UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark one)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2006
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 333-130524-01
C-BASS 2006-CB6 Trust
(exact name of issuing entity as specified in its charter)
Asset Backed Funding Corporation
(exact name of the depositor as specified in its charter)
Credit-Based Asset Servicing and Securitization LLC
(exact name of the sponsor as specified in its charter)
New York 04-3852364
(State or other jurisdiction of 04-3852365
incorporation or organization) 04-3852366
04-3852367
04-3852368
04-3852369
04-3852370
04-3852371
(I.R.S. Employer
Identification No.)
c/o U.S. Bank National Association
60 Livingston Avenue
St. Paul, MN 55107
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (651) 495-3847
Securities registered pursuant to Section 12(b) of the Act:
NONE.
Securities registered pursuant to Section 12(g) of the Act:
NONE.
Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act.
Yes ___ No X
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act.
Yes ___ No X
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No ___
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K ( 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K.
Not applicable.
Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of
"accelerated filer and large accelerated filer" in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer ___ Accelerated filer ___ Non-accelerated filer X
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Act).
Yes ___ No X
State the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at which
the common equity was last sold, or the average bid and asked price of
such common equity, as of the last business day of the registrant's most
recently completed second fiscal quarter.
Not applicable.
Documents Incorporated by Reference
List hereunder the following documents if incorporated by reference and
the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the
document is incorporated: (1)Any annual report to security holders; (2)
Any proxy or information statement; and (3)Any prospectus filed pursuant
to Rule 424(b) or (c) under the Securities Act of 1933. The listed
documents should be clearly described for identification purposes (e.g.,
annual report to security holders for fiscal year ended December 24, 1980).
Not applicable.
PART I
Item 1. Business.
Omitted.
Item 1A. Risk Factors.
Omitted.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
Omitted.
Item 3. Legal Proceedings.
Omitted.
Item 4. Submission of Matters to a Vote of Security Holders.
Omitted.
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities.
Omitted.
Item 6. Selected Financial Data.
Omitted.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Omitted.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Omitted.
Item 8. Financial Statements and Supplementary Data.
Omitted.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
Omitted.
Item 9A. Controls and Procedures.
Omitted.
Item 9A(T). Controls and Procedures.
Omitted.
Item 9B. Other Information.
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Omitted.
Item 11. Executive Compensation.
Omitted.
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters.
Omitted.
Item 13. Certain Relationships and Related Transactions, and Director
Independence.
Omitted.
Item 14. Principal Accounting Fees and Services.
Omitted.
ADDITIONAL DISCLOSURE ITEMS FOR REGULATION AB
Item 1112(b) of Regulation AB, Significant Obligor Financial Information.
No single obligor represents 10% or more of the pool assets held
by this transaction.
Item 1114(b)(2) and 1115(b) of Regulation AB, Significant Enhancement
Provider Financial Information.
No entity or group of affiliated entities provides any external
credit enhancement or other support for the certificates within
this transaction.
No entity or group of affiliated entities provides derivative
instruments with an aggregate significance percentage of 10%
or more.
Item 1117 of Regulation AB, Legal Proceedings.
The following information (other than the final sentence) has
been provided to the Depositor by New Century Mortgage Corporation
("New Century Mortgage"), an indirect wholly owned subsidiary of
New Century Financial Corporation (the "Company").
Securities Class Action Litigation
On February 8, 2007, Avi Gold filed a securities class action
complaint in the United States District Court for the Central
District of California against the Company and certain of its
directors and officers (the "Original Complaint"). The Original
Complaint alleges that defendants violated federal securities
laws by issuing false and misleading statements and failing
to disclose material facts about the Company, which resulted
in artificially inflated market prices of the Company's common
stock. The purported class period is between April 7, 2006
and February 7, 2007. The Original Complaint seeks money
damages in favor of its purported class of purchasers of the
Company's securities, the costs and expenses of the action
and other relief that may be granted by the court.
