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Fitch Ratings has downgraded 12 classes of notes from three collateralized debt obligations backed partly by subprime residential mortgage-backed securities. The affected securities are four classes of notes issued by Robeco High Grade CDO I Ltd.; four classes issued by C-BASS CBO XV Ltd.; and four classes issued by C-BASS CBO XVI Ltd. All three transactions are static cash flow CDOs. All the downgraded classes were removed from Rating Watch Negative. Fitch attributed the downgrades to "significant collateral deterioration" in the portfolios, especially subprime RMBS, alternative-A RMBS, and -- in two of the three CDOs -- structured finance CDOs with underlying exposure to subprime RMBS.

More than 150 additional classes of subprime mortgage-backed securities were downgraded by Fitch Ratings on May 1. Fitch also affirmed the ratings on classes with outstanding balances of approximately $7.5 billion. The securities affected by the latest downgrades were: 38 classes from 18 issues by Ameriquest Mortgage Securities Inc.; 37 classes from six issues by Park Place Securities Inc.; 36 classes from 17 issues by Residential Asset Securities Corp.; 24 classes from seven issues by Ace Securities Corp.; and 17 classes from nine issues by Argent Securities Inc.

Standard & Poor's on has officially halted the rating process for closed-end second-lien mortgages and related residential mortgage-backed securities, citing the sector's inordinately poor performance. "[T]his market segment does not allow for a meaningful analysis of new issuance and securitization," the rating agency said in a report. "The magnitude of our recent rating actions and projected losses on the 2007 U.S. [closed-end second-lien] vintage transactions reflect an unprecedented level of loan performance deterioration. As a result, we will not rate any new U.S. RMBS CES transactions or any transactions that contain CES mortgage loans." S&P can be found on the Web at http://www.standardandpoors.com.

Goldman Sachs mortgage head and managing director Daniel Sparks has stepped down and been replaced by two other executives from within the firm who will co-head the unit, a spokesman has confirmed. Justin Gmelich, head of credit trading, and Tom Cornacchia, head of credit sales, will be filling Mr. Sparks' previous position as managing directors in the mortgage area, the spokesman said.

Freddie Mac has reported that only 56% of the homeowners who refinanced their homes in the first quarter got a mortgage at least 5% larger than the original loan, the smallest cash-out refi percentage since the second quarter of 2004. The percentage was far lower than the 77% recorded in the previous quarter and the 83% recorded a year earlier, the government-sponsored enterprise said in its quarterly refinance review. "A tightening of mortgage underwriting standards throughout the lending industry, coupled with declining home values across much of the nation, has curtailed the amount of home equity cashed out by homeowners," said Frank Nothaft, Freddie Mac's chief economist. "While equity conversion is down, regular refinance activity has stepped up. Fixed mortgage rates reached four-year lows and prompted large volumes of refinancing in the first quarter: more than half of borrowers who refinanced into a fixed-rate mortgage lowered their mortgage rate in the first three months of the year." Freddie Mac can be found online at http://www.freddiemac.com.

The Federal Housing Administration refinancing bill is on a fast-track in the House of Representatives but has hit a bump in the Senate Banking Committee, where a scheduled May 6 mark-up has been postponed. The House Financial Services Committee passed the FHA refinancing bill on May 1, and the full House is expected to vote on it during the week of May 5. The foreclosure prevention bill provides the Federal Housing Administration with $300 billion in loan commitment authority to refinance "underwater" mortgages. House leaders want to attach the FHA refinancing bill to a larger legislative package that includes FHA modernization and GSE reform bills the House passed last year. The bills increase the loan limits for the FHA, Fannie Mae, and Freddie Mac to $729,750. The package also includes a tax bill that provides revenue bonds to refinance subprime loans and a $7,500 tax credit for first-time homebuyers. Meanwhile, it appears that negotiations over a government-sponsored enterprise bill to strengthen regulation of Fannie and Freddie has bogged down, and Senate Banking Committee leaders will reschedule the May 6 mark-up. Committee Chairman Christopher J. Dodd, D-Conn., wants to tackle the GSE reform and FHA refinancing bills in the same mark-up.

Six classes of notes issued by Pyxis ABS CDO 2006-1 Ltd., a collateralized debt obligation backed partly by subprime mortgage-backed securities, have been downgraded by Fitch Ratings. The downgrades were as follows: class A-1, from BBB-minus to CC; class A-2, from BB to CC; class B, from BB-minus to CC; class C, from B to CC; class D, from CCC-plus to CC; and class X, from CCC to CC. The downgrades reflect "significant collateral deterioration" in the portfolio of the hybrid cash and synthetic CDO, specifically subprime residential MBS and structured finance CDOs with underlying exposure to subprime RMBS, Fitch said.

Eight classes from Silver Martin CDO I Ltd., a collateralized debt obligation backed partly by subprime mortgage-backed securities, have been downgraded by Fitch Ratings, and seven of the classes have been removed from Rating Watch Negative. Fitch attributed the downgrades to "significant collateral deterioration" in the portfolio, especially subprime residential MBS, alternative-A RMBS, and structured finance CDOs with underlying exposure to subprime RMBS. Since the last rating action on the transaction in November, nearly 66% of the portfolio has been downgraded, the rating agency said.

Ten classes from Ridgeway Court Funding II Ltd., a collateralized debt obligation backed partly by subprime mortgage-backed securities, have been downgraded by Fitch Ratings, and nine of the classes have been removed from Rating Watch Negative. Fitch attributed the downgrades to "significant collateral deterioration" in the portfolio, especially subprime residential MBS, alternative-A RMBS, and structured finance CDOs with underlying exposure to subprime RMBS. Since the last rating action on the transaction in November, nearly 77% of the portfolio has been downgraded, the rating agency said.

Thirty certificates from seven transactions issued by Merrill Lynch Mortgage Investors Trust and backed by second-lien loans have been downgraded by Moody's Investors Service. Moody's also placed three classes of certificates on review for possible downgrade. The downgrades were attributed to credit enhancement levels, including excess spread and subordination, that were deemed to be too low in view of projected losses. "The actions take into account the continued and worsening performance of transactions backed by closed-end-second collateral," the rating agency said, adding that "substantial pool losses" in recent months have eroded credit enhancement available to the mezzanine and senior certificates.