The head of Impac Mortgage Holdings in Irvine doesn’t like what’s happening to his cross-town colleagues at New Century Financial.

The way Joe Tomkinson sees it, New Century is being needlessly stampeded to the brink of bankruptcy by skittish investment bankers who cut off its funding because of rising defaults. The subprime lender could handle its mounting level of delinquent borrowers if it were given the chance, Tomkinson says.

New Century, an Irvine-based lender specializing in home loans to borrowers with flawed credit, recently drew national attention and sparked a stock plunge after restating earnings to account for delinquency losses. The firm also announced that it’s facing criminal and regulatory investigations, and it stopped making loans after investment banks it relies on for financing cut off its cash supply.

“Do I think that the investment banks are overreacting? They’re throwing the baby out with the bathwater,” says Tomkinson, who has been Impac’s CEO since cofounding the company in 1995.

Tomkinson said he decided to speak out about New Century’s woes to put the story into perspective, saying that “the sky is not falling.” He also wanted to distinguish his company – which makes loans to borrowers with good credit scores but less documentation than required for prime loans – from the subprime lenders.

He conceded that Impac – the nation’s 10th largest lender of so-called “Alt-A” mortgages – also is affected by bad publicity given to the subprime lending industry, even though Alt-A loans are a step above the subprime category.

“Everything that goes on in the financial sector in general affects everyone in the financial sector,” he said.

Analysts expressed concern last week that the lending crisis could be expanding after Impac reported that its percentage of late payers doubled last year, from 3.1 percent of the company’s holdings to 6.2 percent. But Tomkinson says his company has the funds to cover those loan losses.

And while subprime delinquencies rose to a four-year high of 13.3 percent in late 2006, Tomkinson said that historically subprime delinquency rates actually were higher, but fell to very low levels during the housing boom.

He agreed, though, that some subprime lenders have been accepting riskier and riskier loans and that a frenzy of lending to risky borrowers making little or no down payments on their homes had to be curtailed.

“However, that doesn’t mean (the lending industry is) going to implode, that lenders can’t manage what they’re going through now,” he said.

In New Century’s case, Tomkinson said the company has adequate ability to survive those risks. The company is the victim of “a cascading effect,” he added.

New Century restated its earnings, and because that sparked stockholder lawsuits, criminal investigators decided to take a look, all of which New Century was forced by law to publicly disclose, he said.

“Now it’s a criminal investigation. Now the stock begins to plummet, and as the stock begins to plummet, the creditors … begin making unreasonable margin calls,” he said. “Meanwhile, a company with (nearly 7,000) employees that’s provided homeownership is out of business.”

While New Century issued about $8.4 billion in delinquent loans, that’s just a fraction of the company’s output, totaling more than $50 billion last year.

About half of all borrowers who are 60 days behind in their house payments or less manage to resume making all their payments on time, Tomkinson said. When they fail to “cure” their defaults and end up losing the home, the lender recovers most of that default by selling the residence, he said.

“If you have $8 billion in early payment defaults, you’re not going to lose that amount,” he said. “You might lose 10 percent of that.”

Tomkinson speculated that the criminal investigation might have been sparked when Robert K. Cole stepped down as New Century’s chairman and CEO, prompting him to sell off large amounts of company stock he owned since he no longer controls the firm. It’s premature to assume that anyone at New Century did something illegal, he said.

If New Century falters, investment banks likely will swoop in and pick up New Century’s assets at a bargain, he said.

While lending conditions for subprime loans likely will be tightened significantly – Impac, for example, has tightened its own lending standards 20 times in the past 14 months – Tomkinson doubted that funding will dry up completely for future borrowers with bad credit.