The Company has also learned that seventeen additional purported
class actions were filed in the United States District Court for
the Central District of California between February 8, 2007 and
March 16, 2007. These complaints, some of which the Company has
not yet been served with and which name the Company and certain
of its officers and directors as defendants, present in large
degree the same legal and factual issues as the Original
Complaint and allege various class periods, the longest of
which is from April 7, 2006 to March 2, 2007. One of these
class actions has been brought on behalf of the holders of the
Company's 9.125% Series A Cumulative Redeemable Preferred Stock
("Series A Preferred Stock") and the holders of the Company's
9.75% Series B Cumulative Redeemable Preferred Stock ("Series
B Preferred Stock"). Another of these class actions has been
brought on behalf of the holders of the Company's Series B
Preferred Stock. The Company anticipates that similar actions
on behalf of holders of the Company's common stock, Series
A Preferred Stock and Series B Preferred Stock may be filed in
the future. The Company intends to review the allegations in
these complaints and respond appropriately. The Company's
management intends to vigorously defend these claims; however,
an unfavorable outcome in these cases or future securities class
action cases could have a material adverse effect on the
Company's financial condition.
Shareholder Derivative Complaint
The Company was served with a shareholder derivative complaint
on March 1, 2007, filed in the Superior Court of California,
County of Orange. The complaint alleges breach of fiduciary
duty, abuse of control, gross mismanagement, waste of corporate
assets, unjust enrichment, and violations of California
Corporations Code 25402 and seeks damages for breach, disgorgement,
equitable relief, costs and fees. The case is in the very
preliminary stages.
The Company has also learned that five additional shareholder
derivative actions were filed in the Superior Court of
California, County of Orange between February 8, 2007 and
March 16, 2007 and two additional shareholder derivative
actions were filed in the United States District Court for
the Central District of California during this same time period.
These complaints, some of which the Company has not yet been
served with and which name the Company and certain of its
officers and directors as defendants, present in large degree
the same legal and factual issues as the original shareholder
derivative complaint. The Company anticipates that similar
actions may be filed in the future. The Company intends to
review the allegations in these complaints and respond
appropriately.
U.S. Attorney's Office Investigation
On February 27, 2007, the Company received a letter from the
United States Attorney's Office for the Central District of
California (the "U.S. Attorney's Office") indicating that
it was conducting a criminal inquiry under the federal
securities laws in connection with trading in the Company's
securities, as well as accounting errors regarding the
Company's allowance for repurchase losses. The Company has
subsequently received a grand jury subpoena requesting
production of certain documents. The Company intends to
cooperate with the requests of the U.S. Attorney's Office.
SEC Investigation
On March 7, 2007, the Company received a letter from the
Pacific Regional Office of the Securities and Exchange
Commission (the "SEC") requesting that NCFC preserve certain
documents. On March 12, 2007, the Company received a letter
from the staff of the Pacific Regional Office of the SEC
stating that the staff was conducting a preliminary investigation
involving the Company and requesting production of certain
documents. The staff of the SEC had also previously requested
a meeting with the Company to discuss the events leading up to
the Company's previous announcement of the need to restate
certain of its historical financial statements. The Company
intends to cooperate with the requests of the SEC.
State Regulatory Actions
The Company has been engaged in recent ongoing discussions with its
state regulators regarding the Company's funding constraints and
the impact on consumers who are in various stages of the loan
origination process with the Company. The Company has advised
these regulators that it has ceased accepting loan applications.
In addition, the Company has advised these regulators that at this
time, the Company and its subsidiaries are unable to fund any mortgage
loans, including mortgage loans for those consumers who were already
in the loan origination process with the Company. The Company has
been and is continuing to work cooperatively with these regulators
to mitigate the impact on the affected consumers, including
transferring pending loans and loan applications to other mortgage
lenders. The Company has also been providing daily reports to its
various regulators regarding the status of loans in process in their
states, as well as responding to ad hoc information requests.
The Company received cease and desist orders from the States of
Massachusetts, New Hampshire, New Jersey and New York on March
13, 2007 (collectively, the "March 13 Orders"). New Century Mortgage
additionally received a Suspension Order from the state of New York
on March 13, 2007 (the "NCMC Suspension Order"). The NCMC Suspension
Order suspends New Century Mortgage's mortgage banking license in
the State of New York for a period not to exceed 30 days, pending
investigation. On March 14 and 15, 2007, the Company received
additional cease and desist orders from the States of Connecticut,
Maryland, Rhode Island and Tennessee (collectively, the "March
14-15 Orders"). The March 13 Orders and the March 14-15 Orders
contain allegations that certain of the Company's subsidiaries
have engaged in violations of applicable state law, including,
among others, failure to fund mortgage loans after closing.
