##### 



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
  FORM 10-Q
  (Mark One)þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended
    September 30, 2006.o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period from
    
    to   COMMISSION FILE
    NUMBER: 001-32314
  NEW CENTURY FINANCIAL
    CORPORATION
 (EXACT NAME OF REGISTRANT AS
    SPECIFIED IN ITS CHARTER)
  MARYLAND

56-2451736(State of
    Incorporation)

(I.R.S. Employer Identification
    No.)   18400 VON KARMAN, SUITE 1000,
 IRVINE, CALIFORNIA 92612
 (Address of principal executive
    offices)(Zip Code)
  (949) 440-7030
 (Registrants telephone
    number, including area code)
  Not Applicable
 (Former name, former address and
    former fiscal year, if changed since last report)
  þ o
  Rule 12b-2
  Large
    accelerated filer þ
    Accelerated
    filer o
    Non
    accelerated filer o  Rule 12b-2 o þ




---



##### 



NEW
    CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
  FORM 10-Q
  QUARTER
    ENDED SEPTEMBER 30, 2006
  INDEX
  PART I 
    FINANCIAL INFORMATIONItem 1.

Financial Statements

1Item 2.

Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations

38Item 3.

Quantitative and
    Qualitative Disclosures About Market Risk

76Item 4.

Controls and
    Procedures

77PART II 
    OTHER INFORMATIONItem 1.

Legal Proceedings

77Item 1A.

Risk Factors

79Item 2.

Unregistered Sales
    of Equity Securities and Use of Proceeds

80Item 4.

Submission of
    Matters to a Vote of Security Holders

81Item 6.

Exhibits

81SIGNATURES

82EXHIBIT
    INDEX

83  i




---



##### 



Form 10-Q case-by-case
 ii




---



##### 



Form 10-K Form 10-Q.
 iii




---



##### 



PART I 
    FINANCIAL INFORMATION
  Item 1.
    Financial
    Statements  NEW CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
  Condensed Consolidated Balance Sheets
 September 30, 2006 and December 31, 2005
 (Dollars in thousands)
  September 30,


December 31,2006


2005(Unaudited)ASSETSCash and cash equivalents

$
408,860



503,723Restricted cash


572,847



726,697Mortgage loans held for sale at
    lower of cost or market


8,945,134



7,825,175Mortgage loans held for investment,
    net of allowance of $191,561 and $198,131, respectively


14,030,999



16,143,865Residual interests in
    securitizations 
    held-for-trading


223,680



234,930Mortgage servicing assets


59,878



69,315Real estate owned, net of allowance
    of $56,318 and $18,196, respectively


84,021



37,642Accrued interest receivable


109,598



101,945Income taxes, net


80,551



80,823Office property and equipment, net


87,736



86,886Goodwill


95,792



92,980Prepaid expenses and other assets


360,672



243,109Total assets

$
25,059,768



26,147,090LIABILITIES AND
    STOCKHOLDERS EQUITYCredit facilities on mortgage loans
    held for sale

$
8,487,850



7,439,685Financing on mortgage loans held
    for investment, net


13,858,940



16,045,459Accounts payable and accrued
    liabilities


574,258



508,163Junior subordinated notes


51,545



Convertible senior notes, net






4,943Notes payable


22,826



39,140Total liabilities


22,995,419



24,037,390Commitments and contingenciesStockholders equity:Preferred stock, $0.01 par
    value. Authorized 25,000,000 shares at September 30,
    2006 and 10,000,000 shares at December 31, 2005;Series A preferred stock;
    issued and outstanding 4,500,000 shares at
    September 30, 2006 and December 31, 2005


45



45Series B preferred stock;
    issued and outstanding 2,300,000 shares at
    September 30, 2006 and none at December 31, 2005


23



Common stock, $0.01 par value.
    Authorized 300,000,000 shares at September 30, 2006
    and December 31, 2005; issued and outstanding 55,329,184
    and 55,723,267 shares at September 30, 2006 and
    December 31, 2005, respectively


553



557Additional paid-in capital


1,246,451



1,234,362Accumulated other comprehensive
    income


23,450



61,045Retained earnings


793,827



828,2702,064,349



2,124,279Deferred compensation costs






(14,579
)Total stockholders equity


2,064,349



2,109,700Total liabilities and
    stockholders equity

$
25,059,768



26,147,090     1




---



##### 



NEW
    CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
  Condensed
    Consolidated Statements Of Earnings
 (Dollars in thousands, except per share amounts)
 (Unaudited)
  Three Months Ended


Nine Months EndedSeptember 30,


September 30,2006


2005


2006


2005Interest income

$
514,172



494,621



1,478,288



1,246,553Interest expense


(375,228
)


(290,899
)


(1,019,552
)


(671,535
)Net interest income


138,944



203,722



458,736



575,018Provision for losses on mortgage
    loans held for investment


(20,756
)


(38,542
)


(80,906
)


(105,655
)Net interest income after
    provision for losses


118,188



165,180



377,830



469,363Other operating income:Gain on sale of mortgage loans


173,045



176,241



497,732



409,797Servicing income


17,770



10,203



47,424



23,556Other income (loss)


(20,747
)


4,986



18,845



12,257Total other operating income


170,068



191,430



564,001



445,610Operating expenses:Personnel


112,575



146,575



356,218



378,258General and administrative


57,498



49,823



170,086



133,922Advertising and promotion


14,643



25,661



41,197



66,204Professional services


13,295



11,580



33,588



29,063Total operating expenses


198,011



233,639



601,089



607,447Earnings before income taxes


90,245



122,971



340,742



307,526Income tax expense


23,603



2,867



64,822



7,583Net earnings


66,642



120,104



275,920



299,943Dividends paid on preferred stock


3,174



2,567



8,307



2,852Net earnings available to common
    stockholders

$
63,468



117,537



267,613



297,091Basic earnings per share

$
1.14



2.10



4.81



5.37Diluted earnings per share

$
1.12



2.04



4.72



5.18Basic weighted average shares
    outstanding


55,512,895



55,870,410



55,605,770



55,345,952Diluted weighted average shares
    outstanding


56,529,650



57,598,055



56,719,551



57,421,474    2




---



##### 



NEW
    CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
  Condensed Consolidated Statements Of Comprehensive Income
 (Dollars in thousands)
 (Unaudited)
  Three Months Ended


Nine Months EndedSeptember 30,


September 30,2006


2005


2006


2005Net earnings

$
66,642



120,104



275,920



299,943Net unrealized gains (losses) on
    derivative instruments designated as hedges


(60,792
)


66,977



(40,396
)


44,371Reclassification adjustment into
    earnings for derivative instruments


781



2,375



2,386



9,862Tax effect


421



(600
)


415



(1,449
)Comprehensive income

$
7,052



188,856



238,325



352,727    3




---



##### 



NEW
    CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
  Consolidated Statements Of Changes In Stockholders
    Equity
 Year Ended December 31, 2005 and Nine Months Ended
    September 30, 2006
 (In thousands, except per share amounts)
 (Nine Months Ended September 30, 2006 Unaudited)
  AccumulatedOtherPreferred


Preferred


Common


Common


Additional


ComprehensiveShares


Stock


Shares


Stock


Paid-In


Income


Retained


DeferredOutstanding


Amount


Outstanding


Amount


Capital


(Loss)


Earnings


Compensation


TotalBalance at December 31, 2004










54,703



547



1,108,590



(4,700
)


781,627



(7,499
)


1,878,565Proceeds from issuance of common
    stock










1,880



19



26,440















26,459Proceeds from issuance of preferred
    stock


4,500



45











108,619















108,664Repurchases and cancellation of
    treasury stock










(879
)


(9
)


(29,465
)














(29,474
)Cancelled shares related to stock
    options










(244
)


(2
)


(12,414
)














(12,416
)Conversion of convertible senior
    notes










15







500















500Issuance of restricted stock, net










248



2



14,493











(14,495
)


Amortization of deferred
    compensation






























7,415



7,415Net earnings


























416,543







416,543Tax benefit related to
    non-qualified stock options


















17,599















17,599Other comprehensive income, net of
    tax






















65,745











65,745Dividends declared on common
    stock,
    $6.50 per share


























(364,482
)






(364,482
)Dividends declared on preferred
    stock,
    $1.20 per share


























(5,418
)






(5,418
)Balance at December 31, 2005


4,500



45



55,723



557



1,234,362



61,045



828,270



(14,579
)


2,109,700Proceeds from issuance of common
    stock










827



8



14,706















14,714Proceeds from issuance of preferred
    stock


2,300



23











55,580















55,603Repurchases and cancellation of
    treasury stock










(1,544
)


(15
)


(66,476
)














(66,491
)Cancelled shares related to stock
    options










(93
)


(1
)


(1,355
)














(1,356
)Compensation expense related to
    common
    stock options


















8,318















8,318Excess tax benefits related to
    non-qualified
    stock options


















5,037















5,037Conversion of convertible senior
    notes










166



2



4,998















5,000Restricted stock, net










250



2



(2,480
)














(2,478
)Compensation expense related to
    restricted stock


















8,340















8,340Reclassification of deferred
    compensation
    related to adoption of SFAS 123R


















(14,579
)










14,579



Net earnings


























275,920







275,920Other comprehensive income, net of
    tax






















(37,595
)










(37,595
)Dividends declared on common
    stock,
    $5.40 per share


























(302,056
)






(302,056
)Dividends declared on Series A
    preferred stock, $1.71 per share


























(7,700
)






(7,700
)Dividends declared on Series B
    preferred stock, $0.26 per share


























(607
)






(607
)Balance at September 30, 2006


6,800



68



55,329



553



1,246,451



23,450



793,827







2,064,349    4




---



##### 



NEW
    CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
  Condensed Consolidated Statements of Cash Flows
 (Dollars in thousands)
 (Unaudited)
  Nine Months EndedSeptember 30,2006


2005Cash flows from operating
    activities:Net earnings

$
275,920



299,943Adjustments to reconcile net
    earnings to net cash provided by operating activities:Depreciation and amortization of
    office property and equipment


22,669



16,048Amortization of deferred costs
    related to mortgage loans held for investment


64,984



65,072Amortization related to mortgage
    servicing rights and other


15,004



8,634Stock-based compensation


16,658



5,657Cash flows received from residual
    interests in securitizations


2,113



15,021Accretion of Net Interest
    Receivables, or NIR


(18,986
)


(11,949
)NIR gains






(34,807
)Servicing gains


(30,026
)


(60,927
)Fair value adjustment of residual
    interests in securitizations


28,123



7,645Provision for losses on mortgage
    loans held for investment


80,906



105,655Provision for repurchase losses


5,261



4,300Increase in real estate owned, net


(46,379
)


(16,558
)Mortgage loans originated or
    acquired for sale


(42,077,479
)


(30,215,340
)Mortgage loan sales, net


40,630,368



25,453,537Principal payments on mortgage
    loans held for sale


446,841



209,084Increase in credit facilities on
    mortgage loans held for sale


1,048,165



4,513,854Tax benefit (change) related to
    non-qualified stock options


(5,037
)


Net change in other assets and
    liabilities


(249,179
)


77,391Net cash provided by operating
    activities


209,926



442,260Cash flows from investing
    activities:Mortgage loans originated or
    acquired for investment, net


(3,376,627
)


(10,273,642
)Principal payments on mortgage
    loans held for investment


5,370,993



4,984,710Sale of mortgage servicing rights


29,479



8,477Purchase of office property and
    equipment


(23,519
)


