updated 3/26/2008 4:53:06 PM ET 2008-03-26T20:53:06

Bankrupt mortgage lender New Century Financial Corp. used improper accounting practices while making risky loans, creating "a ticking time bomb" that led to the company's rapid downfall, a court examiner said in a report released Wednesday.

Michael J. Missal concluded that New Century engaged in at least seven improper accounting practices in 2005 and 2006.

Missal also found that senior management at the Irvine, Calif.-based lender failed to take appropriate steps to manage rising risks caused by the company's aggressive approach to originating loans, often to borrowers who couldn't afford them.

In addition, the examiner said New Century's accounting firm, KPMG LLC, enabled some of the improper accounting practices to continue.

New Century declared bankruptcy in April 2007, becoming one of the first major lenders to fail during the housing crunch.

A New Century spokesman said the company is pleased the examiner's report has been completed so that the company's plan for liquidation can continue.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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