Additionally, on March 14, 2007, New Century Mortgage and Home123
entered into a Consent Agreement and Order with the Commonwealth
of Pennsylvania Department of Banking, Bureau of Supervision
and Enforcement (the "Pennsylania Consent Agreement").
The March 13 Orders, the March 14-15 Orders and the Pennsylvania
Consent Agreement restrain the Company's subsidiaries from taking
certain actions, including, among others, engaging in alleged
violations of state law and taking new applications for mortgage
loans in the relevant jurisdiction. The March 13 Orders, the
March 14-15 Orders and the Pennsylvania Consent Agreement also
compel the subsidiaries to affirmatively take certain actions,
including the creation of escrow accounts to hold any upfront
fees collected in connection with pending mortgage applications,
the transfer to other lenders of the outstanding mortgage applications
and unfunded mortgage loans held by the subsidiaries, and the
provision of regular information to the state regulators regarding
the subsidiaries' activities in the applicable state, including
the status of all outstanding mortgage applications and unfunded
mortgage loans in that state. The cease and desist order received
from the Rhode Island Department of Business Regulatio on March
14 suspends the licenses of one or more of the Company's subsidiaries
and seeks to assess administrative penalties.
The Company and its subsidiaries requested hearings on the cease
and desist orders issued by regulators in Maryland, Massachusetts,
Connecticut and Rhode Island on March 23, 2007, and in Tennessee
on March 27, 2007.
On March 14, 2007, the Attorney General of Ohio and the Ohio
Department of Commerce, Division of Financial Institution
(together, the "State") filed a lawsuit against the Company,
New Century Mortgage and Home123 (collectively, the "Defendants")
on March 14, 2007 in Ohio state court (the "Ohio Complaint").
The Ohio Complaint alleges that the Company has engaged in
violations of applicable state law, including, among others,
failure to fund mortgage loans after closing. Also on March 14,
2007, the court granted the State's motion to enter a temporary
restraining order, which was subsequently modified by the court
on March 16, 2007, against the Defendants (as modified, the "TRO").
The TRO restrained the Defendants from taking certain actions,
including, among others, (i) engaging in violations of state law,
(ii) soliciting applicants and taking new applications for
mortgage loans in Ohio and (iii) initiating, prosecuting or
enforcing foreclosure actions in Ohio. The TRO required the
parties to confer with respect to restrictions regarding
foreclosure action and the sale, transfer or assignment of
loans more than 60 days delinquent. On March 26, 2007, the
Defendants filed a Motion for Dissolution of Modified Temporary
Restraining Order and Motion for an Emergency Hearing, and
Opposition to a Preliminary Injunction. On March 28, 2007,
the Defendants and the State reached agreement on a Stipulated
Preliminary Injunction effective for 90 days and submitted
it for court approval. The Stipulated Preliminary Injunction
replaces the TRO and provides for a stay of the litigation
for 90 days. The Stipulated Preliminary Injunction restrains
the Defendants from taking certain actions, including, among
others, engaging in alleged violations of state law and taking
new applications for mortgage loans. The Stipulated Preliminary
Injunction also compels the Defendants to take certain actions,
including the transfer to other lenders of any outstanding
mortgage applications and unfunded mortgage loans, the placement
in escrow of any upfront fees collected in connection with
pending mortgage applications, and the provision of regular
information to the State regarding the Company's activities
in Ohio, including the status of all outstanding mortgage
applications and unfunded mortgage loans. The Stipulated
Preliminary Injunction also requires the Defendants to submit
certain loans (and related information) as to which it
intends to foreclose to the State for the State to review.
The State may object to the Company proceeding with a
particular foreclosure and if the Company is unable to
convince the State to permit it to proceed, the foreclosure
will not proceed for the duration of the Stipulated
Preliminary Injunction. The Stipulated Preliminary
Injunction also provides for the State to review and
object to the Defendants selling, transferring or
assigning certain loans that are more than 60 days
delinquent.
