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BOB MOON: The big subprime mortgage lender New Century Financial has inched closer to bankruptcy. The company announced that it’s no longer doing business with Freddie Mac, the country’s second-biggest provider of money for home loans. New Century has also entered into agreements with several state legislatures to stop making loans. Marketplace’s Jeff Tyler takes a look at where that leaves consumers.

JEFF TYLER: If you got your mortgage through New Century, chances are your loan has already been sold to someone else.

Such lenders often profit off the fees collected for originating the loan, then pass it off like a hot potato before the borrower has a chance to default.

NORMA GARCIA: The hot potato can be very profitable and if you can pass it off to someone else, so much the better. That’s exactly what’s happened in the subprime lending industry.

That’s Norma Garcia, an attorney with Consumers Union. She advocates a simple solution.

GARCIA: The lenders must determine that the borrower has the ability to repay the loan. I know it sounds silly, but I can tell you that in my work in different state legislatures, we’ve had the members of the lending industry fight against such a proposal.

Garcia also proposes expanding existing laws to protect more borrowers.

Next month, federal bank regulators will consider Wall Street’s culpability in the mortgage mess.

I’m Jeff Tyler for Marketplace.