(46,761
)Acquisition of net assets


9,795



(80,573
)Net cash provided by (used in)
    investing activities


2,010,121



(5,407,789
)Cash flows from financing
    activities:Proceeds from issuance of financing
    on mortgage loans held for investment, net


3,280,904



9,792,230Repayments of financing on mortgage
    loans held for investment


(5,488,031
)


(4,688,033
)(Increase) decrease in restricted
    cash


153,850



(317,306
)Proceeds from issuance of junior
    subordinated notes


51,545



Net proceeds from issuance of
    common stock


14,714



25,368Net proceeds from issuance of
    preferred stock


55,603



108,664Increase (decrease) in notes
    payable, net


(16,314
)


7,680Payment of dividends on common stock


(294,193
)


(259,067
)Payment of dividends on preferred
    stock


(7,700
)


(2,852
)Excess tax benefits from
    stock-based compensation


5,037



Purchase of common stock


(70,325
)


(13,950
)Net cash provided by (used in)
    financing activities


(2,314,910
)


4,652,734Net decrease in cash and cash
    equivalents


(94,863
)


(312,795
)Cash and cash equivalents,
    beginning of year


503,723



842,854Cash and cash equivalents, end of
    period

$
408,860



530,059Supplemental cash flow disclosure:Interest paid

$
1,014,275



652,937Income taxes paid


60,720



24,746Supplemental noncash financing
    activity:Restricted stock issued

$
8,340



14,866Restricted stock cancelled


2,478



5,896Accrued dividends on common stock


102,400



93,183Accrued dividends on preferred stock


607



    5




---



##### 



NEW
    CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited)
    September 30, 2006 and 2005
  1.
    Basis of
    Presentation           6




---



##### 



NEW
    CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    (Unaudited)
    September 30, 2006 and 2005
      Form 10-Q Rule 10-01 Regulation S-X. Form 10-K
  Reclassification
    Recent
    Accounting Developments
     7




---



##### 



NEW
    CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    (Unaudited)
    September 30, 2006 and 2005
  available-for-sale
        Cash
    and Cash Equivalents
   8




---



##### 



NEW
    CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    (Unaudited)
    September 30, 2006 and 2005
  Restricted
    Cash
    Mortgage
    Loans Held for Sale
    Mortgage
    Loans Held for Investment
    Allowance
    for Losses on Mortgage Loans Held for Investment
    Residual
    Interests in Securitizations
  off-balance
   9




---



##### 



NEW
    CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    (Unaudited)
    September 30, 2006 and 2005
      interests-in-securitization
     10




---



##### 



NEW
    CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    (Unaudited)
    September 30, 2006 and 2005
    6-month, 1-year, 2-year, 3-year 5-year
  Real
    Estate Owned
   11




---



##### 



NEW
    CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    (Unaudited)
    September 30, 2006 and 2005
    September 30,


December 31,2006


2005Real estate owned, netReal estate owned

$
140,339



55,838Valuation allowance


(56,318
)


(18,196
)$
84,021



37,642     Three Months Ended


Nine Months EndedSeptember 30,


September 30,2006


2005


2006


2005Balance, beginning of period

$
32,068



12,170



18,196



6,576Additions(1)


41,885



6,006



88,764



18,948Charge-offs(2)


(17,635
)


(5,977
)


(50,642
)


(13,325
)Balance, end of period

$
56,318



12,199



56,318



12,199     (1)
    
    Additions to the valuation allowance consist of amounts
    reclassified from the allowance for losses on mortgage loans
    held for investment at the time the related mortgage loans are
    foreclosed upon and reclassified from mortgage loans held for
    investment to real estate owned.(2)
    
    Charge-off amounts presented above represent a portion of the
    charge-offs included in the rollfoward of the allowance for
    losses on mortgage loans held for investment.  Derivative
    Instruments
    Interest
    Rate Lock and Forward Sale Commitments
   12




---



##### 



NEW
    CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    (Unaudited)
    September 30, 2006 and 2005
    Income
    Taxes
      2.
    Mortgage
    Loans Held for Sale    September 30,


December 31,2006


2005Mortgage loans held for sale:First trust deeds

$
8,022,396



7,110,722Second trust deeds


884,854



704,430Net deferred origination costs and
    other(1)


37,884



9,973$
8,945,134



7,825,125     (1)
    
    Other includes approximately $10.0 million of lower of cost
    or market valuation allowance, primarily related to hurricane
    exposure, at December 31, 2005. The amount is immaterial at
    September 30, 2006.    3.
    Mortgage
    Loans Held for Investment   13




---



##### 



NEW
    CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    (Unaudited)
    September 30, 2006 and 2005
    September 30,


December 31,2006


2005Mortgage loans held for investment:First trust deeds

$
13,560,995



15,877,535Second trust deeds


570,299



334,689Allowance for loan losses


(191,561
)


(198,131
)Net deferred origination costs


91,266



129,772$
14,030,999



16,143,865       Three Months Ended


Nine Months EndedSeptember 30,


September 30,2006


2005


2006


2005Balance, beginning of period

$
209,889



145,565



198,131



90,227Additions


20,756



38,542



80,906



105,655Charge-offs, net


(39,084
)


(6,348
)


(87,476
)


(18,123
)Balance, end of period

$
191,561



177,759



191,561



177,759   4.
    Residual
    Interests in Securitizations       14




---



##### 



NEW
    CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    (Unaudited)
    September 30, 2006 and 2005
          Nine Months EndedSeptember 30,2006


2005Balance, beginning of period

$
234,930



148,021Additions






34,807Cash received


(2,113
)


(15,021
)Accretion


18,986



11,949Fair value adjustment


(28,123
)


(7,645
)Balance, end of period

$
223,680



172,111   5.
    Mortgage
    Servicing Assets    Nine Months EndedSeptember 30,2006


2005Balance, beginning of period

$
69,315



8,249Additions


30,026



60,927Sales of servicing rights


(24,516
)


(8,477
)Amortization


(14,947
)


(6,389
)Balance, end of period

$
59,878



54,310  15




---



##### 



NEW
    CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    (Unaudited)
    September 30, 2006 and 2005
      6.
    Goodwill        Balance, beginning of period

$
92,980Acquisition of Access Lending
    operating platform


3,200Purchase price allocation
    adjustment related to acquisition of RBC Mortgage origination
    platform


(388
)Balance, end of period

$
95,792  16




---



##### 



NEW
    CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    (Unaudited)
    September 30, 2006 and 2005
  7.
    Credit
    Facilities and Other Short-Term Borrowings    September 30,

December 31,2006

2005A

$2.0 billion asset-backed
    commercial paper facility for Von Karman Funding Trust, a
    wholly-owned subsidiary of New Century Mortgage, expiring in
    February 2009, secured by mortgage loans held for sale and cash,
    bearing interest based on a margin over one-month LIBOR. The
    Company expects to renew or extend this facility prior to its
    expiration

$
1,316,746



A

$2.0 billion master
    repurchase agreement ($1 billion of which is uncommitted)
    among New Century Mortgage, NC Capital, Home 123, New Century
    Credit and Bank of America, N.A. expiring in September 2007,
    secured by mortgage loans held for sale, bearing interest based
    on a margin over one-month LIBOR. The Company expects to renew
    or extend this facility prior to its expiration


876,350



916,714A

$1.0 billion master
    repurchase agreement among New Century Mortgage, Home 123 and
    Bank of America, N.A. expiring in September 2007, secured by
    mortgage loans held for sale, bearing interest based on a margin
    over one-month LIBOR. The Company expects to renew or extend
    this facility prior to its expiration


394,085



277,484A

$1.0 billion master
    repurchase agreement among New Century Credit, NC Asset Holding,
    New Century Mortgage, NC Capital and Barclays Bank PLC expiring
    in March 2007, secured by mortgage loans held for sale, bearing
    interest based on a margin over one-month LIBOR. The Company
    expects to renew or extend this facility prior to its expiration


217,701



821,856An

$800 million master
    repurchase agreement ($400 million of which is uncommitted)
    among NC Capital, NC Asset Holding, New Century Credit and Bear
    Stearns Mortgage Capital expiring in November 2006, secured by
    mortgage loans held for sale, bearing interest based on a margin
    over one-month LIBOR


636,333



610,365A

$650 million master
    repurchase agreement among New Century Credit, NC Capital and
    Citigroup Global Markets Realty Corp., which expired in July
    2006, secured by mortgage loans held for sale, bearing interest
    based on a margin over one-month LIBOR. The Company did not
    renew this facility as it has been replaced by a new Citigroup
    master repurchase agreement






276,816 17




---



##### 



NEW
    CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    (Unaudited)
    September 30, 2006 and 2005
  September 30,

December 31,2006

2005A

$250 million master
    repurchase agreement among New Century Mortgage, NC Capital, New
    Century and Citigroup Global Markets Realty Corp., which expired
    in July 2006, secured by delinquent loans and real estate owned,
    or REO, properties, bearing interest based on a margin over
    one-month LIBOR. The Company did not renew this facility as it
    has been replaced by a new Citigroup master repurchase agreement






109,076A

$950 million uncommitted
    master repurchase agreement among New Century Financial, New
    Century Mortgage, Home123, NC Capital, New Century Credit and
    Citigroup Global Markets Realty Corp., expiring in July 2007,
    secured by mortgage loans held for sale, bearing interest based
    on a margin over one-month LIBOR. The Company has the ability,
    at any one time, to secure up to $150 million with
    delinquent loans and real estate owned, or REO, properties. The
    Company expects to renew or extend this facility prior to its
    expiration


137,653



A

$1.5 billion master
    repurchase agreement ($500 million of which is uncommitted)
    among New Century Credit, New Century Mortgage, NC Capital,
    Home123 and Credit Suisse First Boston Mortgage Capital LLC
    expiring in December 2006, secured by mortgage loans held for
    sale, bearing interest based on a margin over one-month LIBOR.
    The Company expects to renew or extend this facility prior to
    its expiration


546,479



452,239A

$1.0 billion master
    repurchase agreement among New Century Credit, New Century
    Mortgage, NC Capital, Home123 and Deutsche Bank expiring in
    November 2006, secured by mortgage loans held for sale, bearing
    interest based on a margin over one-month LIBOR. The Company
    expects to renew or extend this facility prior to its expiration


582,545



441,227A

$150 million master
    repurchase agreement among New Century Mortgage, Home 123, NC
    Capital, and Deutsche Bank, Aspen Funding Corp., Newport Funding
    Corp. and Gemini Securitization Corp., LLC expiring in April
    2007, secured by delinquent loans or REO properties, bearing
    interest based on a margin over one-month LIBOR. The Company
    expects to renew or extend this facility prior to its expiration


129,371



 18




---



##### 



NEW
    CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    (Unaudited)
    September 30, 2006 and 2005
  September 30,

December 31,2006

2005An

$850 million master
    repurchase agreement ($150 million of which is uncommitted)
    among New Century Credit, New Century Mortgage, NC Capital, NC
    Asset Holding, Home123, and IXIS Real Estate Capital Inc.
    expiring in November 2006, secured by mortgage loans held for
    sale, bearing interest based on a margin over one-month LIBOR.
    The Company expects to renew or extend this facility prior to
    its expiration


449,333



404,696A

$3.0 billion master
    repurchase agreement among New Century Credit, New Century
    Mortgage, NC Capital, NC Asset Holding, Morgan Stanley Bank, and
    Morgan Stanley Mortgage Capital Inc. expiring in February 2007,
    secured by mortgage loans held for sale, bearing interest based
    on a margin over one-month LIBOR. The Company expects to renew
    or extend this facility prior to its expiration