On March 16, 2007, the Company received additional cease and
desist orders from the State of California (the "California
Orders") and certain of the Company's subsidiaries entered
into consent agreements with the State of Florida's Office
of Financial Regulation and the State of Washington's
Department of Financial Institutions, respectively, each
dated March 16, 2007 (the "March 16 Agreements" and
together with the California Orders, the "March 16 Orders
and Consent Agreements").
The March 16 Orders and Consent Agreements contain
allegations that certain of the Company's subsidiaries
have engaged in violations of state law, including, among
others, failure to fund mortgage loans after closing.
The March 16 Orders and Consent Agreements restrain the
Company's subsidiaries from taking certain actions, including,
among others, engaging in alleged violations of state law
and taking new applications for mortgage loans in the
relevant jurisdiction. The March 16 Orders and Consent
Agreements also compel the subsidiaries to affirmatively
take certain actions, including the creation of escrow
accounts to hold any upfront fees collected in connection
with pending mortgage applications, the transfer to other
lenders of the outstanding mortgage applications and unfunded
mortgage loans held by the subsidiaries, and the provision of
regular information to the state regulators regarding the
subsidiaries' activities in the applicable state, including
the status of all outstanding mortgage applications and
unfunded mortgage loans in that state.
On March 16, 2007, Home123 received a suspension order
(the "Home123 Suspension Order") from the State of New York
Banking Department. The Home123 Suspension Order contains
allegations similar to those included in the NCMC Suspension
Order and further provides that Home123's mortgage banking
license in the State of New York has been suspended for a
period not exceeding 30 days, pending investigation.
The Company and Home123 are reviewing the Home123 Suspension
Order and accordingly have not yet determined whether they
will appeal all or any portion of the Home123 Suspension Order.
On March 20, 2007, the Company entered into a Combined
Statement of Charges and Consent Order with the State of
Iowa and a Consent Agreement and Order with the State of
Maine Office of Consumer Credit Regulation, Department of
Professional and Financial Regulation (together, the
"March 20 Orders"). On March 21, 2007, the Company entered
into a Consent Order with the State of Michigan, Department
of Labor & Economic Growth, Office of Financial and Insurance
Services and a Consent Order with the State of Wyoming Banking
Commission (the "March 21 Orders"). On March 23, 2007, the
Company entered into a Consent Agreement and Order with the
State of Idaho Department of Finance (the "March 23 Order").
Similar to the consent agreements described above, the March
20, 21 and 23 Orders contain allegations that certain of the
Company's subsidiaries have engaged in violations of state
law, including, among others, failure to fund mortgage loans
after closing. They restrain the Company's subsidiaries from
taking certain actions, including, among others, engaging in
alleged violations of state law and taking new applications for
mortgage loans in the relevant jurisdiction. They also compel
the subsidiaries to affirmatively take certain actions,
including the creation of escrow accounts to hold any upfront
fees collected in connection with pending mortgage applications,
the transfer to other lenders of the outstanding mortgage
applications and unfunded mortgage loans held by the
subsidiaries, and the provision of regular information to the
state regulators regarding the subsidiaries' activities in the
applicable state, including the status of all outstanding
mortgage applications and unfunded mortgage loans in that state.
The Company anticipates that cease and desist orders will
continue to be received by the Company and its subsidiaries
from additional states in the future and that the Company
and its subsidiaries may enter into additional consent
agreements similar to those described above.
The Company intends to continue to cooperate with its regulators
in order to mitigate the impact on consumers resulting from the
Company's funding constraints.
Under the terms of the pooling and servicing agreement, the Sponsor
makes all the representations and warranties with respect to
the Mortgage Loans. No originator makes any representations and
warranties for the benefit of the certificateholders.
Item 1119 of Regulation AB, Affiliations and Certain Relationships and
Related Transactions.
No changes to the information provided in the prospectus.
Item 1122 of Regulation AB, Compliance with Applicable Servicing Criteria.
