarters, in response to
these market conditions.

                                       14
<PAGE>

The securitization market weakened somewhat in the third quarter; however, the
Company was able to recognize moderate gains on securitized loans. The Company
believes that there are indications, however, that the securitization market may
remain weak in the fourth quarter, partly due to general uncertainty in the
financial markets relating to the Year 2000.

One other significant third quarter development that may affect the Company's
secondary marketing strategy was the increase in interest rates.  Over the
course of the third quarter a general trend of increasing interest rates has
resulted in a modest reduction in the expected gain on sale for loans currently
held for sale, particularly the Company's fixed-rate loans.  The rate increases
could affect both the expected whole loan value of the loans, as well as the
gain on sale recognized in securitization transactions as investors in the
Company's mortgage-backed securities demand higher yields in line with competing
financial instruments.

The Company has responded to the interest rate increases through corresponding
increases in the rates offered to its borrowers. However, there is a lag of time
for the rate increases to be reflected in the Company's inventory of loans held
for sale. Accordingly, the Company believes that the gain on sale for the
Company's loans in the fourth quarter may be negatively affected by the lower-
than-average spread between the Company's weighted average coupon and investor
yield requirements.

The Company believes that the continuing lower whole loan prices, rising
interest rates and the shift of the whole loan market to narrower pool criteria
will continue to affect the Company's secondary marketing strategy, cash flow
and profitability. Based on current liquidity and profit projections and current
market conditions, the Company expects that in the remainder of 1999, less than
40% of its loan sales will be in the form of whole loan sales.

In order to address some of these fourth-quarter secondary market uncertainties,
the Company has entered into a forward transaction for the securitization of
approximately $640 million in the Company's adjustable-rate production.
The transaction's closing is subject to the Company's ability to deliver loans
with the required characteristics and to provide a minimum specified
subordination level for the AAA securities.

Results of Operations


                                       15
<PAGE>

Nine Months Ended September 30, 1999 Compared to Nine Months Ended September 30,
1998

The Company originated and purchased $3.0 billion in loans for the nine months
ended September 30, 1999, compared to $2.4 billion for the nine months ended
September 30, 1998.  Loans originated and purchased through the Company's
Wholesale Division were $2.1 billion, or 71.1%, of total originations and
purchases for the nine months ended September 30, 1999.  Loans originated
through the Company's Retail Division were $757.1 million, or 25.2%, of total
originations and purchases for the nine month period.  Loans originated through
the Company's Primewest subsidiary were $113.1 million, or 3.7%, of total
originations and purchases for the nine months ended September 30, 1999.  For
the same period in 1998, Wholesale, Retail and Primewest originations and
purchases totaled $1.7 billion, or 70.8%, $631.1 million, or 26.4% and $65.2
million, or 2.8%, respectively, of total originations and purchases.

Total revenues for the nine months ended September 30, 1999 increased to $173.2
million, from $132.3 million for the nine months ended September 30, 1998.  This
increase was due primarily to the increase in loan originations and purchases
and sales in 1999, as well as the increase in servicing revenues due to the
increase in the mortgage loan servicing portfolio.  Gain on sale of loans
increased to $94.9 million for the nine months ended September 30, 1999, from
$82.7 million for the nine months ended September 30, 1998, due to the increase
in loan sales in 1999, partially offset by the decrease in whole loan prices and
securitization gains recorded in 1999.

                                       16
<PAGE>

The components of the gain on sale of loans are illustrated in the following
table (dollars in thousands):

<TABLE>
<CAPTION>
                                              Nine Months Ended September 30,
                                                1999                 1998
                                                ----                 ----
<S>                                           <C>                  <C>
Gain from whole loan sale transactions        $ 27,051             $ 47,297
Non-cash gain from securitizations             126,425              101,655
Non-cash gain from servicing asset              12,940                2,693
Cash loss from securitizations/NIMS             (3,575)                  --
Securitization expenses                        (10,519)              (7,974)
Accrued interest                               (12,417)              (6,390)
Provision for losses                            (5,787)             (10,096)
General valuation provision for NIR            (13,000)              (7,500)
Non-refundable loan fees                        40,167               35,170
Premiums paid                                  (16,614)             (24,274)
Origination costs                              (47,600)             (43,750)
Hedging losses                                  (2,181)              (4,174)
                                              --------             --------
Gain on sale of loans                         $ 94,890             $ 82,657
                                              ========             ========
</TABLE>

Whole loan sales decreased to $862.3 million for the nine months ended September
30, 1999, from $1.0 billion for the corresponding period in 1998.  This decrease
is the result of a change in the mix of whole loan sales versus securitizations.
Loans sold through whole loan sales decreased to 28.3% of total loan sales in
the nine months ended September 30, 1999, compared to 44.2% for the
corresponding period in 1998.