1,509,478



1,469,860A

$2.0 billion master
    repurchase agreement ($500 million of which is uncommitted)
    between New Century Funding I, a special-purpose vehicle
    established as a Delaware statutory trust, which is a
    wholly-owned subsidiary of New Century Mortgage, and UBS Real
    Estate Securities Inc. expiring in June 2008, secured by
    mortgage loans held for sale, bearing interest based on a margin
    over one-month LIBOR. The Company expects to renew or extend
    this facility prior to its expiration


1,480,379



1,673,225A

$450 million master
    repurchase agreement ($250 million of which is uncommitted)
    among New Century Warehouse, New Century Mortgage, New Century,
    and Goldman Sachs Mortgage Company expiring in February 2007,
    secured by mortgage loans held for sale, bearing interest based
    on a margin over one-month LIBOR. The Company expects to renew
    or extend this facility prior to its expiration


91,173



A

$100 million master
    repurchase agreement among New Century, New Century Warehouse,
    Access Investments II L.L.C., a direct subsidiary of New
    Century Warehouse, Access Lending, Galleon Capital Corporation,
    State Street Capital Markets, LLC and State Street Bank and
    Trust Company expiring in August 2008, secured by mortgage loans
    held for sale, bearing interest based on a margin over the
    one-month commercial paper rate. The Company expects to renew or
    extend this facility prior to its expiration


48,701



A

$125 million master
    repurchase agreement among New Century Warehouse and Guaranty
    Bank expiring in February 2007, secured by mortgage loans held
    for sale, bearing interest based on a margin over one-month
    LIBOR. The Company expects to renew or extend this facility
    prior to its expiration


71,523



 19




---



##### 



NEW
    CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    (Unaudited)
    September 30, 2006 and 2005
  September 30,

December 31,2006

2005Less: Credit facility amounts
    reclassified to financing on mortgage loans held for investment






(13,873
)$
8,487,850



7,439,685   debt-to-net
  8.
    Financing
    on Mortgage Loans Held for Investment    September 30,


December 31,2006


2005Securitized bonds

$
13,895,512



16,071,460Short-term financing on retained
    bonds






1,9032005-NC3 NIM bond


23,784



21,405Debt issuance costs


(60,356
)


(63,182
)Credit facility amounts
    reclassified from warehouse credit facilities






13,873Total financing on mortgage loans
    held for investment

$
13,858,940



16,045,459     Due in less than 1 year

$
5,066,814Due in 2 years


2,919,213Due in 3 years


1,517,554Due thereafter


4,355,359$
13,858,940   9.
    Convertible
    Senior Notes   20




---



##### 



NEW
    CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    (Unaudited)
    September 30, 2006 and 2005
    10.
    Junior
    Subordinated Notes          11.
    Cumulative
    Redeemable Preferred Stock     21




---



##### 



NEW
    CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    (Unaudited)
    September 30, 2006 and 2005
  12.
    Interest
    Income    Three Months Ended


Nine Months EndedSeptember 30,


September 30,2006


2005


2006


2005Interest on mortgage loans held
    for investment

$
287,372



342,105



878,859



905,652Interest on mortgage loans held
    for sale


220,404



145,876



575,914



320,906Residual interest income


5,249



4,022



18,986



11,949Other interest income


1,147



2,618



4,529



8,046$
514,172



494,621



1,478,288



1,246,553   13.
    Interest
    Expense    Three Months Ended


Nine Months EndedSeptember 30,


September 30,2006


2005


2006


2005Interest on financing on mortgage
    loans held for investment

$
205,555



196,376



591,652



474,742Interest on credit facilities and
    other short-term borrowings


157,975



85,930



398,046



182,986Interest on junior subordinated
    notes


215







215



Interest on convertible senior
    notes






67



64



190Other interest expense


11,483



8,526



29,575



13,617$
375,228



290,899



1,019,552



671,535  22




---



##### 



NEW
    CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    (Unaudited)
    September 30, 2006 and 2005
  14.
    Derivative
    Activities    September 30,2006


2005Cash flow hedges:Euro Dollar futures contracts

$
30,706



79,508Interest rate swap contracts


(11,265
)


Interest rate cap contracts


38



1,104Fair value hedges






517Free-standing derivatives:Euro Dollar futures contracts


800



663Purchased options on Euro Dollar
    futures contracts


2,749



Interest rate swap contracts


377



Interest rate locks


4,571



(2,257
)Forward sale commitments


(10,238
)


5,200$
17,738



84,735     Three Months Ended September 30,


Nine Months Ended September 30,2006


2005


2006


2005Cash flow hedges:Euro Dollar futures contracts

$
26,728



8,142



71,013



22,636Ineffectiveness






2,160



13,726



5,776Interest rate cap contracts


(939
)


(1,346
)


(2,602
)


(6,340
)Fair value hedge


(1,396
)


6,232



(3,112
)


10,994Free-standing derivatives:Euro Dollar futures contracts


(17,830
)


(3,029
)


11,645



(2,612
)Purchased options on Euro Dollar
    futures contracts


(701
)






(5,754
)


Interest rate swap contracts


(15,084
)






(3,402
)


Interest rate locks


4,875



(4,938
)


4,578



(4,938
)Forward sale commitments


(33,818
)


7,703



(9,195
)


7,703Total derivative gains (losses)

$
(38,165
)


14,924



76,897



33,219    23




---



##### 



NEW
    CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    (Unaudited)
    September 30, 2006 and 2005
        Cash Flow Hedge Instruments
  Euro Dollar futures contracts
 24




---



##### 



NEW
    CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    (Unaudited)
    September 30, 2006 and 2005
    Ineffectiveness .
  Interest Rate Swap Contracts
  Interest Rate Cap Contracts
  Accumulated Other Comprehensive Income
  Fair Value Hedge Instruments
 25




---



##### 



NEW
    CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    (Unaudited)
    September 30, 2006 and 2005
    Free-standing
    derivatives
  Euro Dollar futures contracts
  Purchased options on Euro Dollar futures contracts
  Interest Rate Swap contracts
  Interest Rate Locks 
  Forward Sale Commitments 
 26




---



##### 



NEW
    CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    (Unaudited)
    September 30, 2006 and 2005
    15.
    Income
    Taxes        Three Months Ended


Nine Months EndedSeptember 30,


September 30,2006


2005


2006


2005Federal statutory rate


35.0%



35.0%



35.0%



35.0%State and local taxes, net of
    federal benefit


5.0%



6.0%



5.0%



6.0%Benefit of REIT election


−14.2%



−34.8%



−21.3%



−33.3%Recapture of tax reserve


−2.4%



−12.0%



−0.6%



−4.8%Other


2.8%



8.1%



0.9%



−0.4%Consolidated effective tax rate


26.2%



2.3%



19.0%



2.5%  27




---



##### 



NEW
    CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    (Unaudited)
    September 30, 2006 and 2005
  16.
    Earnings
    per Share    Three Months Ended


Nine Months EndedSeptember 30,


September 30,2006


2005


2006


2005Basic:Net earnings

$
66,642



120,104



275,920



299,943Less: Preferred stock dividends


3,174



2,567



8,307



2,852Net earnings available to common
    stock holders

$
63,468



117,537



267,613



297,091Weighted average number of common
    shares outstanding


55,513



55,870



55,606



55,346Earnings per share

$
1.14



2.10



4.81



5.37Diluted:Net earnings available to common
    stockholders

$
63,468



117,537



267,613



297,091Add: Interest and amortization of
    debt issuance costs on convertible senior notes, net of tax


(16
)


(30
)


86



65Diluted net earnings

$
63,452



117,507



267,699



297,156Basic weighted average number of
    common shares outstanding


55,513



55,870



55,606



55,346Effect of dilutive securities:Restricted stock awards


150



103



136



135Stock options


864



1,468



948



1,778Convertible senior notes






155



27



160Directors deferred
    compensation plan awards


3



2



3



256,530



57,598



56,720



57,421Earnings per share

$
1.12



2.04



4.72



5.18      28




---



##### 



NEW
    CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    (Unaudited)
    September 30, 2006 and 2005
  17.
    Stock-Based
    Compensation    paid-in-capital
        paid-in-capital.
 29




---



##### 



NEW
    CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    (Unaudited)
    September 30, 2006 and 2005
        Three Months


Nine MonthsEnded


EndedSeptember 30,


September 30,2005


2005Basic earnings available to common
    stockholders:As reported

$
117,537



297,091Compensation expense, net of
    related tax effects


(1,782
)


(4,971
)Pro forma

$
115,755



292,120Diluted earnings available to
    common stockholders:As reported

$
117,507



297,156Compensation expense, net of
    related tax effects


(1,782
)


(4,971
)Pro forma

$
115,725



292,185Basic earnings per share:As reported

$
2.10



5.37Pro forma


2.07



5.28Diluted earnings per share:As reported

$
2.04



5.18Pro forma


2.03



5.15Basic weighted average shares
    outstanding:As reported


55,870



55,346Pro forma


55,870



55,346Diluted weighted average shares
    outstanding:As reported


57,598



57,421Pro forma


56,909



56,747  30




---



##### 



NEW
    CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    (Unaudited)
    September 30, 2006 and 2005
      Three Months Ended


Nine Months EndedSeptember 30,


September 30,2006


2005


2006


2005Fair value

$
8.01



10.87



6.32



9.23Expected life (years)


4.0



4.5



4.0



4.5Risk-free interest rate


4.8-5.1
%


3.9
%


4.4-4.7
%


4.2
%Volatility


41.7
%


59.4
%


40.9
%


60.5
%Expected annual dividend yield


11.1
%


12.5
%


11.1
%


13.7
%Expected annual forfeiture rate



%



%


11.0
%



%     WeightedAverageNumber of


ExerciseShares


PriceBalance, beginning of period


3,819,533


$
27.29Granted


388,459



40.27Exercised


(660,120
)


12.44Cancelled


(274,589
)


37.51Balance, end of period


3,273,283



30.89  31




---



##### 



NEW
    CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    (Unaudited)
    September 30, 2006 and 2005
    Outstanding


ExercisableAverage


Weighted





WeightedNumber of


Remaining


Average


Number of


AverageStock


Term


Exercise


Stock


ExerciseRange of Exercise Prices


Options


(in years)


Price


Options


Price$
6.00 - 6.79



349,768



4.77


$
6.58



349,768


$
6.587.33 - 9.27



160,000



4.86



8.71



64,599



8.4710.47 - 12.17



240,418



5.37



10.49



206,668



10.4914.43 - 17.83



202,331



5.96



15.15



91,706



15.3818.65 - 18.66



343,347



6.24



18.66



181,797



18.6619.47 - 26.97



192,939



6.71



26.22



98,349



26.5335.74 - 39.10



366,425



9.00



38.32



100,293



38.3041.60 - 44.06



405,169



8.47



44.01



33,391



43.9645.04 - 45.96



364,496



7.35



45.86



316,362



45.8746.02 - 46.78



306,760



8.13



46.60



218,129



46.6347.00 - 49.92



226,525



8.56



49.16



16,194



47.5950.47 - 60.47



115,105



8.00



55.18



91,117



56.093,273,283











1,768,373       WeightedAverageGrantNumber of


Date FairOptions


ValueBalance, beginning of period


2,075,965


$
11.26Granted


388,459



6.32Vested


(768,483
)


10.95Forfeited


(191,031
)


10.92Balance, end of period


1,504,910



10.19  32




---



##### 



NEW
    CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    (Unaudited)
    September 30, 2006 and 2005
    WeightedAverageGrantNumber of