The assessment of compliance of Litton Loan Servicing LP ("Litton")
has disclosed material noncompliance with criteria 1122(d)(2)(vii)(D)
and 1122(d)(4)(ix). Certain investor bank account reconciliations
included certain reconciling items that were not resolved within
90 calendar days of their original identification on eleven of
sixty-three investor bank account reconciliations. The sum of the
reconciling items for those eleven reconciliations was $216,950.
Also, among a sample of sixty-five adjustable rate mortgages there
were two instances where certain adjustable rate mortgages for which
the interest rate reset in the servicing system did not agree to
interest rates in the appropriate source index per the borrowers
note documents. These were the result of incorrect information
transferring from the prior servicer. Additionally, the same
sixty-five mortgages included one instance where the adjustable rate
mortgage payment change date in the servicing system did not agree to
the loan documents.
See Item 15, exhibit 33 and 34.
Item 1123 of Regulation AB, Servicer Compliance Statement.
The servicer compliance statements are attached hereto under
Item 15.
PART IV
Item 15. Exhibits, Financial Statement Schedules.
(a)(3) Exhibits
(4.1) Pooling and Servicing Agreement, dated as of July 1, 2006, by and
among Asset Backed Funding Corporation, Credit-Based Asset Servicing
and Securitization LLC, Litton Loan Servicing LP and U.S. Bank
National Association (including exhibits), incorporated by reference
from Exhibit 4.1 of the registrant's Current Report on Form 8-k
filed on August 15, 2006.
(10.1) Custodial Agreement, dated as of July 1, 2006, by and among
U.S. Bank National Association (including exhibits), incorporated
by reference from Exhibit 10.1 of the registrant's Current
Report on Form 8-k filed on August 15, 2006.
(31) Rule 13a-14(d)/15d-14(d) Certifications.
(33) Reports on assessment of compliance with servicing criteria for
asset-backed securities.
a) Litton Loan Servicing LP, as Servicer
b) U.S. Bank National Association, as Trustee
c) The Bank of New York, as Custodian
(34) Attestation reports on assessment of compliance with servicing
criteria for asset-backed securities.
a) Litton Loan Servicing LP, as Servicer
b) U.S. Bank National Association, as Trustee
c) The Bank of New York, as Custodian
(35) Servicer compliance statement.
a) Litton Loan Servicing LP, as Servicer
(b) See 15(a)(3).
(c) Not Applicable.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
C-BASS 2006-CB6 Trust
by: Litton Loan Servicing LP, as Servicer
/s/ Elizabeth Folk
Senior Vice President and Chief Financial Officer
(senior officer in charge of the servicing function of the servicer)
Date: March 30, 2007
Supplemental information to be furnished with reports filed
pursuant to seciton 15(d) of the Act by Registrants which have
not registered securities pursuant to Section 12 of the Act.
No annual report, proxy statement, form of proxy or other proxy
solicitating material has been sent to certificateholders, and
the registrant does not presently contemplate sending any such
materials subsequent to the filing of this report.
Exhibit Index
Exhibit No.
(4.1) Pooling and Servicing Agreement, dated as of July 1, 2006, by and
among Asset Backed Funding Corporation, Credit-Based Asset Servicing
and Securitization LLC, Litton Loan Servicing LP and U.S. Bank
National Association (including exhibits), incorporated by reference
from Exhibit 4.1 of the registrant's Current Report on Form 8-k
filed on August 15, 2006.
(10.1) Custodial Agreement, dated as of July 1, 2006, by and among
U.S. Bank National Association (including exhibits), incorporated
by reference from Exhibit 10.1 of the registrant's Current
Report on Form 8-k filed on August 15, 2006.
(31) Rule 13a-14(d)/15d-14(d) Certifications.
(33) Reports on assessment of compliance with servicing criteria for
asset-backed securities.
a) Litton Loan Servicing LP, as Servicer
b) U.S. Bank National Association, as Trustee
c) The Bank of New York, as Custodian
(34) Attestation reports on assessment of compliance with servicing
criteria for asset-backed securities.
a) Litton Loan Servicing LP, as Servicer
b) U.S. Bank National Association, as Trustee
c) The Bank of New York, as Custodian
(35) Servicer compliance statement.
a) Litton Loan Servicing LP, as Servicer