Hedge fund Carrington Capital Management and American Home Mortgage Servicing agreed to settle a three-year dispute over how REO tied to a subprime mortgage bond was managed.

The terms of the agreement were not released.

Carrington Founder and CEO Bruce Rose accused American Home and its owner Wilbur Ross of unloading REO it managed on behalf of Carrington at "fire sale prices" to make payments on an advance financing facility, according to a suit filed in 2009.

But American Home said it sold the properties out of protection for the entire trust Carrington invested in. The hedge fund said because of the class of subordinate certificates in various mortgage-backed securities it acquired, it had the right to direct American Home how to manage the properties.

The dispute turned ugly later in 2009 when American Home sued Carrington and claimed the hedge fund was involved in a racketeering scheme over the REO.

Nearly three years later, a settlement was finally reached over the original claims along with any other disputes between the two firms, according to a statement.

"We look forward to a productive relationship with AHMSI going forward," Rose said Friday. "The market has changed dramatically over the past few years, and both companies have decided that we're better off working together than fighting past battles."

jprior@housingwire.com