By Al Yoon

NEW YORK, May 15 (Reuters) - A money manager owned by Canada's Manulife Financial Corp (MFC.TO: Quote, Profile, Research) is seeking to fire one of the largest subprime mortgage companies in the United States, claiming that Carrington Mortgage Services is unfairly tarnishing some bonds.

Declaration Management & Research, which manages $12 billion, is trying to rally other investors to help it take on Carrington, which it claims has failed to manage loans to provide the best possible returns for all bondholders.

Carrington appears to favor practices that steer payments to the riskiest parts of bonds, some of which it may own, according to analysts.

Carrington defended its practices as being in line with its contracts governing mortgage-backed securities.

The controversy over Carrington practices comes as it and other servicers are being asked by the U.S. government to boost efforts to stop foreclosures using federal programs to modify troubled loans. Soaring foreclosures are seen as a key factor in worsening the recession by fueling a vicious cycle of falling home prices and defaults.

But federal programs have increased the conflict at servicing companies that collect and distribute payments from mortgages to owners of the loans, investors said.

"The current environment pits bondholders interests versus servicers interest," said Bill Frey, president of Greenwich Financial Services in Greenwich, Connecticut. "This is like having the fox watch the henhouse."

Declaration, in recent website commentary, warned customers the federal programs providing financial incentives to modify mortgages will have "negative implications" for all home loans outside the umbrella of federal guarantees.