Accredited Home Lenders of San Diego, once a top ranked subprime lender, is expected to file for bankruptcy protection in Delaware, perhaps as soon as this afternoon, according to a source close to the matter.

According to company notes provided to National Mortgage News it appears that Accredited will go into liquidation and will auction off its servicing platform. The lender, which was bought by Lonestar Funds, a hedge fund company, two years ago, at last check had about $6 billion in servicing rights on its books.

The source said that Accredited Home Lenders (a holding company) and "certain affiliates and subsidiaries" will file voluntary petitions under chapter 11 of the bankruptcy code and then "commence an orderly wind-down of operations."

Accredited, the source said, decided to liquidate "as a result of extremely challenging market conditions and the desire to conduct an orderly wind-down and disposition of assets." The lender is currently trying to sell its real estate owned (REO) portfolio.

The source said the company is promising its borrowers that "there will be no disruption" for them in regard to the servicing of their loans. Accredited's board of directors is prepared to name Meade Monger of AlixPartners as its chief restructuring officer, the source said.

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