New Century Faces Lawsuit From Deutsche Bank Unit
Dow Jones Newswires - April 26, 2007 4:18 PM ET
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By Carol McCleary
Of DOW JONES NEWSWIRES
A Deutsche Bank unit that bought hundreds of millions of dollars worth of home loans from New Century Financial Corp. (NEWC) is suing the struggling subprime lender to force it to turn over documents and income tied to some of the loans.
The lawsuit, filed Wednesday by DB Structured Products Inc., or DBSP, marks the third such suit New Century has been hit with since entering Chapter 11 protection April 2.
DBSP contends that New Century may not have handed over all loan payments it has received while servicing the loans on behalf of the Deutsche Bank unit. The unit is seeking immediate access to the records tied to 235 loans that New Century transferred to it on March 6 to satisfy a $14.1 million margin call.
"The greater the delay in the turnover of these records, the greater the risk that the value of (all the purchased loans) will be impaired due to servicing issues, asset management issues, as well as an increasing likelihood of defaults and delinquencies," DBSP said.
New Century, however, contends that the 235 loans were wrongly transferred, and it sent a letter to DBSP on March 30 demanding their return.
The transferred loans continue to be listed among the other loans New Century has placed on the auction block, and the lender has refused to segregate and turn over funds received on account of such loans, the lawsuit said.
Some of the home loans at issue are entitled to be federally insured or guaranteed, but DBSP said that it must provide documentation of the loans before the government will back them.
New Century is still servicing some of DBSP's loans, including the transferred loans, and receiving payments related to them. DBSP said, however, that there are "discrepancies" between the amounts it has received from the company and what it believes it should have gotten on account of the loans.
The suit seeks to force New Century to turn over to DBSP all of the purchased loans, any related mortgage payments, and all records needed for DBSP to transfer servicing of - and gain control over - such loans.
The company is facing similar lawsuits from two of its other loan buyers, Alaska Seaboard Partners L.P. and UBS Real Estate Securities Inc. Alaska Seaboard, a Eureka, Calif., mortgage broker, filed suit against New Century on April 16, seeking to recover about $500,000 in mortgage payments and obtain documents tied to the loans it bought from the company.
New Century sold home loans to Alaska Seaboard on Feb. 28 and agreed to transfer servicing of the loans to Alaska Seaboard's servicer, SN Servicing Corp. on March 21.
Despite repeated requests, the company hasn't, Alaska Seaboard said, turned over the $497,623 in loan payments it received on account of the transferred loans.
UBS, a New York provider of financing to home lenders, claims New Century misappropriated at least $3.8 million of mortgage payments collected on UBS-owned loans.
In an April 5 lawsuit, UBS said that New Century hasn't complied with its requests to deposit the missing millions into its account, nor has the company provided an accounting of all payments received on UBS-owned loans.
New Century, of Irvine, Calif., is one of a growing number of subprime mortgage lenders that have collapsed into bankruptcy in recent months. It filed for Chapter 11 protection in Delaware early this month and is on a fast track to sell its assets.
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