Interest income increased to $45.0 million for the nine months ended September
30, 1999, from $34.5 million for the same period in 1998, primarily due to
increased interest income from loans held for sale. Interest income is earned on
loans held in inventory for sale. Such interest income accrues during periods
when loans are accumulated for future sales, and increases as loan originations
and purchases increase. The increase in interest income for the nine months
ended September 30, 1999 is the result of a higher average inventory of loans
held for sale compared to the corresponding period in 1998, primarily as a
result of increased loan originations and purchases.

Servicing income increased to $33.3 million for the nine months ended September
30, 1999, from $15.1 million for the nine months ended September 30, 1998.  This
increase resulted from the increase in securitizations, pursuant to which the
Company retains ownership of the servicing rights.  Servicing income reflects
servicing fees received on loans sold or securitized by the Company, net of
amortization of mortgage servicing assets, as well as income recognized on
residual cash flows from securitizations.  As of September 30, 1999, the Company
had securitized over $5.5 billion in loans and retained the servicing rights.
As of September 30, 1998, the Company had securitized $2.4 billion in loans.

Total expenses increased to $117.7 million for the nine months ended September
30, 1999, from $93.5 million for the nine months ended September 30, 1998.
Interest expense increased due to the higher level of loan inventory and
corresponding warehouse

                                       17
<PAGE>

and aggregation borrowings. All other expense components increased from 1998 to
1999 due primarily to (1) higher loan origination volume in the nine months
ended September 30, 1999 compared to the same period in 1998; and (2) the
addition of five sales offices from September 30, 1998 to September 30, 1999.

Three Months Ended September 30, 1999 Compared to Three Months Ended September
30, 1998

The Company originated and purchased $1.2 billion in loans for the three months
ended September 30, 1999, compared to $914.3 million for the three months ended
September 30, 1998. Loans originated and purchased through the Company's
Wholesale Division were $823.6 million, or 71.1%, of total originations and
purchases for the three months ended September 30, 1999. Loans originated
through the Company's Retail Division were $292.1 million, or 25.2%, of total
originations and purchases for the three month period. Loans originated through
the Company's Primewest subsidiary were $41.8 million, or 3.7%, of total
originations and purchases for the three months ended September 30, 1999. For
the same period in 1998, Wholesale, Retail and Primewest originations and
purchases totaled $672.3 million, or 73.5%, $210.6 million, or 23.0% and $31.4
million, or 3.5%, respectively, of total originations and purchases.

Total revenues for the three months ended September 30, 1999 increased to $63.0
million, from $48.3 million for the three months ended September 30, 1998. This
increase was due primarily to the increase in loan originations and purchases
and sales in 1999, as well as the increase in servicing revenues due to the
increase in the mortgage loan servicing portfolio. Gain on sale of loans
increased to $35.3 million for the three months ended September 30, 1999, from
$30.6 million for the three months ended September 30, 1998, due to the increase
in loan sales in 1999.

                                       18
<PAGE>

The components of the gain on sale of loans are illustrated in the following
table (dollars in thousands):

<TABLE>
<CAPTION>
                                             Three Months Ended September 30,
                                               1999                    1998
                                             ---------               --------
<S>                                          <C>                     <C>
Gain from whole loan sale transactions        $  3,790               $ 11,026
Non-cash gain from securitizations              51,292                 49,888
Non-cash gain from servicing asset               5,478                  2,693
Cash gain from securitizations                     127                     --
Securitization expenses                         (4,089)                (3,406)
Accrued interest                                (5,564)                (3,497)
Provision for losses                            (2,199)                (4,650)
General valuation provision for NIR               ----                 (6,500)
Non-refundable loan fees                        14,900                 11,975
Premiums paid                                   (7,627)                (8,446)
Origination costs                              (18,900)               (16,000)
Hedging losses                                  (1,933)                (2,526)
                                              --------               --------
Gain on sale of loans                         $ 35,275               $ 30,557
                                              ========               ========
</TABLE>

Whole loan sales decreased to $189.7 million for the three months ended
September 30, 1999, from $248.2 million for the corresponding period in 1998.
This decrease is the result of a change in the mix of whole loan sales versus
securitizations.  Loans sold through whole loan sales decreased to 15.3% of
total loan sales in the three months ended September 30, 1999, compared to 29.4%
for the corresponding period in 1998.

Interest income increased to $16.0 million for the three months ended September
30, 1999, from $11.2 million for the same period in 1998, primarily due to
increased interest income from loans held for sale.  Interest income is earned
on loans held in inventory for sale.  Such interest income accrues during
periods when loans are accumulated for future sales, and increases as loan
originations and purchases increase.