Date FairShares


ValueBalance, beginning of period


441,630


$
45.03Granted


285,907



41.57Vested


(161,719
)


36.30Forfeited


(35,451
)


41.09Balance, end of period


530,367



46.09           18.
    Segment
    Reporting    
    The portfolio segment reflects the Companys investment in
    its mortgage loan portfolio, which produces net interest income
    consisting of interest income less interest expense and a
    provision for mortgage loan losses on mortgage loans it holds in
    its portfolio.
    The mortgage loan operations segment, consisting of the
    Wholesale and Retail origination divisions, reflects purchases
    and originations of residential mortgage loans and records
    (i) net interest income comprised of interest income and
    interest expense on the mortgage loans the Company holds prior
    to selling its loans to the portfolio segment or in the whole
    loan market and (ii) gain on sale of mortgage loans less
    expenses to originate the mortgage loans.
    The servicing and other segment services loans, seeking to
    ensure that loans are repaid in accordance with their terms and
    the Company earns a servicing fee based upon the dollar amount
    of the servicing portfolio. Operations not included in the
    portfolio, mortgage loan operations or servicing segments are
    considered other and are included in the servicing and other
    segment. The Companys recently acquired 33




---



##### 



NEW
    CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    (Unaudited)
    September 30, 2006 and 2005
  Access Lending platform is included in the servicing and other
    segment, although it has not had a material impact on the
    Companys results of operations or financial position for
    the first nine months of 2006.        Three Months Ended September 30, 2006REIT &Qualified


Taxable REIT SubsidiaryREIT





Mortgage Loan OperationsSubsidiaries





Total


Total


ServicingPortfolio


Portfolio


Wholesale


Retail


and Other


Eliminations


ConsolidatedInterest income

$
258,233



30,176



176,676



37,035



12,052







514,172Interest expense


(178,283
)


(24,384
)


(120,743
)


(31,386
)


(20,432
)






(375,228
)Net interest income


79,950



5,792



55,933



5,649



(8,380
)






138,944Provision for losses on mortgage
    loans held for investment


(22,500
)


1,744



















(20,756
)Net interest income after provision
    for losses


57,450



7,536



55,933



5,649



(8,380
)






118,188Other operating income (loss):Gain on sale of mortgage loans










197,310



90,676



(67,517
)


(47,424
)


173,045Servicing & other income
    (loss)


(30,168
)










(66
)


27,257







(2,977
)Total other operating income (loss)


(30,168
)






197,310



90,610



(40,260
)


(47,424
)


170,068Operating expenses


4,246







158,202



98,116



(62,553
)






198,011Earnings before income taxes

$
23,036



7,536



95,041



(1,857
)


13,913



(47,424
)


90,245Funding volume

$








13,482,612



2,349,903











15,832,515Securitizations structured as
    financings

$
























Total assets at September 30,
    2006

$
11,426,092



1,683,192



10,196,797



1,781,636







(27,949
)


25,059,768   34




---



##### 



NEW
    CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    (Unaudited)
    September 30, 2006 and 2005
  Nine Months Ended September 30, 2006REIT &Qualified


Taxable REIT SubsidiaryREIT





Mortgage Loan OperationsSubsidiaries





Total


Total


ServicingPortfolio


Portfolio


Wholesale


Retail


and Other


Eliminations


ConsolidatedInterest income

$
777,928



112,077



473,807



90,166



24,310







1,478,288Interest expense


(510,021
)


(76,286
)


(315,344
)


(73,784
)


(44,117
)






(1,019,552
)Net interest income


267,907



35,791



158,463



16,382



(19,807
)






458,736Provision for losses on mortgage
    loans held for investment


(82,200
)


1,294



















(80,906
)Net interest income after provision
    for losses


185,707



37,085



158,463



16,382



(19,807
)






377,830Other operating income (loss):Gain on sale of mortgage loans










610,717



257,837



(205,513
)


(165,309
)


497,732Servicing & other income
    (loss)


(7,169
)






(144
)


(608
)


74,190







66,269Total other operating income (loss)


(7,169
)






610,573



257,229



(131,323
)


(165,309
)


564,001Operating expenses


17,860







459,129



285,482



(161,382
)






601,089Earnings before income taxes

$
160,678



37,085



309,907



(11,871
)


10,252



(165,309
)


340,742Funding volume

$








38,684,177



6,759,095











45,443,272Securitizations structured as
    financings

$
3,393,531























3,393,531Total assets at September 30,
    2006

$
11,426,092



1,683,192



10,196,797



1,781,636







(27,949
)


25,059,768   35




---



##### 



NEW
    CENTURY FINANCIAL CORPORATION AND SUBSIDIARIES
    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    (Unaudited)
    September 30, 2006 and 2005
  Three Months Ended September 30, 2005REIT &Qualified


Taxable REIT SubsidiaryREIT





Mortgage Loan OperationsSubsidiaries





Total


Total


ServicingPortfolio


Portfolio


Wholesale


Retail


and Other


Eliminations


ConsolidatedInterest income

$
293,706



52,414



132,085



13,814



2,602







494,621Interest expense


(159,022
)


(37,354
)


(77,602
)


(8,386
)


(8,535
)






(290,899
)Net interest income


134,684



15,060



54,483



5,428



(5,933
)






203,722Provision for losses on mortgage
    loans held for investment


(38,500
)


(42
)


















(38,542
)Net interest income after provision
    for losses


96,184



15,018



54,483



5,428



(5,933
)






165,180Other operating income (loss):Gain on sale of mortgage loans










165,399



75,394



(10,703
)


(53,849
)


176,241Servicing & other income
    (loss)


11,579







(5
)


404



3,211







15,189Total other operating income (loss)


11,579







165,394



75,798



(7,492
)


(53,849
)


191,430Operating expenses


2,836







161,880



92,588



(23,665
)






233,639Earnings before income taxes

$
104,927



15,018



57,997



(11,362
)


10,240



(53,849
)


122,971Funding volume

$








14,859,085



1,852,513











16,711,598Securitizations structured as
    financings

$
2,080,230























2,080,230Total assets at September 30,
    2005

$
15,110,803



2,611,568



10,194,849



1,227,874







(57,851
)


29,087,243   36




---



##### 



Nine Months Ended September 30, 2005REIT &Qualified


Taxable REIT SubsidiaryREIT





Mortgage Loan OperationsSubsidiaries





Total


Total


ServicingPortfolio


Portfolio


Wholesale


Retail


and Other


Eliminations


ConsolidatedInterest income

$
739,470



178,131



289,204



32,619



7,129







1,246,553Interest expense


(360,569
)


(114,173
)


(164,067
)


(18,805
)


(13,921
)






(671,535
)Net interest income


378,901



63,958



125,137



13,814



(6,792
)






575,018Provision for losses on mortgage
    loans held for investment


(104,201
)


(1,454
)


















(105,655
)Net interest income after provision
    for losses


274,700



62,504



125,137



13,814



(6,792
)






469,363Other operating income (loss):Gain on sale of mortgage loans










588,805



208,432



(231,754
)


(155,686
)


409,797Servicing & other income
    (loss)


(10,705
)






(4
)


404



46,118







35,813Total other operating income (loss)


(10,705
)






588,801



208,836



(185,636
)


(155,686
)


445,610Operating expenses


15,760







452,782



218,552



(79,647
)






607,447Earnings before income taxes

$
248,235



62,504



261,156



4,098



(112,781
)


(155,686
)


307,526Funding volume

$








36,063,790



4,343,545











40,407,335Securitizations structured as
    financings

$
10,961,958























10,961,958Total assets at September 30,
    2005

$
15,110,803



2,611,568



10,194,849



1,227,874







(57,851
)


29,087,243  37




---



##### 



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Form 10-Q Form 10-K Form 10-K
  The following discussion and analysis of our financial
    condition and results of operations should be read in
    conjunction with our consolidated financial statements and
    related notes contained elsewhere herein. As used herein, except
    where the context suggests otherwise, for time periods on and
    after October 1, 2004, the terms the company,
    our, its, we, the
    group, and us refer to New Century Financial
    Corporation and its consolidated subsidiaries and, for the time
    periods before October 1, 2004, the terms the
    company, our, its, we,
    the group, and us mean New Century TRS
    Holdings, Inc. and its consolidated subsidiaries.
  General
           38




---



##### 



Recent
    Acquisitions
        Executive
    Summary
    gain-on-sale gain-on-sale gain-on-sale
    case-by-case
 39




---



##### 



Overview
    REIT
    and TRS Mortgage Loan Portfolios
        60-day-plus
 40




---



##### 



Originations
    and Sales
      loan-to-value debt-to-income 30-year
    Net interest income on mortgage loans held for
    sale
  Gain on sale of mortgage loans
 41




---



##### 



Loan origination or acquisition cost
    Loan
    Originations and Purchases
         42




---



##### 



40-year
  monthly-amortizing negative-amortizing, loan-to-values monthly-amortizing
   43




---



##### 



For the Three Months EndedSeptember 30, 2006


September 30, 2005Prime &











Prime &Non-Prime


Alt-A


Total


%


Non-Prime


Alt-A


Total


%Wholesale

$
12,727,703



754,909



13,482,612



85.2



14,498,442



360,643



14,859,085



88.9Retail


1,099,510



1,250,393



2,349,903



14.8



1,358,536



493,977



1,852,513



11.1Total originations and purchases


13,827,213



2,005,302



15,832,515



100.0



15,856,978



854,620



16,711,598



100.0Fixed-rate mortgages:15  30 year


2,200,129



1,386,982



3,587,111



22.7



4,263,060



516,122



4,779,182



28.6Interest-Only


93,831



216,480



310,311



2.0















40-Year


843,288



85,042



928,330



5.8















HELOC






























Sub-total
    Fixed


3,137,248



1,688,504



4,825,752



30.5



4,263,060



516,122



4,779,182



28.6Adjustable-rate mortgages:Hybrid  30 year(1)


2,796,291



179,867



2,976,158



18.8



5,986,780



30,514



6,017,294



36.0Interest-Only


2,394,570



116,452



2,511,022



15.9



5,607,138



307,984



5,915,122



35.4Hybrid  40 year(1)


5,499,104







5,499,104



34.7















HELOC






20,479



20,479



0.1















Sub-total
    ARM


10,689,965



316,798



11,006,763



69.5



11,593,918



338,498



11,932,416



71.4Total originations and purchases


13,827,213



2,005,302



15,832,515



100.0



15,856,978



854,620



16,711,598



100.0Purchases


5,469,518



1,312,972



6,782,490



42.8



6,730,049



510,493



7,240,542



43.3Refinances:Cash-out refinances


7,082,991



198,009



7,281,000



46.0



7,809,407



89,346



7,898,753



47.3Rate/term refinances


1,274,704



494,321



1,769,025



11.2



1,317,522



254,781



1,572,303



9.4Total originations and purchases


13,827,213



2,005,302



15,832,515



100.0



15,856,978



854,620



16,711,598



100.0Full documentation


7,628,488



1,228,637



8,857,125



55.9



8,663,510



576,456



9,239,966



55.3Limited documentation


294,317







294,317



1.9



276,062







276,062



1.7Stated documentation


5,904,408



776,665



6,681,073



42.2



6,917,406



278,164



7,195,570



43.0Total originations and purchases

$
13,827,213



2,005,302



15,832,515



100.0



15,856,978



854,620



16,711,598



100.0Average principal balance of loans
    originated and purchased

$
191



177



189







181



182



181Weighted average FICO score of
    loans originated and purchased


624



712



635







631



718



636Percent of loans secured by first
    mortgages


94.0
%


92.9
%


93.8
%






93.3
%


94.0
%


93.4
%Weighted average
    loan-to-value
    ratio(2)


