by Tanta on 4/05/2007 09:33:00 PM

From AP:

UBS Real Estate Securities Inc. sued New Century Financial Corp. on Thursday, claiming the subprime lender misappropriated millions of dollars from mortgage payments made on loans owned by the investment firm.

In the 14-page filing with the U.S. Bankruptcy Court for the District of Delaware, UBS claims New Century breached the terms of a contract that called for the subprime lender to buy back home loans sold to UBS under certain conditions, such as when borrowers default soon after taking on the loans.

UBS claims New Century and its subsidiaries had agreed to collect borrowers' mortgage payments and deposit them into a third-party account, pending New Century complying with its obligation to buy back some of its loans.

But New Century failed to deposit more than $3.8 million in mortgage payments that the company received from borrowers on loans purchased and owned by UBS, according to the complaint.

UBS also claims New Century has failed to account for missing escrow payments made by borrowers.

Interesting. The dog ate the escrow payments, and UBS is telling it to the bankruptcy judge. And these loans are owned outright by UBS? It does make you wonder what's going on with the loans backing the securities, doesn't it? I guess we're officially past "this isn't going to end well" and well into "this isn't going to end." (Hat tip HVH!)