Servicing income increased to $11.7 million for the three months ended September
30, 1999, from $6.6 million for the three months ended September 30, 1998.  This
increase resulted from the increase in securitizations, pursuant to which the
Company retains ownership of the servicing rights.  Servicing income reflects
servicing fees received on loans sold or securitized by the Company, as well as
income recognized on residual cash flows from securitizations.  As of September
30, 1999, the Company had securitized over $5.5 billion in loans and retained
the servicing rights.  As of September 30, 1998, the Company had securitized
$2.4 billion in loans.

Total expenses increased to $42.7 million for the three months ended September
30, 1999, from $33.4 million for the three months ended September 30, 1998.
Interest expense increased due to the higher level of loan inventory and
corresponding warehouse and aggregation borrowings.  All other expense
components increased from 1998 to 1999 due primarily to (1) higher loan
origination volume in the quarter ended September 30, 1999 compared to the same
period in 1998; and (2) the addition of five sales offices from September 30,
1998 to September 30, 1999.

                                       19
<PAGE>

One tool that management uses to measure the Company's cost-effectiveness in
originating loans is the "all-in acquisition cost" per loan. The Company
calculates this figure as the sum of fees paid to wholesale brokers and
correspondents, direct loan origination costs and corporate overhead costs, net
of points and fees received from borrowers, all divided by total production
volume. The all-in acquisition cost for the three months ended September 30,
1999 was 2.88%, down from 3.69% for the same period in 1998. The decrease was
due to decreases in operating expenses as a percent of production volume, as
economies of scale were realized and new branch offices matured.

Residual Securities

The carrying value of the Company's residual securities at September 30, 1999
and December 31, 1998 is summarized below (dollars in thousands):

<TABLE>
<CAPTION>
                                              September 30,   December 31,
                                                  1999           1998
                                              -------------   ------------
<S>                                           <C>             <C>
Carrying value of securities                  $317,336        $215,895
Less: general valuation allowance for NIR      (10,500)        (10,500)
                                              --------        --------
      Net book value                          $306,836        $205,395
                                              ========        ========
</TABLE>

In establishing the net book value of the residual securities, management
reviews on a quarterly basis the underlying assumptions used to value each
residual security. The specific values set forth above were established and
tested by (i) changing prepayment speed assumptions and loss assumptions for
each security to reflect actual experience and future expectations, and (ii)
performing sensitivity analyses on the assumptions to assess the potential
impact of a higher prepayment and lower loss scenario, and the potential impact
of a lower prepayment and higher loss scenario.

To date, the Company's overall cash flows on its residual interests are higher
than the Company projected. However, based on historic prepayment activity,
particularly in the 6-month and 2/28 ARM products, the Company believes that
future cash flows may fall short of original projections. Based on the quarterly
evaluation of residual interests, the Company recorded a $4.0 million write-down
in the first quarter of 1999 and an additional $9.0 million in the second
quarter of 1999. The quarterly evaluation performed at the end of the third
quarter of 1999 resulted in no additional valuation adjustments.

Liquidity and Capital Resources

Financing Sources. The Company requires access to short-term warehouse and
aggregation credit facilities in order to fund loan originations and purchases
pending the securitization and sale of such loans. In May 1999, the Company
renewed its $300.0 million warehouse line of credit led by U.S. Bank National
Association, with an expiration date in May 2000 and an interest rate equal to
the one month LIBOR plus 1.25%. During the third quarter, the facility was
decreased to $290.0 million. At September 30, 1999, the balance outstanding
under the warehouse line of credit was $225.6 million.

                                       20
<PAGE>

Borrowings under the warehouse line are secured by first and second mortgages
funded through the facility. Within seven days of funding, the Company is
required to deposit the mortgage note and file with U.S. Bank to be held as
collateral. If the file is incomplete, U.S. Bank ceases to count the loan as
valid collateral in calculating the Company's available borrowing capacity. As a
consequence, the Company is essentially forced to use its own cash to carry the
loan until the file defect can be cured and the loan can be resubmitted under
the warehouse line. As of September 30, 1999, the Company's "zero-collateral"
balance was not material, and did not affect the Company's liquidity.

As of September 30, 1999, the Company also had a $600.0 million aggregation
facility with Salomon Smith Barney (Salomon), which is subject to renewal by
Salomon on a monthly basis and bears interest at a rate generally equal to the
one month LIBOR plus 1.25%. At September 30, 1999, the balance outstanding under
the aggregation facility was $94.2 million. As of September 30, 1999, the
Company also had a $3.0 million line of credit with Salomon secured by a special
purpose subsidiary of the Company established to hold residential properties
owned by the Company from time to time. This facility bears interest at a rate
equal to the one month LIBOR plus 2.50%. The balance outstanding at September
30, 1999 was $2.4 million.