81.7
%


79.1
%


81.4
%






81.3
%


76.3
%


81.1
%Weighted average interest rates:Fixed-rate mortgages


8.9
%


7.1
%


8.3
%






7.7
%


6.1
%


7.5
%Adjustable-rate
    mortgages  initial rate


8.4
%


5.8
%


8.3
%






7.1
%


5.3
%


7.1
%Adjustable-rate
    mortgages  margin over index


6.2
%


2.7
%


6.1
%






5.9
%


2.9
%


5.8
%Total originations and purchases


8.5
%


6.9
%


8.3
%






7.3
%


5.9
%


7.2
%Percentage of loans originated in
    AAA, AA and A+ credit grades


87.4
%


N/A



N/A







90.4
%


N/A



N/APercentage of loans originated in
    bottom two credit grades


2.9
%


N/A



N/A







2.3
%


N/A



N/A     (1)
    
    Majority of hybrid products have a fixed rate for 2 or
    3 years. 44




---



##### 



(2)
    
    Weighted average
    loan-to-value
    (LTV) is the LTV of the first lien mortgages and combined LTV of
    the second lien mortgages.  For the Nine Months EndedSeptember 30, 2006


September 30, 2005Prime &











Prime &Non-Prime


Alt-A


Total


%


Non-Prime


Alt-A


Total


%Wholesale

$
36,347,510



2,336,667



38,684,177



85.1



35,703,147



360,643



36,063,790



89.3Retail


3,090,039



3,669,056



6,759,095



14.9



3,849,568



493,977



4,343,545



10.7Total originations and purchases


39,437,549



6,005,723



45,443,272



100.0



39,552,715



854,620



40,407,335



100.0Fixed-rate mortgages:15-30 year


6,349,325



4,104,443



10,453,768



23.0



9,622,637



516,122



10,138,759



25.1Interest-Only


248,234



848,717



1,096,951



2.4















40-Year


2,182,322



221,282



2,403,604



5.3















HELOC






239



239



















Sub-total
    Fixed


8,779,881



5,174,681



13,954,562



30.7



9,622,637



516,122



10,138,759



25.1Adjustable-rate mortgages:Hybrid  30 year(1)


8,719,296



441,844



9,161,140



20.2



16,502,073



30,514



16,532,587



40.9Interest-Only


6,284,923



336,086



6,621,009



14.6



13,428,005



307,984



13,735,989



34.0Hybrid  40 year(1)


15,653,449







15,653,449



34.4















HELOC






53,112



53,112



0.1















Sub-total
    ARM


30,657,668



831,042



31,488,710



69.3



29,930,078



338,498



30,268,576



74.9Total originations and purchases


39,437,549



6,005,723



45,443,272



100.0



39,552,715



854,620



40,407,335



100.0Purchases


16,220,611



3,818,747



20,039,358



44.1



15,956,704



510,493



16,467,197



40.8Refinances:Cash-out refinances


19,728,437



610,304



20,338,741



44.8



20,251,060



89,346



20,340,406



50.3Rate/term refinances


3,488,501



1,576,672



5,065,173



11.1



3,344,951



254,781



3,599,732



8.9Total originations and purchases


39,437,549



6,005,723



45,443,272



100.0



39,552,715



854,620



40,407,335



100.0Full documentation


21,505,862



3,797,574



25,303,436



55.7



21,013,295



576,456



21,589,751



53.4Limited documentation


922,042







922,042



2.0



1,198,654







1,198,654



3.0Stated documentation


17,009,645



2,208,149



19,217,794



42.3



17,340,766



278,164



17,618,930



43.6Total originations and purchases

$
39,437,549



6,005,723



45,443,272



100.0



39,552,715



854,620



40,407,335



100.0Average principal balance of loans
    originated and purchased

$
186



176



185







181



182



181Weighted average FICO score of
    loans originated and purchased


623



710



634







631



718



632Percent of loans secured by first
    mortgages


93.7
%


92.7
%


93.5
%






94.0
%


94.0
%


94.0
%Weighted average
    loan-to-value
    ratio(2)


81.6
%


78.4
%


81.1
%






81.3
%


76.3
%


81.2
%Weighted average interest rates:Fixed-rate mortgages


8.9
%


6.9
%


8.1
%






7.7
%


6.1
%


7.6
%Adjustable-rate
    mortgages  initial rate


8.4
%


5.4
%


8.3
%






7.1
%


5.3
%


7.1
%Adjustable-rate
    mortgages  margin over index


6.2
%


2.7
%


6.1
%






5.8
%


2.9
%


5.7
%Total originations and purchases


6.7
%


8.5
%


8.2
%






7.2
%


5.9
%


7.2
%Percentage of loans originated in
    AAA, AA and A+ credit grades


87.6
%


N/A



N/A







89.9
%


N/A



N/APercentage of loans originated in
    bottom two credit grades


3.0
%


N/A



N/A







2.4
%


N/A



N/A     (1)
    
    Majority of hybrid adjustable-rate mortgage products have a
    fixed rate for 2 or 3 years.(2)
    
    Weighted average
    loan-to-value
    (LTV) is the LTV of the first lien mortgages and combined LTV of
    the second lien mortgages. 45




---



##### 



Secondary
    Market Transactions
      Three Months Ended September 30,


Nine Months Ended September 30,2006


2005


2006


2005% of





% of





% of





% ofAmount


Sales


Amount


Sales


Amount


Sales


Amount


SalesNon-prime whole loan sales

$
13,877,545



87.5
%


9,983,362



71.3
%


35,170,037



79.8
%


22,507,439



61.8
%Prime and Alt-A whole loan sales


1,715,503



10.8
%


19,358



0.1
%


5,058,310



11.5
%


19,358



0.1
%Securitizations structured as sales






0.0
%


1,999,959



14.3
%






0.0
%


2,989,181



8.2
%Total premium sales


15,593,048



98.3
%


12,002,679



85.7
%


40,228,347



91.3
%


25,515,978



70.1
%Discounted whole loan sales


409,896



2.6
%


32,081



0.2
%


916,340



2.1
%


178,525



0.5
%Total sales


16,002,944



100.9
%


12,034,760



85.9
%


41,144,687



93.4
%


25,694,503



70.6
%Securitizations structured as
    financings






0.0
%


2,080,230



14.8
%


3,393,531



7.7
%


10,961,958



30.1
%Repurchases


(150,974
)


(0.9
)%


(102,027
)


(0.7
)%


(469,342
)


(1.1
)%


(240,966
)


(0.7
)%Total secondary market transactions

$
15,851,970



100.0
%


14,012,963



100.0
%


44,068,876



100.0
%


36,415,495



100.0
%   Whole
    Loan Sales
       46




---



##### 



Discounted
    Loan Sales
      Three Months Ended September 30,


Nine Months Ended September 30,2006


2005


2006


2005Principal


Discount


Principal


Discount


Principal


Discount


Principal


DiscountRepurchases from whole loan
    investors

$
181,871



(26.7
)%


32,081



(3.5
)%


242,248



(26.5
)%


90,453



(8.1
)%Other discounted sales


228,025



(1.8
)%










674,093



(2.3
)%


88,072



0.5
%Total discounted sales

$
409,896



(12.9
)%


32,081



(3.5
)%


916,341



(8.7
)%


178,525



(3.9
)%   Securitizations
    Structured as Financings
   47




---



##### 



Securitizations
    Structured as Sales
    held-for-trading
      Non-Performing
    Assets
   48




---



##### 



September 30,


December 31,2006


2005%





%Principal


Principal


Principal


PrincipalMortgage loans held for
    investment: (1)Current

$
12,954,903



91.68
%

$
15,231,245



93.95
%Delinquent 
    30-60 days (excluding non-accrual)


358,613



2.54
%


314,416



1.94
%Non-Accrual


817,778



5.78
%


666,563



4.11
%Total

$
14,131,294



100.00
%

$
16,212,224



100.00
%Allowance for losses on mortgage
    loans held of investment

$
191,561



1.36
%

$
198,131



1.22
%Charge-offs, net of recoveries


87,476



0.62
%


32,329



0.20
%Mortgage loans held for sale:Current

$
8,559,218



96.09
%

$
7,699,132



98.51
%Delinquent 
    30-60 days (excluding non-accrual)


113,021



1.27
%


35,891



0.46
%Non-Accrual


235,011



2.64
%


80,179



1.03
%Total

$
8,907,250



100.00
%

$
7,815,202



100.00
%     (1)
    
    Average seasoning of portfolio was 22 months and
    15 months at September 30, 2006 and December 31,
    2005, respectively.  Critical
    Accounting Policies
      Allowance
    for Losses on Mortgage Loans Held for Investment
   49




---



##### 



Residual
    Interests in Securitizations
        interests-in-securitization
   50




---



##### 



6-month, 1-year, 2-year, 3-year 5-year
   51




---



##### 



Allowance
    for Repurchase Losses
    Balance, beginning of period

$
6,955Provision for repurchase losses


5,261Transfers of reserves previously
    related to hurricane exposure on mortgage loans held for sale


4,361Charge-offs, net


(2,692
)Balance, end of period

$
13,885   Gain
    on Sale of Loans
     52




---



##### 



Income
    Taxes
    Estimated
    REIT Taxable Income
    Three Months Ended


Nine Months EndedSeptember 30,


September 30,Estimated


Estimated


Estimated


Estimated2006


2005


2006


2005GAAP consolidated earnings before
    income taxes

$
90,245


$
122,971


$
340,742


$
307,526GAAP / Tax differences in
    accounting for:TRS earnings before income taxes


(67,208
)


(18,558
)


(182,446
)


(59,292
)Provision for loan losses


22,500



38,500



82,200



104,201Realized loan losses


(15,504
)


(3,157
)


(42,800
)


(7,320
)All other GAAP / Tax differences,
    net


19,867



3,891



36,286



7,759REIT taxable income before
    preferred dividends


49,900



143,647



233,982



352,874Preferred dividends


(3,174
)


(2,566
)


(8,307
)


(2,851
)REIT taxable income available to
    common shareholders

$
46,726


$
141,081


$
225,675


$
350,023    53




---



##### 



Derivative
    Instruments
    Interest
    Rate Lock and Forward Sale Commitments
    Securitizations
    Structured as Financings
    Corporate
    Governance
    
    The Board of Directors is composed of a majority of independent
    directors, who are coordinated by our Lead Independent Director.
    The Audit, Governance and Nominating and Compensation Committees
    of the Board of Directors are composed exclusively of
    independent directors. The Board of Directors (i) reviews
    our financial results, policy compliance and strategic direction
    on a quarterly basis and (ii) reviews our budget and
    strategic plan annually.
    We have a Code of Business Conduct and Ethics that covers a wide
    range of business practices and procedures that apply to all of
    our Associates, officers and directors in order to foster the
    highest standards of ethics and conduct in all of our business
    relationships. In addition, we have a Code of Conduct, with
    standards applicable to our Associates and officers, and a Code
    of Ethics for Senior Financial Officers applicable to our senior
    officers who have financial responsibility or oversight.
    We have instituted and distributed policies and procedures
    designed to encourage any of our Associates or officers to raise
    concerns, including through anonymous means, regarding possible
    violations of federal fraud or securities laws, which may
    involve financial matters, such as accounting, auditing or 54




