Lone Star, however, told the lender that because of the "drastic" deterioration of Accredited's financial and operational condition, it believes the conditions of the acquisition deal won't be satisfied.

Accredited said that under its agreement with Lone Star, changes affecting the subprime-mortgage industry in general don't give the buyout firm the right to abandon the deal.

 

Accredited says Lone Star can't get out of the deal because of issues that existed and were publicly known when the deal was signed or that were disclosed to Lone Star.

 

"Accordingly, Accredited has filed this lawsuit to hold Lone Star to its obligations, and to hold it fully responsible for any damages caused by its failure to satisfy those obligations," the company said in a statement.

 

Lone Star countered that the facts will support its position and it looks forward to presenting them in court.

 

On Monday Accredited said that if Lone Star doesn't follow through with the acquisition, it won't trigger a default under its warehouse-credit lines.

Many mortgage originators rely on so-called warehouse lenders to help them store home loans before packaging them up and selling them on to institutional investors as mortgage-backed securities. Without such support, mortgage originators struggle to continue operating.

 

Accredited said it has spoken with its warehouse lenders and plans to continue to fund its mortgage originations. The company noted that it has $1.6 billion of warehouse loans available in the U.S. and another $150 million for Canada.

"Accredited remains open for business and is continuing to operate in the normal course and to fund mortgage loans in both the U.S. and Canada," the company said.