During the second quarter of 1999, the Company negotiated a second aggregation
and residual financing facility with Greenwich Capital Markets (Greenwich). The
aggregation facility totals $300.0 million, and bears interest at a rate equal
to the one-month LIBOR plus 1.25%. The facility is structured as a loan and
security agreement and consists of a $200 million committed portion and a $100
million uncommitted portion. From December 1, 1999 through January 10, 2000 the
committed portion is reduced to $50 million and the uncommitted portion
increases to $250 million. The facility expires in June 2000. Although the
Company utilized the facility during the third quarter, the balance outstanding
as of September 30, 1999 was zero.

In July 1999, the Company negotiated a third aggregation and residual financing
facility with Paine Webber Real Estate Securities, Inc. (Paine Webber). The $300
million facility is structured as a loan and security agreement and bears
interest at a rate based on the one month LIBOR. The entire amount is
uncommitted. The Paine Webber facility also includes a "wet funding" feature
that will permit the Company to use the facility to fund its loan originations
and purchases. The facility renews after one year, unless terminated by the
Company. As of September 30, 1999, the balance outstanding under this facility
was $33.8 million.

The Company utilizes the U.S. Bank warehouse line to finance the actual funding
of its loan originations and purchases. After loans are funded by the Company
using the warehouse line and all loan documentation is complete, the loans are
generally transferred to the Salomon, Greenwich or Paine Webber aggregation
facilities. The aggregation facilities are paid down with the proceeds of loan
sales and securitizations.

The Company has residual financing arrangements with Salomon, Greenwich and
Paine Webber, whereby the respective lender provides financing of the Company's
residual interests in securitizations as well as its residual interest from NIM
transactions. The amount of residual financing provided upon each securitization
is determined pursuant to

                                       21
<PAGE>

formulas set forth in the respective agreements and is generally subject to
repayment as a result of changes in the market value of the residual interests
or the formula used by the lead underwriter to determine the market value of the
residual interest (which the lead underwriter may adjust in its sole
discretion). The Greenwich residual financing facility has an aggregate limit of
$30 million. The Paine Webber facility is uncommitted, and is built into the
overall $300 million limit for that facility. The Salomon facility is structured
as a repurchase arrangement, and does not have a specified limit. The facilities
bear interest at a rate based on the one month LIBOR. At September 30, 1999, the
balance outstanding under these facilities was $146.9 million.

The Company's business requires substantial cash to support its operating
activities and growth plans. As a result, the Company is dependent on the U.S.
Bank warehouse facility, the aggregation lines and the residual financing
facilities in order to finance its continued operations. If Salomon, U.S. Bank,
Greenwich or Paine Webber decided not to renew its credit facility with the
Company, the loss of borrowing capacity could have a material adverse impact on
the Company's results of operations, business and financial condition unless the
Company found a suitable alternative source. Similarly, if Salomon, Greenwich or
Paine Webber decided to reduce the assumed market value of the Company's
residual interests, the resulting margin call could have a material adverse
impact on the Company's results of operations, business and financial condition.

Industry Liquidity Environment. Although the Company was able to renew its
warehouse credit agreement and establish new aggregation credit facilities in
the second and third quarters, the financing environment for sub-prime mortgage
lenders in general remains unfavorable by historical standards. In recent
quarters, several of the Company's competitors have had warehouse or aggregation
facilities withdrawn or substantially curtailed. In addition, as whole loan
prices have fallen, lenders have gradually reduced the levels at which they will
lend against mortgage loans and residual interests. This reduction in advance
rates has had a negative effect on the Company's cash flow. If the lower advance
rates persist, the Company believes it may affect the Company's secondary
marketing strategy, and may have a material adverse effect on the Company's
results of operations, business and financial condition.

Strategy. The Company has employed a variety of strategies to deal with the more
difficult financing environment and to permit the Company to pursue its desired
secondary marketing strategy. In order to reduce its reliance on single sources
of aggregation, warehouse and residual financing, the Company established the
Greenwich and Paine Webber facilities. In addition, the Company has devoted
significant efforts to reducing its origination costs. The "all-in acquisition
cost" per loan - defined as the sum of fees paid to wholesale brokers and
correspondents, direct loan origination costs, including commissions and
corporate overhead costs, net of points and fees received from borrowers, all
divided by total production volume - declined by 81 basis points from the third
quarter of 1998 to the third quarter of 1999.

Finally, the Company has raised an additional $40 million of cash in 1999 from
the sale of its securities to U.S. Bancorp. On July 26, 1999, the Company raised
$20 million through the sale of shares of preferred stock to U.S. Bancorp. On
October 15, 1999 the Company

                                       22
<PAGE>

raised an additional $20 million from U.S. Bancorp in the form of subordinated
debt.

