Mortgage manager Yes Home Loans and GE Money are wrangling in the New South Wales Supreme Court over the decision by GE to withhold more than $70,000 a month in income from Yes to cover actual and projected mortgage losses.Yes has a mortgage portfolio of around $200 million funded by GE Money, Lee Boueri, the firm's founder, said.Formed nine years ago, Yes became one of the largest originators of Australian Financial Investment Group, which GE Money bought from ABN Amro at the end of 2004.Yes secured a loan of $1.5 million from GE Money several years ago to invest in marketing and expansion of the brand. Yes provided a charge over its assets to GE under this loan.Despite paying this loan back earlier this year GE is now relying on this charge to withhold income from Yes, Boueri said.GE may also be entitled to withhold funds payable to Yes under the terms of the management and funding contract between the two entities.One issue is that its mortgage insurer, presumably Genworth, has declined to pay insurance claims under some Yes-originated loans. According to Boueri GE is withholding funds not just on the basis of actual mortgages losses but on the basis of projected losses as well.A second issue is that rogue or fraudulent lending through the Melbourne office of Yes has given rise to an unusually high level of loans in default. Victorian Police are investigating this matter.This isn't a court report, and this account relies on interviews with Boueri.Geoff Lynch, corporate affairs manager for GE Money confirmed in an email that the company "is exercising its right to withhold trail to offset losses from certain loans. Our right to withhold payment before that hearing is currently before the court so it would not be appropriate to comment. Needless to say, however, our view is that it is justified under the circumstances."Yes is seeking an injunction from the court to prevent GE Money from withholding the payment of commissions, and thus to resume the payments. Yes is considering a damages claim against GE for loss of business reputation.The Supreme Court of New South Wales heard the application from Yes for an injunction this week. A ruling is likely tomorrow. A trial on the matter is expected in early 2009.QBE, as professional indemnity insurer for Yes, has agreed to fund the litigation for Yes.Boueri said a number of other mortgage managers have also had all or some of their commissions payments withheld by GE on similar grounds, though this newsletter is still to confirm details with the managers involved.