---



##### 



financial reporting, with our Corporate Ethics Officer or the
    appropriate supervisors, officers or committees of the Board of
    Directors.  
    We have approved and implemented an Insider Trading Policy that
    prohibits any of our directors, officers or Associates from
    buying or selling our stock on the basis of material nonpublic
    information or communicating material nonpublic information to
    others.
    We have a formal internal audit function to further the
    effective functioning of our internal controls and procedures.
    Our internal audit plan is approved annually by the Audit
    Committee of the Board of Directors and is based on a formal
    risk assessment and is intended to provide management and the
    Audit Committee with an effective tool to identify and address
    areas of financial or operational concerns and ensure that
    appropriate oversight, controls and procedures are in place.
    Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002,
    we have completed and will complete annually an evaluation of
    our internal control over financial reporting, as described
    under the heading Controls and Procedures 
    Managements Annual Report on Internal Control over
    Financial Reporting on page 90 of our Annual Report
    on
    Form 10-K
    for the year ended December 31, 2005.  Form 10-K, Form 10-Q, Form 8-K (949) 224-5745.
  Results
    of Operations
      Three Months Ended


Nine Months EndedSeptember 30,


September 30,2006


2005


2006


2005Interest income:Net interest income

$
138,944



48.20
%


203,722



57.13
%


458,736



48.71
%


575,018



62.85
%Provision for losses on mortgage
    loans held for investment


(20,756
)


(7.20
)%


(38,542
)


(10.81
)%


(80,906
)


(8.59
)%


(105,655
)


(11.55
)%Other operating income:Gain on sale of mortgage loans


173,045



60.03
%


176,241



49.42
%


497,732



52.85
%


409,797



44.79
%Servicing income


17,770



6.16
%


10,203



2.86
%


47,424



5.04
%


23,556



2.57
%Other income (loss)


(20,747
)


(7.19
)%


4,986



1.40
%


18,845



1.99
%


12,257



1.34
%Total net interest income and other
    operating income


288,256



100.00
%


356,610



100.00
%


941,831



100.00
%


914,973



100.00
% 55




---



##### 



Three Months Ended


Nine Months EndedSeptember 30,


September 30,2006


2005


2006


2005Total operating expenses


198,011



68.69
%


233,639



65.52
%


601,089



63.82
%


607,447



66.39
%Earnings before income taxes


90,245



31.31
%


122,971



34.48
%


340,742



36.18
%


307,526



33.61
%Income tax expense


23,603



8.19
%


2,867



0.80
%


64,822



6.88
%


7,583



0.83
%Net earnings

$
66,642



23.12
%


120,104



33.68
%


275,920



29.30
%


299,943



32.78
%Basic earnings per share

$
1.14







2.10







4.81







5.37Diluted earnings per share

$
1.12







2.04







4.72







5.18Basic weighted average shares
    outstanding


55,512,895







55,870,410







55,605,770







55,345,952Diluted weighted average shares
    outstanding


56,529,650







57,598,055







56,719,551







57,421,474   Nine
    months ended September 30, 2006 compared to nine months
    ended September 30, 2005
  Originations
    and Purchases
    For the Nine Months Ended September 30, 2006


For the Nine Months Ended September 30, 2005Wholesale


Retail


Total


%


Wholesale


Retail


Total


%Non-Prime

$
36,347,510



3,090,039



39,437,549



86.8



35,703,147



3,849,568



39,552,715



97.9Prime & Alt-A


2,336,667



3,669,056



6,005,723



13.2



360,643



493,977



854,620



2.1Total originations and purchases


38,684,177



6,759,095



45,443,272



100.0



36,063,790



4,343,545



40,407,335



100.0Fixed-rate mortgages:15  30 year


7,113,073



3,340,695



10,453,768



23.0



8,085,673



2,053,086



10,138,759



25.1Interest-Only


587,485



509,466



1,096,951



2.4















40-Year


1,780,058



623,546



2,403,604



5.3















HELOC






239



239



















Sub-total
    Fixed


9,480,616



4,473,946



13,954,562



30.7



8,085,673



2,053,086



10,138,759



25.1Adjustable-rate mortgages:Hybrid  30 year(1)


8,426,752



734,388



9,161,140



20.2



14,998,765



1,533,822



16,532,587



40.9Interest-Only


6,234,451



386,558



6,621,009



14.6



12,979,352



756,637



13,735,989



34.0Hybrid  40 year(1)


14,530,279



1,123,170



15,653,449



34.4















HELOC


12,079



41,033



53,112



0.1















Sub-total
    ARM


29,203,561



2,285,149



31,488,710



69.3



27,978,117



2,290,459



30,268,576



74.9Total originations and purchases


38,684,177



6,759,095



45,443,272



100.0



36,063,790



4,343,545



40,407,335



100.0Purchases


16,929,573



3,109,785



20,039,358



44.1



15,885,921



581,276



16,467,197



40.8Refinances:Cash-out refinances


17,979,801



2,358,940



20,338,741



44.8



17,265,319



3,075,087



20,340,406



50.3Rate/term refinances


3,774,803



1,290,370



5,065,173



11.1



2,912,550



687,182



3,599,732



8.9Total originations and purchases


38,684,177



6,759,095



45,443,272



100.0



36,063,790



4,343,545



40,407,335



100.0 56




---



##### 



For the Nine Months Ended September 30, 2006


For the Nine Months Ended September 30, 2005Wholesale


Retail


Total


%


Wholesale


Retail


Total


%Full documentation


20,512,819



4,790,617



25,303,436



55.7



18,399,871



3,189,880



21,589,751



53.4Limited documentation


831,096



90,946



922,042



2.0



1,082,386



116,268



1,198,654



3.0Stated documentation


17,340,262



1,877,532



19,217,794



42.3



16,581,533



1,037,397



17,618,930



43.6Total originations and purchases

$
38,684,177



6,759,095



45,443,272



100.0



36,063,790



4,343,545



40,407,335



100.0Average principal balance of loans
    originated and purchased

$
190



160



185







185



151



181Weighted average FICO score of
    loans originated and purchased


629



665



634







633



625



632Weighted average
    loan-to-value
    ratio(2)


81.4
%


79.7
%


81.1
%






81.4
%


78.7
%


81.2
%Weighted average interest rates:Fixed-rate mortgages


8.6
%


7.1
%


8.1
%






7.8
%


6.8
%


7.6
%Adjustable-rate
    mortgages  initial rate


8.3
%


7.7
%


8.3
%






7.1
%


7.1
%


7.1
%Adjustable-rate
    mortgages  margin over index


6.1
%


5.6
%


6.1
%






5.7
%


5.7
%


5.7
%Total originations and purchases


8.4
%


7.3
%


8.2
%






7.2
%


6.9
%


7.2
%     (1)
    
    Majority of hybrid adjustable-rate mortgage products have a
    fixed rate for 2 or 3 years.(2)
    
    Weighted average
    loan-to-value
    (LTV) is the LTV of the first lien mortgages and combined LTV of
    the second lien mortgages.     57




---



##### 



Secondary
    Market Transactions
    Interest
    Income
    Interest
    Expense
   58




---



##### 




    the average balance of our mortgage loans held for investment,
    mortgage loans held for sale, cash, and the liabilities
    financing our assets;
    the average interest rates earned or paid;
    the actual amount of interest income and expense; and
    the overall interest margin earned on our balance sheet.    Nine Months Ended September 30,2006


2005Average


Avg.





Average


Avg.Balance


Yield


Income


Balance


Yield


IncomeInterest-earning assets:Mortgage loans held for
    investment(1)

$
15,945,302



7.35
%

$
878,859


$
16,982,661



7.11
%

$
905,652Mortgage loans held for sale


9,495,905



8.09



575,914



6,085,835



7.03



320,906Residual interests in
    securitizations


219,496



11.53



18,986



148,317



10.74



11,949Cash and investments


808,264



0.75



4,529



981,234



1.09



8,046Total

$
26,468,967



7.45
%

$
1,478,288


$
24,198,047



6.87
%

$
1,246,553Interest-bearing liabilities:Financing on mortgage loans held
    for investment(2)

$
15,414,918



5.12
%

$
591,652


$
16,650,175



3.80
%

$
474,742Credit facilities


9,113,384



5.82



398,046



5,896,570



4.14



182,986Junior subordinated notes


3,210



8.93



215











Convertible senior notes


556



15.35



64



5,332



4.75



190Notes payable


30,844



8.47



1,960



36,455



5.78



1,581Other interest(3)










27,615











12,036Total

$
24,562,912



5.53



1,019,552


$
22,588,532



3.96



671,535Net interest spread/income






1.92
%

$
458,736







2.91
%

$
575,018     (1)
    
    Includes impact of prepayment penalty income of
    $64.6 million and $66.7 million for the nine months
    ended September 30, 2006 and 2005, respectively.(2)
    
    Includes impact of derivative instruments accounted for as
    hedges of $79.7 million and $36.3 million for the nine
    months ended September 30, 2006 and 2005, respectively.(3)
    
    Other interest consists of interest related costs associated
    with our servicing operation.  long-term
  Provision
    for losses on mortgage loans held for investment
   59




---



##### 



Nine Months EndedSeptember 30,2006


2005Balance, beginning of period

$
198,131



90,227Additions


80,906



105,655Charge-offs, net


(87,476
)


(18,123
)Balance, end of period

$
191,561



177,759   Other
    Operating Income
  Gain on sale
 60




---



##### 



Nine Months EndedSeptember 30,2006


2005Cash gain from whole loan sale
    transactions

$
660,887



491,892Gain from securitization of loans






67,315Non-cash gain from servicing
    assets related to securitizations






16,629Cash gain on sale of servicing
    rights related to securitizations






8,477Non-cash gain from servicing
    rights related to whole loan sales


30,026



35,157Securitization expenses






(5,149
)Accrued interest






(15,613
)Fair value adjustment of residual
    securities


(28,123
)


(7,645
)Provision for repurchase losses


(5,261
)


(4,300
)Repurchase costs 
    non-prime


(20,684
)


(12,001
)Non-refundable fees(1)


263,865



215,641Premiums paid(2)


(167,913
)


(216,882
)Origination costs


(235,200
)


(174,500
)Derivative gains


135



10,776Gain on sale of mortgage loans

$
497,732



409,797     (1)
    
    Non-refundable loan fees represent points and fees collected
    from borrowers.(2)
    
    Premiums paid represent fees paid to brokers for wholesale loan
    originations and purchases.  Servicing income
    Other Income
 61




---



##### 



Other
    Operating Expenses
    Nine Months EndedSeptember 30,2006


2005Operating ExpensesPersonnel

$
577,818



561,458General and administrative


170,086



133,922Advertising and promotion


41,197



66,204Professional services


33,588



29,063Gross operating expenses


822,689



790,647Deferred fees and costs(1)


(221,600
)


(183,200
)Total operating expenses

$
601,089



607,447     (1)
    
    Deferred fees and costs represent net direct origination costs
    associated with mortgage loan originations, deferred pursuant to
    SFAS 91 (described below).        Nine Months EndedSeptember 30,2006


2005Average workforce:Non-prime lending


4,043



4,121Prime/Alt-A lending


1,522



221Servicing division


499



335Corporate administration


1,055



917Total average workforce


7,119



5,594  62




---



##### 



Income
    Taxes
    Three
    months ended September 30, 2006 compared to three months
    ended September 30, 2005
  Originations
    and Purchases
    For the Three Months Ended September 30, 2006