There can be no assurance that the Company will be able to raise additional
capital in future quarters, that the Company will be able to further reduce its
"all-in acquisition cost" or that the Company's lenders will not further reduce
their advance rates under the Company's credit facilities. The cash impact of
advance rate reductions or the Company's inability to raise additional capital
could have a material adverse effect on the Company's results of operations,
business and financial condition.

Cash Flow. For the nine months ended September 30, 1999, the Company's
operations used approximately $63.8 million in cash, which is primarily
attributable to its securitization strategy. The Company records a residual
interest in securitization and recognizes a gain on sale when it effects a
securitization, but only receives the cash representing such gain over the life
of the loans securitized. In order to support its loan origination, purchase and
securitization programs, the Company is required to make significant cash
investments that include the funding of: (i) fees paid to brokers and
correspondents in connection with generating loans through wholesale lending
activities; (ii) fees and expenses incurred in connection with the
securitization and sale of loans including over-collateralization requirements
for securitization; (iii) commissions paid to sales employees to originate
loans; (iv) any difference between the amount funded per loan and the amount
advanced under the current warehouse facility; (v) principal and interest
payments on residual financing secured by the NIM residual bonds, for which the
Company does not expect to receive cash flows during 1999; and (vi) income tax
payments arising from the recognition of gain on sale of loans. The Company also
requires cash to fund ongoing operating and administrative expenses, including
capital expenditures and debt service. The Company's sources of operating cash
flow include: (i) the premium advance component of the aggregation facilities;
(ii) premiums obtained in whole loan sales; (iii) mortgage origination income
and fees; (iv) interest income on loans held for sale; (v) excess cash flow from
securitization trusts; and (vi) servicing income.

The Company has a discretionary, non-revolving $5.0 million line of credit with
an affiliate of U.S. Bank secured by the Company's furniture and equipment.
Advances under this facility are made periodically at the discretion of the
lender, and bear interest at a fixed rate established at the time of each
advance for a term of three years. As of September 30, 1999, the balance
outstanding under this facility was $2.6 million, and the weighted-average
interest rate was 8.7%.

The Company has various non-revolving operating lease agreements totaling $20.5
million at September 30, 1999, for purposes of financing office property and
equipment. Advances under these facilities are made periodically and a financing
rate is established at the time of each advance. As of September 30, 1999, the
Company had $1.6 million available under these facilities.

Subject to the various uncertainties described above, the Company anticipates
that its current liquidity, credit facilities and capital resources will be
sufficient to fund its operations for the foreseeable future.

                                       23
<PAGE>

U.S. Bancorp Investment and Strategic Alliance

On July 26, 1999, U.S. Bancorp purchased 20,000 shares of the Company's Series
1999A Convertible Preferred Stock for an aggregate purchase price of $20
million. Each share of the Preferred Stock is convertible into 46.80 shares of
the Company's Common Stock that, upon conversion, will represent approximately
5.1% of the Company's total outstanding Common Stock. The Preferred Stock is
also entitled to a liquidation preference as well as a dividend payable
quarterly at a rate of 7.0% per year.

With the completion of this investment, U.S. Bancorp has increased its equity
position in the Company to approximately 23.2%, assuming conversion of both the
Series 1999A and 1998A Convertible Preferred Stock.

On October 15, 1999, U.S. Bancorp invested an additional $20.0 million in the
form of subordinated debt. The subordinated debt was structured as a component
of the Company's warehouse credit facility. The subordinated debt bears interest
at a rate of 12.0% per annum and matures in May 2000.

The Company believes that the proceeds from the U.S. Bancorp investments will
give the Company greater flexibility to pursue a more economically advantageous
secondary marketing strategy of securitizing a greater portion of its loan
production in the fourth quarter. There can be no assurance that U.S. Bancorp or
any other investor will make subsequent cash investments to allow the Company to
continue to pursue its optimal growth strategy. The Company's inability to raise
additional cash in subsequent quarters could have a material adverse impact on
the Company's results of operations, financial condition and business prospects.

Internet and Technology Initiatives

During the second quarter, the Company purchased the assets of 1800Anyloan,
which consisted primarily of the Internet domain names 1800anyloan.com and
anyloan.com and the toll free number 800anyloan. Additionally, the Company
purchased a 10% equity interest in DeNovoNet, Inc., a highly-specialized
technology company that develops and manages Internet solutions with the
objective to become the premier Internet business-to-business financial service
technology application provider.

Both transactions were part of the Company's ongoing expansion of its Internet
origination capabilities. In early August 1999, the Company commenced operation
of its anyloan.com web site. The Company expects to devote significant financial
and human resources in coming quarters to expand its Internet business. The
Company believes that these investments may result in an overall increase in the
Company's all-in acquisition cost for loans in coming quarters. There can be no
assurance that the Company's Internet business will contribute significantly to
revenues or that it will be profitable.

