Deutsche Bank Structured Products filed a lawsuit against New Century Mortgage Corp. yesterday, alleging that the subprime mortgage lender refuses to turn over servicing records and income on hundreds of originated loans that it sold to Deutsche Bank under the terms two repurchase agreements as well as other purchased loans.
Deutsche wants the servicing records on the repo-related loans so that it can, in turn, apply for government backing on them and receive proper compensation for the loans that it is carrying. The longer that New Century delays turning over those records, says Deutsche, the more likely that the loans will lose their value because of servicing and asset-management issues. Also, the loans could fall into delinquency and default.
Deutsche is also trying to get servicing records on a group of so-called "hospital loans", mortgages that Deutsche bought from New Century after the lender originated them, then sold and repurchased them from another party. It claims that there are discrepancies between the amounts that is has received on them and what it should be receiving.
Brought before the U.S. Bankruptcy Court, the complaint claims that Deutsche Bank bought about 235 mortgages for about $54.1 million from New Century from March 5 through March 7, 2007. New Century, however, never turned over the servicing records for the loans. Deutsche says that it hired a contractor to work with New Century so that it could get the loan records, and ultimately submit appropriate documents to the government for its backing.
Another issue, says Deutsche, is that New Century still lists those repurchase agreement loans as up for sale on its Intralinks Web site, which could potentially create confusion in the subprime RMBS marketplace over ownership - and eventual liability for - the loans.