For the Three Months Ended September 30, 2005Wholesale


Retail


Total


%


Wholesale


Retail


Total


%Non-Prime

$
12,727,703



1,099,510



13,827,213



87.3



14,498,442



1,358,536



15,856,978



94.9Prime & Alt-A


754,909



1,250,393



2,005,302



12.7



360,643



493,977



854,620



5.1Total originations and purchases


13,482,612



2,349,903



15,832,515



100.0



14,859,085



1,852,513



16,711,598



100.0Fixed-rate mortgages:15-30 year


2,430,716



1,156,395



3,587,111



22.7



3,806,950



972,232



4,779,182



28.6Interest-Only


173,677



136,634



310,311



2.0















40-Year


682,140



246,190



928,330



5.8















HELOC






























Sub-total
    Fixed


3,286,533



1,539,219



4,825,752



30.5



3,806,950



972,232



4,779,182



28.6Adjustable-rate mortgages:Hybrid  30 year(1)


2,722,675



253,483



2,976,158



18.8



5,513,076



504,218



6,017,294



36.0Interest-Only


2,352,613



158,409



2,511,022



15.9



5,539,059



376,063



5,915,122



35.4Hybrid  40 year(1)


5,117,146



381,958



5,499,104



34.7















HELOC


3,645



16,834



20,479



0.1















Sub-total
    ARM


10,196,079



810,684



11,006,763



69.5



11,052,135



880,281



11,932,416



71.4Total originations and purchases


13,482,612



2,349,903



15,832,515



100.0



14,859,085



1,852,513



16,711,598



100.0Purchases


5,714,383



1,068,107



6,782,490



42.8



6,788,131



452,411



7,240,542



43.3Refinances:Cash-out refinances


6,439,946



841,054



7,281,000



46.0



6,799,747



1,099,006



7,898,753



47.3Rate/term refinances


1,328,283



440,742



1,769,025



11.2



1,271,207



301,096



1,572,303



9.4Total originations and purchases


13,482,612



2,349,903



15,832,515



100.0



14,859,085



1,852,513



16,711,598



100.0Full documentation


7,203,433



1,653,692



8,857,125



55.9



7,842,896



1,397,070



9,239,966



55.3Limited documentation


258,761



35,556



294,317



1.9



248,152



27,910



276,062



1.7Stated documentation


6,020,418



660,655



6,681,073



42.2



6,768,037



427,533



7,195,570



43.0Total originations and purchases

$
13,482,612



2,349,903



15,832,515



100.0



14,859,085



1,852,513



16,711,598



100.0Average principal balance of loans
    originated and purchased


194



164



189







185



154



181Weighted average FICO score of
    loans originated and purchased


629



666



635







635



642



636Weighted average
    loan-to-value
    ratio(2)


81.6
%


79.9
%


81.4
%






81.3
%


78.8
%


81.1
%Weighted average interest rates:Fixed-rate mortgages


8.7
%


7.3
%


8.3
%






7.7
%


6.7
%


7.5
%Adjustable-rate
    mortgages  initial rate


8.4
%


7.7
%


8.3
%






7.1
%


7.0
%


7.1
%Adjustable-rate
    mortgages  margin over index


6.1
%


5.5
%


6.1
%






5.8
%


5.6
%


5.8
%Total originations and purchases


8.5
%


7.4
%


8.3
%






7.3
%


6.8
%


7.2
%     (1)
    
    Majority of hybrid adjustable-rate mortgage products have a
    fixed rate for 2 or 3 years. 63




---



##### 



(2)
    
    Weighted average
    loan-to-value
    (LTV) is the LTV of the first lien mortgages and combined LTV of
    the second lien mortgages.        Secondary
    Market Transactions
    Interest
    Income
   64




---



##### 



Interest
    Expense
      
    the average balance of our mortgage loans held for investment,
    mortgage loans held for sale, cash, and the liabilities
    financing our assets;
    the average interest rates earned or paid;
    the actual amount of interest income and expense; and
    the overall interest margin earned on our balance sheet. 65




---



##### 



Three Months Ended September 30,2006


2005Average


Avg.





Average


Avg.Balance


Yield


Income


Balance


Yield


IncomeInterest-earning assets:Mortgage loans held for
    investment(1)

$
15,434,727



7.45
%

$
287,372


$
19,228,796



7.12
%

$
342,105Mortgage loans held for sale


10,820,978



8.15



220,404



8,081,264



7.22



145,876Residual interests in
    securitizations


217,108



9.67



5,249



154,970



10.38



4,022Cash and investments


758,437



0.60



1,147



1,109,897



0.94



2,618Total

$
27,231,250



7.55
%

$
514,172


$
28,574,927



6.92
%

$
494,621Interest-bearing liabilities:Financing on mortgage loans held
    for investment(2)

$
14,914,295



5.51
%

$
205,555


$
18,835,231



4.17
%

$
196,376Credit facilities


10,306,261



6.13



157,975



7,753,173



4.43



85,930Junior subordinated notes


9,525



9.03



215











Convertible senior notes














5,000



5.36



67Notes payable


25,636



8.58



550



41,097



6.73



691Other interest(3)










10,933











7,835Total

$
25,255,717



5.94



375,228


$
26,634,501



4.37



290,899Net interest spread/income






1.61
%

$
138,944







2.55
%

$
203,722     (1)
    
    Includes impact of prepayment penalty income of
    $19.1 million and $29.5 million for the three months
    ended September 30, 2006 and 2005, respectively.(2)
    
    Includes impact of derivative instruments accounted for as
    hedges of $29.3 million and $13.5 million for the
    three months ended September 30, 2006 and 2005,
    respectively.(3)
    
    Other interest consists of interest related costs associated
    with our servicing operation.  long-term
  Provision
    for losses on mortgage loans held for investment
   66




---



##### 



Three Months EndedSeptember 30,2006


2005Balance, beginning of period

$
209,889



145,565Additions


20,756



38,542Charge-offs, net


(39,084
)


(6,348
)Balance, end of period

$
191,561



177,759   Other
    Operating Income
  Gain on sale
  Three Months EndedSeptember 30,2006


2005Cash gain from whole loan sale
    transactions

$
248,587



185,787Gain from securitization of loans






47,842Non-cash gain from servicing
    assets related to securitizations






7,923Cash gain on sale of servicing
    rights related to securitizations






8,477Non-cash gain from servicing
    rights related to whole loan sales


23,230



8,443Securitization expenses






(3,202
)Accrued interest






(10,620
)Fair value adjustment of residual
    securities


10,639



(3,226
)Provision for repurchase losses


(4,469
)


(1,600
)Repurchase costs 
    non-prime


(8,808
)


(4,953
)Non-refundable fees(1)


94,372



85,604Premiums paid(2)


(61,656
)


(90,047
)Origination costs


(89,400
)


(60,200
)Derivative gains (losses)


(39,450
)


6,013Gain on sale of mortgage loans

$
173,045



176,241     (1)
    
    Non-refundable loan fees represent points and fees collected
    from borrowers. 67




---



##### 



(2)
    
    Premiums paid represent fees paid to brokers for wholesale loan
    originations and purchases.  Servicing income
    Other income (loss)
  Other
    Operating Expenses
    Three Months EndedSeptember 30,2006


2005Operating ExpensesPersonnel

$
199,575



214,475General and administrative


57,498



49,823Advertising and promotion


14,643



25,661Professional services


13,295



11,580Gross operating expenses


285,011



301,539Deferred fees and costs(1)


(87,000
)


(67,900
)Total operating expenses

$
198,011



233,639     (1)
    
    Deferred fees and costs represent net direct origination costs
    associated with mortgage loan originations, deferred pursuant to
    SFAS 91.   68




---



##### 



Three Months EndedSeptember 30,2006


2005Average workforce:Non-prime lending


4,056



4,165Prime/Alt-A lending


1,423



662Servicing division


526



361Corporate administration


1,133



897Total average workforce


7,138



6,085   Income
    Taxes
    Liquidity
    and Capital Resources
  Credit
    Facilities
      debt-to-equity debt-to-equity
 69




---



##### 



Asset-backed commercial paper facility.
  Bank of America master repurchase
    agreement.
  Bank of America master repurchase
    agreement.
  Barclays master repurchase agreement.
  Bear Stearns master repurchase agreement.
  Citigroup master repurchase agreement.
  Credit Suisse First Boston master repurchase
    agreement.
 70




---



##### 



Deutsche Bank master repurchase agreement.
  Deutsche Bank master repurchase agreement for delinquent
    loans.
  IXIS master repurchase agreement.
  Morgan Stanley master repurchase agreement.
  UBS Real Estate Securities master repurchase
    agreement.
  Goldman Sachs Mortgage master repurchase
    agreement.
  State Street Bank receivables purchase
    agreement.
  Guaranty Bank mortgage loan purchase and sale
    agreement.
 71




---



##### 



Convertible
    Senior Notes
    Junior
    Subordinated Notes
        Preferred
    Stock
      Securitizations
    Structured as Financings
   72




---



##### 



Other
    Borrowings
      Off-Balance
    Sheet Arrangements
     73




---



##### 



Contractual
    Obligations
    Payment Due by PeriodLess Than


1 to 3


3 to 5


More ThanTotal


1 Year


Years


Years


5 YearsNotes payable

$
22,826



15,506



7,320







Operating leases


183,879



37,480



67,340



35,882



43,177Credit facilities


8,487,850



8,487,850











Financing on mortgage loans held
    for investment


13,858,940



5,066,814



4,436,767



2,218,035



2,137,324     Stock
    Repurchases
        Cash
    Flow
       74




---



##### 



Liquidity
    Strategy
  Form 10-K
     75




---



##### 



Quarterly
    Dividend
        Item 3.
    Quantitative
    and Qualitative Disclosures About Market Risk  General
  and/or and/or
   76




---



##### 



As of
    September 30, 2006:
  Hypothetical Change in Interest Rate (basis points)

+50


+100


-50


-100Change in fair value of residual
    interests in securitizations

$
(11,062
)


(21,395
)


10,643



20,564Change in fair value of
    derivatives related to residual interests in securitizations


7,725



15,450



(7,725
)


(15,450
)Change in fair value of mortgage
    loans held for investment


(44,835
)


(98,331
)


45,895



91,178Change in fair value of
    derivatives related to mortgage loans held for investment


35,839



71,678



(35,839
)


(71,677
)Net change

$
(12,333
)


(32,598
)


12,974



24,615   As of
    December 31, 2005:
  Hypothetical Change in Interest Rate (basis points)

+50


+100


-50


-100Change in fair value of residual
    interests in securitizations

$
(15,440
)


(30,801
)


14,457



28,716Change in fair value of
    derivatives related to residual interests in securitizations


12,913



25,825



(12,913
)


(25,825
)Change in fair value of mortgage
    loans held for investment


(86,166
)


(169,337
)


89,367



176,368Change in fair value of
    derivatives related to mortgage loans held for investment


82,038



164,075



(82,038
)


(164,075
)Net change

$
(6,655
)


(10,238
)


8,873



15,184   Item 4.
    Controls
    and Procedures  Rule 13a-15(e)
 PART II 
    OTHER INFORMATION  Item 1.
    Legal
    Proceedings  Form 10-K, Form 10-Q
 77




---



##### 



England.
  Rubio.
  Bonner.
 78




---



##### 



Bonner,
    Phillips Forrest
  Jeppesen.
    Item 1A.
    Risk
    Factors  Form 10-K Form 10-K
  New
    legislation or regulations could restrict our ability to make
    mortgage loans, which could harm our earnings.
   79




---



##### 



We
    could be harmed if we are forced to sell a greater percentage of
    our loans at a discount.
  Form 10-K
  Item 2.
    Unregistered
    Sales of Equity Securities and Use of Proceeds   80




