Servicing

Standard & Poor's has lowered certain ratings of Lehman Brothers, Merrill Lynch & Co., and Morgan Stanley after the completion of a global securities industry review. Lehman Brothers Holdings Inc.'s long-term rating has been lowered from A-plus to A, and the counterparty credit ratings of Merrill Lynch & Co. and Morgan Stanley have been lowered from A-plus/A1 to A/A1. S&P analysts cited "concern that the pace and extent of earnings improvement could be considerably more muted than we previously assumed" in the downgrades. S&P can be found on the Web at http://www.standardandpoors.com.

Ginnie Mae guaranteed $22 billion in mortgage-backed securities in May, and the secondary-market agency will face "issues" such as possible understaffing as MBS issuance continues to increase, according to the president's nominee to head the agency. Joseph Murin told the Senate Banking Committee at his confirmation hearing that Ginnie Mae has only 65 full-time employees, and he indicated that the agency will have to face those issues as time goes on and issuance increases. The former president of Mortgage Settlement Network also testified that legislation "is needed" to expand the Federal Housing Administration program and help more struggling homeowners. He pledged that Ginnie Mae will "act diligently" to achieve the best execution of those securitizations. "If it is enacted, I think the investor community will embrace it, from what I am told and what I see," Mr. Murin said. President Bush nominated Mr. Murin to be the new Ginnie Mae president back in October. Ginnie can be found on the Web at http://www.ginniemae.gov.

Two classes from Argent Net Interest Margin 2006-M1 have been downgraded by Fitch Ratings. Class N1 was downgraded from BB to C/DR6, and class N2 was downgraded from B to C/DR6. "The rating actions reflect actual pay-down performance of the NIM securities to date compared to initial projections, as well as changes that Fitch previously made to its subprime loss forecasting assumptions for the underlying transactions," the rating agency said.

Three classes from Wisconsin Avenue Securities Mezzanine REMIC Pass-Through Certificates Fannie Mae REMIC Trust 1998-W3 have been downgraded by Fitch Ratings. The downgrades were as follows: class B1, from AA-minus to A-minus; class B2, from A-minus to B; and class B3, from BB to C/DR4. Fitch also affirmed the ratings on nine classes from three other Wisconsin Avenue securities transactions. The downgrades were attributed to the relationship between credit enhancement and loss expectations. The rating agency said Fannie Mae has "no exposure" to any of the affected tranches, adding that it believes the asset quality of Fannie's portfolio "remains unaffected" by the rating actions. Fitch can be found on the Web at http://www.fitchratings.com.

Mack-Cali Realty, a real estate investment trust based in Edison, N.J., has been designated the "Bear of the Day" for June 3 by Zacks Equity Research, Chicago. The Bear of the Day is a stock expected to underperform the markets over the next three to six months. Zacks said the office REIT "will have a difficult time holding steady occupancy and increasing rents" and that suburban office landlords are expected to "have a tough time in 2008." Zacks can be found online at http://www.zacks.com, and Mack-Cali can be found at http://www.mack-cali.com.

Fremont General Corp., Brea, Calif., has completed the sale of the remaining mortgage servicing rights on its $12.2 billion portfolio to Litton Loan Servicing. Fremont received support for the sale agreement from the California Department of Financial Institutions and the Federal Deposit Insurance Corp. The troubled California thrift's stock was suspended from the New York Stock Exchange earlier this year and now trades via the "pink sheets" service. Litton Loan Servicing is an affiliate of Goldman Sachs & Co.

Thornburg Mortgage Inc., a troubled real estate investment trust based in Santa Fe, N.M., has announced that it needs more time to file its first-quarter earnings report with the Securities and Exchange Commission and estimated that it will do so by June 12. The company previously estimated that it would file the report by June 2. To finalize its Form 10-Q, the company said it must, among other things, complete its valuation analysis and the accounting for a March 31 senior subordinated secured note transaction. (Thornburg completed a $1.35 billion private placement at that time after announcing that it had to raise nearly $1 billion in capital to keep in place a key 364-day agreement with certain counterparties involved in potentially "material" margin calls it had been facing.) The company has also announced receipt of a letter from the New York Stock Exchange stating that the company is not in compliance with the NYSE's continued-listing criteria because the average closing price of its common stock has been less than $1 for 30 consecutive trading days. Thornburg said it intends to cure the deficiency by implementing a reverse stock split. It can be found online at http://www.thornburgmortgage.com.

Residential Capital Corp., which is trying to restructure its bank lines, says in a new public filing that it may need $1.4 billion in additional liquidity. The Minneapolis-based ResCap, which controls the nation's eighth-largest residential mortgage banker, said it needs additional funds because of "the inability to consummate certain asset sales, due to adverse conditions" by June 30. (It was hoping to raise $1.3 billion by selling assets.) In a filing with the Securities and Exchange Commission dated June 3, ResCap said it is negotiating with its parent company and affiliates to sell certain assets to them, including RFC Resort Funding. ResCap, the mortgage arm of GMAC Financial Services, can be found on the Web at http://www.rescapholdings.com.

Early delinquencies on securitized subprime loans declined slightly in March for the first time in years, but the percentage of B&C loans 90 days or more past due rose nearly 30 basis points to 9.67%, according to a Friedman Billings Ramsey Investment Management report. In addition, loans in foreclosure jumped nearly 50 bps to 11.47%, the report says. FBRIM managing director Michael Youngblood says loss mitigation efforts and economic stimulus checks, along with seasonal factors, will provide a "temporary respite" from sharply rising 30-day and 60-day delinquencies this summer. However, the research director says he expects defaults to accelerate in September and the fourth quarter due to deteriorating labor market conditions and weak housing markets. The 30-day delinquency rate on securitized alternative-A mortgages fell back 13 bps to 3.97% in March, according to FBRIM. But the 60-day delinquency rate rose 13 bps to 2.2% and loans 90 days or more past due rose 35 bps to 3.36%. Alt-A mortgages in foreclosure rose 42 bps to 4.77%. FBRIM is a subsidiary of Friedman Billings Ramsey, which can be found online at http://www.fbr.com.

Over 160 classes from 43 alternative-A mortgage-backed securities deals were downgraded by Fitch Ratings on May 30. The affected securities were: 118 classes from 31 Banc of America Alternative Loan Trust deals and 45 classes from 12 J.P. Morgan Alternative Loan Trust deals. Fitch also affirmed 56 classes in the alt-A transactions. The rating agency attributed the downgrades to expected defaults and losses from delinquent loans and projected losses from the currently performing pools. Fitch can be found on the Web at http://www.fitchratings.com.