Other Developments Affecting the Industry

The Company is closely monitoring a number of recent developments that could
affect the Company's industry. First, the Company believes that increases in
interest rates could reduce demand for
                                       24
<PAGE>

mortgages, particularly from borrowers seeking to refinance their homes.
Historically, non-prime mortgage originations have been less sensitive to
interest rate increases than conforming mortgages. However, the Company has
noted a modest decrease in its originations for the month of October 1999 as
compared to the months of August and September 1999, which the Company believes
may be due to the increase in interest rates. There can be no assurance that the
rising interest rate environment will not have a material adverse effect on the
Company's results of operations, business and financial condition.

Second, Fannie Mae and Freddie Mac have recently announced pilot programs to
begin purchasing mortgages originated to borrowers who would not qualify under
their conforming mortgage standards. The programs may encourage conforming
mortgage originators to begin originating some non-prime loans. To date, the
Company has not been affected by these efforts. However, if the Fannie Mae and
Freddie Mac programs expand significantly, the Company believes they could
result in increased competition for non-prime originators such as the Company.

Third, in recent months the non-prime mortgage industry has been criticized for
engaging in so-called "predatory" lending practices. Federal and state
regulators have initiated several high-profile enforcement actions against
brokers and lenders who have engaged in such conduct. Community activists have
also mounted some public relations campaigns against such abusive practices.
These practices have led some states to consider passing more stringent laws
regarding loan origination transactions. The Company does not condone unethical
lending practices, and does not oppose legitimate efforts to stop these
practices when they occur. However, the Company is concerned that some of the
legislation being considered by states would impose overly broad restrictions on
legitimate lending activities. If states begin adopting the sorts of legislation
currently being proposed, it could have a material adverse effect on the
Company's results of operations, business and financial condition.

Finally, in recent quarters, large, diversified financial corporations have
purchased several of the Company's competitors. As a result, some of these
competitors may have access to capital at a cost lower than the Company's cost
of capital under its warehouse, aggregation and residual financing facilities.
If, for a sustained period of time, the Company's cost of capital is higher than
the cost of capital of its competitors, it could have a material adverse effect
on the Company's results of operations, business and financial condition.

More detailed information regarding these and other risks faced by the Company
is available in the Company's Annual Report on Form 10-K for the year ended
December 31, 1998 and its other filings with the Securities and Exchange
Commission.

Year 2000

The Year 2000 Issue

The Year 2000 issue is the result of computer hardware and software being
designed with the year field being set for two digits instead of four digits.
Computer programs and systems with this problem will be unable to properly
distinguish between the year 2000 and the year 1900. As a result the programs
could fail or yield incorrect results.

The Company's business, as well of those of its principal vendors, is dependent
on the ability of a variety of software and hardware systems to function. Less
visible, but also important, are the many non-information technology (Non-IT)
systems which have computer chips embedded in them. Failure of one or more of
these IT and Non-IT systems of the Company or an important vendor could disrupt
the Company's operations

                                       25
<PAGE>

and cause a material adverse impact on the Company's business, results of
operations and financial condition.

The Company's Year 2000 Strategy

The Company is in the final stages of implementing its plan (the "Y2K Plan" or
the "Plan") to prepare for the Year 2000 issue. The Plan consists of (i)
evaluating the Company's exposure to Year 2000 problems, (ii) having its major
systems certified and tested as Year 2000 ready, (iii) obtaining certifications
and/or responses to detailed questionnaires from its major vendors regarding
their Year 2000 readiness, and (iv) establishing contingency plans. Except for
minor remediation efforts to be completed in November 1999, the Company had
substantially completed implementation of the Plan as of September 30, 1999.

Progress Report

In order to spearhead implementation of the Year 2000 effort, in 1998 the
Company established a Year 2000 Task Group (the "Group"). The Group divided the
Plan implementation process into four categories: 1) Hardware, 2) Non-
Information Technology (e.g., telephone systems, pagers, etc.), 3) Software, and
4) Outside Vendors.

Hardware - The Company's most important hardware systems are its several dozen
--------
servers located at the Company's headquarters and regional operating centers.
The Group has contacted the manufacturers of those systems, and has obtained
certification of Year 2000 readiness. Because the Company was not formed until
late 1995 and did not commence lending operations until February 1996, most of
these systems are relatively new and were manufactured to be Year 2000 ready.

In addition, in March 1999, the Group commenced testing of each of the hardware
systems to confirm that they are able to function properly in a Year 2000
simulation. The Group completed the testing in the second quarter, and concluded
that the systems were Year 2000 ready.