---



##### 



Rule 10b-18(a)(3)
  Total Number of


MaximumShares Purchased


Number of Sharesas Part of


That May Yet beTotal Number


Average


Publicly


Purchasedof Shares


Price Paid


Announced Plan


Under theCalendar Month

Purchased(1)


per Share


or Program(1)


Plan or Program(1)July





$








3,569,000August





$








3,569,000September


992,500


$
41.66



992,500



2,576,500Total


992,500


$
41.66



992,500



2,576,500     (1)
    
    On November 3, 2005, we publicly announced that our board
    of directors had approved a stock repurchase program for up to
    5 million shares of our common stock over the following
    12 months. All purchased shares listed in this table were
    purchased through this publicly announced plan. Pursuant to its
    terms, this plan expired on November 2, 2006. On
    November 2, 2006, we announced that on October 31,
    2006, our board of directors approved a new stock repurchase
    program for up to 5 million shares of our common stock over
    the following 12 months. No shares were purchased under
    this plan in the third quarter.  Item 4.
    Submission
    of Matters to a Vote of Security Holders    Item 6.
    Exhibits   81




---



##### 



SIGNATURES       Date: November 9, 2006

/s/  Robert
    K. ColeRobert
    K. Cole
    Chairman of the BoardDate: November 9, 2006

/s/  Patti
    M. DodgePatti
    M. Dodge
    Executive Vice President and
    Chief Financial OfficerDate: November 9, 2006

/s/  Brad
    A. MorriceBrad
    A. Morrice
    President and
    Chief Executive Officer  82




---



##### 



EXHIBIT INDEX  ExhibitNumber

Description of Document1
.1

Underwriting Agreement dated
    August 15, 2006, by and among New Century Financial
    Corporation and Bear, Stearns & Co. Inc. and Morgan
    Stanley & Co. Incorporated, as representatives of the
    several underwriters named in Schedule A thereto.(9)2
.1

Agreement and Plan of Merger,
    dated as of April 21, 2004, by and among New Century TRS
    Holdings, Inc. (f/k/a New Century Financial Corporation), New
    Century Financial Corporation (f/k/a New Century REIT, Inc.) and
    NC Merger Sub, Inc.(1)3
.1

Articles of Amendment and
    Restatement of New Century Financial Corporation.(2)3
.2

Articles of Amendment of New
    Century Financial Corporation, dated as of May 11, 2006.(9)3
.3

Articles of Amendment of New
    Century Financial Corporation, dated as of May 11, 2006.(9).3
.4

Certificate of Correction to the
    Articles of Amendment and Restatement of New Century Financial
    Corporation, dated as of January 13, 2006 and filed with
    the State Department of Assessments and Taxation of the State of
    Maryland on January 20, 2006.(8)3
.5

Articles Supplementary of New
    Century Financial Corporation.(3)3
.6

Articles Supplementary of New
    Century Financial Corporation relating to 9.125% Series A
    Cumulative Redeemable Preferred Stock, liquidation preference
    $25.00 per share.(4)3
.7

Articles Supplementary of New
    Century Financial Corporation relating to 9.75% Series B
    Cumulative Redeemable Preferred Stock, liquidation preference
    $25.00 per share.(9)3
.8

Amended and Restated Bylaws of New
    Century Financial Corporation.(2)3
.9

Second Amended and Restated Bylaws
    of New Century Financial Corporation.(5)3
.10

Third Amended and Restated Bylaws
    of New Century Financial Corporation.(7)4
.1

Specimen Certificate for New
    Century Financial Corporations Common Stock.(6)10
.1

Third Amended and Restated Master
    Repurchase Agreement, dated as of September 7, 2006, by and
    among New Century Financial Corporation, NC Capital Corporation,
    New Century Credit Corporation, New Century Mortgage Corporation
    and Bank of America, N.A.(10)10
.2

Fourth Amended and Restated
    Guaranty, dated as of September 7, 2006, by and between New
    Century Financial Corporation and Bank of America, N.A.(10)10
.3

Amended and Restated Master
    Repurchase Agreement, dated as of September 28, 2006, by
    and among New Century Financial Corporation, NC Capital
    Corporation, New Century Credit Corporation, Home123
    Corporation, New Century Mortgage Corporation and Bank of
    America, N.A.(11)10
.4

Amended and Restated Guaranty,
    dated as of September 28, 2006, by and between New Century
    Financial Corporation and Bank of America, N.A.(11)10
.5

Employment Agreement, dated as of
    October 25, 2006, between New Century Financial Corporation
    and Tajvinder S. Bindra. * (12)10
.6

Amended and Restated Employment
    Agreement, dated as of October 30, 2006, between New
    Century Financial Corporation and Patti M. Dodge. * (12)10
.7

Amended and Restated Trust
    Agreement, dated as of September 13, 2006, by and among New
    Century Financial Corporation, Wells Fargo Bank, N.A., Wells
    Fargo Delaware Trust Company and the Administrative Trustees
    named therein.10
.8

Preferred Securities Purchase
    Agreement, dated September 13, 2006, by and among New
    Century Financial Corporation and New Century Capital I Trust,
    on the one hand, and Kodiak Warehouse LLC, on the other
    hand.10
.9

Junior Subordinated Indenture,
    dated as of September 13, 2006, by and between New Century
    Financial Corporation and Wells Fargo Bank, N.A.10
.10

Amendment Number One to Fourth
    Amended and Restated Master Repurchase Agreement, dated as of
    August 10, 2006, by and among IXIS Real Estate Capital,
    Inc., New Century Mortgage Corporation, NC Asset Holding, L.P.,
    NC Capital Corporation, New Century Credit Corporation and
    Home123 Corporation. 83




---



##### 



ExhibitNumber

Description of Document10
.11

Amendment Number One to Amended
    and Restated Guaranty, dated as of August 24, 2006, by and
    between New Century Financial Corporation and Citigroup Global
    Markets Realty Corp.10
.12

Amendment Number Four to Servicer
    Advance Financing Facility Agreement, dated as of
    August 24, 2006, by and between New Century Mortgage
    Corporation and Citigroup Global Markets Realty Corp.10
.13

Amendment Number Three to Master
    Repurchase Agreement, dated as of August 31, 2006, among
    Bank of America, N.A., New Century Mortgage Corporation, Home123
    Corporation, New Century Credit Corporation, NC Capital
    Corporation and New Century Financial Corporation, as
    Guarantor.10
.14

Amendment Number Six to Master
    Repurchase Agreement, dated as of September 18, 2006, among
    Credit Suisse First Boston Mortgage Capital LLC, New Century
    Mortgage Corporation, NC Capital Corporation, NC Asset Holding,
    L.P., New Century Credit Corporation, Loan Partners Mortgage,
    Ltd., Kingston Mortgage Company, Ltd., Compufund Mortgage
    Company, Ltd, WRT Financial Limited Partnership, Peachtree
    Residential Mortgage, L.P., Residential Prime Lending Limited
    Partnership, Team Home Lending, Ltd., Sutter Buttes Mortgage,
    L.P., Midwest Home Mortgage Ltd, Austin Mortgage, L.P., Capital
    Pacific Home Loans, L.P., Golden Oak Mortgage, L.P., scFinance
    LP, Ad Astra Mortgage, Ltd, Home123 Corporation, New Century
    Mortgage Ventures, LLC and New Century Financial
    Corporation.10
.15

Letter Agreement, dated as of
    October 4, 2006, to Fourth Amended Master Repurchase
    Agreement by and among IXIS Real Estate Capital, Inc., New
    Century Mortgage Corporation, NC Asset Holding, L.P., NC Capital
    Corporation, New Century Credit Corporation and Home123
    Corporation.10
.16

Amendment Number One to Master
    Repurchase Agreement, dated as of October 25, 2006, among
    Goldman Sachs Mortgage Company, New Century Warehouse
    Corporation, New Century Mortgage Corporation and New Century
    Financial Corporation.10
.17

Amendment Number One to Master
    Repurchase Agreement, dated as of October 25, 2006, among
    DB Structured Products, Inc., Aspen Funding Corp., Newport
    Funding Corp., Gemini Securitization Corp., LLC, New Century
    Mortgage Corporation, Home123 Corporation and NC Capital
    Corporation.10
.18

Amendment Number Five to Master
    Repurchase Agreement, dated as of November 2, 2006, by and
    among NC Capital Corporation, New Century Mortgage Corporation,
    NC Asset Holding, L.P., Home123 Corporation, New Century Credit
    Corporation, Morgan Stanley Bank and Morgan Stanley Mortgage
    Capital, Inc.31
.1

Certification of Robert K. Cole
    pursuant to Section 302 of the Sarbanes-Oxley Act of
    2002.31
.2

Certification of Patti M. Dodge
    pursuant to Section 302 of the Sarbanes-Oxley Act of
    2002.31
.3

Certification of Brad A. Morrice
    pursuant to Section 302 of the Sarbanes-Oxley Act of
    2002.32
.1

Certification of Robert K. Cole
    pursuant to 18 U.S.C. Section 1350 as adopted pursuant
    to Section 906 of the Sarbanes-Oxley Act of 2002.32
.2

Certification of Patti M. Dodge
    pursuant to 18 U.S.C. Section 1350 as adopted pursuant
    to Section 906 of the Sarbanes-Oxley Act of 2002.32
.3

Certification of Brad A. Morrice
    pursuant to 18 U.S.C. Section 1350 as adopted pursuant
    to Section 906 of the Sarbanes-Oxley Act of 2002.     *
    
    Management contract or compensatory plan or arrangement.
    
    Filed or furnished herewith.(1)
    
    Incorporated by reference from our Registration Statement on
    Form S-3,
    as filed with the Securities and Exchange Commission on
    April 22, 2004.(2)
    
    Incorporated by reference from our Quarterly Report on
    Form 10-Q,
    as filed with the Securities and Exchange Commission on
    November 9, 2004.(3)
    
    Incorporated by reference from our Current Report on
    Form 8-K,
    as filed with the Securities and Exchange Commission on
    October 1, 2004. 84




---



##### 



(4)
    
    Incorporated by reference from our Current Report on
    Form 8-K,
    as filed with the Securities and Exchange Commission on
    June 21, 2005.(5)
    
    Incorporated by reference from our Current Report on
    Form 8-K,
    as filed with the Securities and Exchange Commission on
    August 8, 2005.(6)
    
    Incorporated by reference to the joint filing of New Century
    Financial Corporations Registration Statement on
    Form S-3
    (333-119753)
    and New Century TRS Holdings, Inc.s Post-Effective
    Amendment No. 3 to the Registration Statement
    (No. 333-109727)
    on
    Form S-3,
    as filed with the Securities and Exchange Commission on
    October 14, 2004.(7)
    
    Incorporated by reference from our Current Report on
    Form 8-K,
    as filed with the Securities and Exchange Commission on
    October 31, 2005.(8)
    
    Incorporated by reference from our Current Report on
    Form 8-K,
    as filed with the Securities and Exchange Commission on
    January 20, 2006.(9)
    
    Incorporated by reference from our Current Report on
    Form 8-K,
    as filed with the Securities and Exchange Commission on
    August 18, 2006.(10)
    
    Incorporated by reference from our Current Report on
    Form 8-K,
    as filed with the Securities and Exchange Commission on
    September 13, 2006.(11)
    
    Incorporated by reference from our Current Report on
    Form 8-K,
    as filed with the Securities and Exchange Commission on
    October 4, 2006.(12)
    
    Incorporated by reference from our Current Report on
    Form 8-K,
    as filed with the Securities and Exchange Commission on
    October 31, 2006. 85