Non-Information Technology - The Group also contacted the vendors of its
--------------------------
principal Non-IT systems in order to obtain certificates of Year 2000 readiness.
The Company's material Non-IT systems include its telephone, paging, voicemail
and telemarketing systems. Because most of these systems were purchased after
1995, the majority of these systems were designed and manufactured to be Year
2000 ready. The Company has received certifications of Year 2000 readiness with
respect to all of its material Non-IT systems. All remediation was complete as
of October 31, 1999.

Software - The Group also evaluated all material software applications for Year
--------
2000 readiness. The Company's material software applications include its loan
origination, accounting and servicing software, as well as the general word
processing and spreadsheet programs used by the majority of the Company's
employees. Because
                                       26
<PAGE>

most of the Company's material software applications were purchased in the last
three years, most of this software was designed to be Year 2000 ready.

The Company has completed testing its material software systems for their
performance with respect to critical Year 2000 dates. Based on this testing, the
Company made some minor programming changes to a small number of programs in
order to bring them into Year 2000-readiness. The Group concluded that the
Company did not need to replace or materially upgrade any of the software
tested.

The Group is planning to complete additional testing of the software for
readiness with respect to a number of dates that fall after the Year 2001. This
second phase of testing is scheduled to be completed by end of the second
quarter in 2000.

Outside Vendors - The Group has identified its outside vendor relationships as a
---------------
significant area of uncertainty with respect to Year 2000 readiness. The Company
is dependent on many vendors, both for the origination of loans and for their
subsequent sale or securitization. If one or more of the Company's principal
vendors experiences significant business disruption as a result of the Year 2000
issue, it could have a material adverse effect on the Company's business,
results of operations and financial condition.

For example, if the Company's warehouse line of credit is not functioning
properly, the Company may be unable to fund loans. Similarly, if other major
origination-related vendors such as credit reporting agencies, title companies,
appraisers and county recorders are not operating, the Company's ability to
originate loans could be significantly impaired.

In order to mitigate the risks related to outside vendors, the Group developed a
questionnaire that was distributed in the third quarter of 1999 to the Company's
principal vendors. In addition, the Group has received from some of these
vendors, or retrieved from their web sites, information regarding their Year
2000 testing and readiness. To date, no major vendor issues have been
identified.

Contingency Planning

The Group has formulated and tested contingency plans in the event that any
material system or vendor will not be Year 2000 ready in a timely manner.

Outside Consultant Review

In order to obtain feedback on the status of Year 2000 efforts to date, the
Group retained an outside consulting firm to perform a Year 2000 risk analysis
in July 1999. The outside consulting firm reviewed the Company's Y2K Plan and
risk management approach, and has provided a confidential report to management.
This report includes recommendations and suggestions to enhance the Company's
readiness effort, and management is responding to these items.

Upon completion of the initial risk analysis, the Company continued to retain
the outside consulting firm for continuous review and refinement of the process.

                                       27
<PAGE>

Costs

The Company has budgeted up to $1,000,000 for implementation of the Plan to
cover the costs of evaluating systems, upgrading or replacing non-compliant
systems and hiring an outside Year 2000 consultant. The Group did not exceed
original cost estimates. To date, expenditures for Year 2000 readiness have been
approximately $750,000.

Risks

Outside Vendors. At present, the Company perceives that one of its most
significant Year 2000 risks relates to its dependence on outside vendors. Even
if the Company can satisfy itself that the principal IT and Non-IT systems of
its main vendors are Year 2000 ready, those vendors in turn rely on a myriad of
suppliers to operate their businesses. It is conceivable that Year 2000-related
failures far removed from the Company could trigger a chain event that could
materially harm the Company's business.

Financial Market Effects. Another significant risk posed by the Year 2000 issue
is its potential disruption of financial markets. If Year 2000 disrupts
financial markets and financial institutions, it could have a material adverse
effect on the Company's operations and financial condition. For example, the
financial institutions that purchase whole loans or mortgage-backed securities
may curtail their purchases or insist on higher returns. Similarly, the
Company's lenders may seek to reduce their financing commitments to the Company.
Finally, if consumer confidence is impaired, the Company's loan originations
might decline.

The Company is already seeing Year 2000 affect the timing and terms of possible
fourth quarter secondary marketing transactions. Whole loan sales and
securitizations may need to be completed earlier in the fourth quarter as a
result of market uncertainty regarding Year 2000. There are also initial
indications that fourth quarter secondary marketing pricing terms might be worse
for the Company and its competitors than in prior quarters as a result of Year
2000 uncertainty. In order to mitigate some of the uncertainty posed by Year
2000 concerns in the financial markets, the Company has entered into a forward
commitment for the securitization of approximately $640 million in loans in
December 1999. The transaction's closing is subject to the Company's delivery of
loans having the specified characteristics and other customary conditions.

In short, while the Company is committed to attempt to prevent Year 2000-related
harms, there can be no assurance that Year 2000 problems will not have a
material adverse effect on the Company's business, results of operations or
financial condition.

                                       28
<PAGE>

Item 3.   Quantitative and Qualitative Disclosures About Market Risk

As of September 30, 1999, the Company had $306.8 million in residual interests
in securitizations and $19.8 million in mortgage servicing assets which subject
the Company to market risk. These assets are carried at fair value on the
Company's balance sheet. The Company determines the fair value of these assets
using significant assumptions (See "Notes to Consolidated Financial Statements -
Basis of Presentation"). In future periods, if cash flows are greater than
projected, the value of the assets will increase. Alternatively, if cash flows
are less than projected, the value of the assets will decrease. The Company also
has loans receivable held for sale and outstanding borrowings which subject the
Company to market risk. Loans receivable held for sale are generally sold, and
the related borrowings repaid, within three months.

                                       29
<PAGE>

PART II - OTHER INFORMATION

Item 1.        Legal Proceedings

           The Company occasionally becomes involved in litigation arising in
           the normal course of business. Management believes that any liability
           with respect to such legal actions, individually or in the aggregate,
           will not have a material adverse effect on the Company.

Item 2.        Change in Securities and Use of Proceeds

           On July 26, 1999, the Company issued 20,000 shares of Series 1999A
           Convertible Preferred Stock to U.S. Bancorp for an aggregate cash
           consideration of $20,000,000. The sale and issuance of the shares
           were exempt from the registration requirements of the Securities Act
           by virtue of Section 4(2) of the Securities Act and Regulation D
           thereunder. Each share of Preferred Stock is convertible at any time
           at the election of U.S. Bancorp into 46.80 shares of the Company's
           Common Stock.

Item 3.        Defaults Upon Senior Securities

           None.

Item 4.        Submission of Matters to a Vote of Security Holders

           None.

Item 5.        Other Information

           None.

Item 6.(a) Exhibits required by Item 601 of Regulation S-K

           See "Exhibit Index."

       (b) Reports on Form 8-K

           None.

                                       30
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.


                                               NEW CENTURY FINANCIAL CORPORATION



DATE:   November 12, 1999        By: /s/ BRAD A. MORRICE
                                    --------------------------------------
                                    Brad A. Morrice
                                    President


DATE:   November 12, 1999        By: /s/ EDWARD F. GOTSCHALL
                                    --------------------------------------
                                    Edward F. Gotschall
                                    Chief Financial Officer
                                    (Principal Financial and Accounting Officer)

                                       31
<PAGE>

                                 EXHIBIT INDEX

Exhibit              Description of
Number                   Exhibit
------               --------------

* 3.1     First Amended and Restated Certificate of Incorporation
          of the Company

**3.2     Certificate of Designation for Series 1998A Convertible
          Preferred Stock

***3.3    Certificate of Designation for Series 1999A Convertible Preferred
          Stock

*3.4      First Amended and Restated Bylaws of the Company

*4.1      Specimen Stock Certificate

****4.2   Specimen Series 1998A Convertible Preferred Stock Certificate

***4.3    Specimen Series 1999A Convertible Preferred Stock Certificate

10.1      First Amendment to Fourth Amended and Restated Credit Agreement
          between the Company and U.S. Bank National Association, dated August
          31, 1999

10.2      Second Amendment to Fourth Amended and Restated Credit Agreement
          between the Company and U.S. Bank National Association dated, October
          15, 1999

10.3      Amendment to Master Loan and Security Agreement dated as of July 20,
          1999 by and among New Century Mortgage Corporation, NC Capital
          Corporation and Paine Webber Real Estate Securities Inc., dated as of
          September 30, 1999

10.4      Letter Agreement by and between NC Capital Corporation, New Century
          Mortgage Corporation and Salomon Brothers Realty Corp., dated
          September 1, 1999

10.5      Amendment Number One to Master Loan and Security Agreement dated as of
          June 23, 1999 by and between NC Capital Corporation and Greenwich
          Capital Financial Products, Inc., dated as of October 23, 1999

10.6      Industrial Lease, dated October 11, 1999, between the Company and The
          Irvine Company.

11.1      Statement re Computation of Per Share Earnings

                                       32
<PAGE>

27.1    Financial Data Schedule

*       Incorporated by reference from the Company's Form S-1 Registration
        Statement (No. 333-25483) as filed with the SEC on June 23, 1997.

**      Incorporated by reference from the Company's Form 8-K as filed with the
        SEC on December 8, 1998.

***     Incorporated by reference from the Company's Quarterly Report on Form
        10-Q as filed with the SEC on August 16, 1999.

****    Incorporated by reference from the Company's Annual Report on Form 10-K
        for the year ended December 31, 1998 as filed with the SEC.

                                       33