Servicing

Over 150 additional classes of subprime mortgage pass-through certificates were downgraded by Fitch Ratings on April 4 as a result of changes to its subprime loss forecasting assumptions. Fitch also placed 12 classes of subprime pass-throughs on Rating Watch Negative, removed two from Rating Watch Negative, and affirmed the ratings on classes with outstanding balances of nearly $4 billion. The securities affected by the latest downgrades were: 54 classes from nine issues of Barclays Capital mortgage pass-throughs; 47 classes from seven issues of Asset Backed Securities Corp. pass-throughs; 31 classes from six issues of Bear Stearns Asset Backed Securities I Trust pass-throughs; and 30 classes from four issues of CSFB Home Equity Asset Trust pass-throughs. The rating actions were attributed to changes to Fitch's subprime loss forecasting assumptions that "better capture the deteriorating performance of pools from 2006 and late 2005 with regard to continued poor loan performance and home price weakness." Fitch can be found online at http://www.fitchratings.com.

The servicer quality rating of Fremont Investment & Loan as a primary servicer of subprime loans has been downgraded from SQ4 to SQ4-minus by Moody's Investors Service. The rating remains on review for possible further downgrade. In addition, the outlook for Fremont and its parent, Fremont General Corp., remains negative, and the company's servicing stability assessment has been revised from below average to weak, Moody's said. The rating agency said the action was prompted by continued deterioration of financial and operating conditions as well as regulatory actions affecting Fremont and its parent. The Suffolk Superior Court recently issued a preliminary injunction, sought by the Massachusetts attorney general, barring Fremont from initiating or advancing foreclosures on loans that are "presumptively unfair" without first complying with the court's order, Moody's said. The injunction was later modified to further restrict Fremont's efforts to sell mortgage servicing rights on loans serviced in Massachusetts. Moody's said the rating action also stemmed partly from management turnover at Fremont and its parent. Moody's can be found online at http://www.moodys.com.

Anthracite Capital Inc., New York, has announced a $93.5 million capital investment in its common and preferred stock by DLJ Real Estate Capital Partners Inc. Anthracite reported that it has issued and sold to DLJ RECP $23.4 million of common stock at $6.69 per share and $70.1 million of cumulative redeemable convertible preferred stock. In connection with the preferred stock investment, Anthracite's board has been expanded to include Andrew P. Rifkin, managing partner of DLJ Real Estate Capital Partners. Richard M. Shea, Anthracite's president and chief operating officer, said the transaction positions the company to respond to "the dislocations in the global credit markets." He noted that the investment by DLJ RECP represents the resumption of a strategic partnership that began in 1999 and ended in 2002. Anthracite, which is managed by Black/Rock Financial Management, can be found online at http://www.anthracitecapital.com.

Strategic Recovery Group LLC, a national mortgage asset recovery company based in Plano, Texas, has launched a special servicing unit, Acqura Loan Services, to meet the growing needs of lenders, hedge funds, and investors in distressed debt. Acqura, which began hiring personnel and developing proprietary scoring and servicing technology in mid-2007, offers a full spectrum of servicing, loss mitigation, and collection services and creates a customized risk-management solution for each of its clients, the parent company said. "At this stage in the credit cycle, lenders, Wall Street, and MBS/ABS investors realize they are facing a triple threat: the prospect of recession, the credit/liquidity problems, and falling home prices," said David Vida, chief executive officer of both Acqura and its parent. "What investors and issuers are looking for now are focused, innovative partners who can commit to higher service levels and deliver experienced asset managers and the latest technology to achieve better outcomes for both borrowers and investors."

Reverse Mortgage Solutions, Spring, Texas, has announced plans to expand its operations as a technology systems provider. A start-up just one year ago, the multifaceted company has come of age just as the leading edge of the 80 million-member baby boom generation enter their twilight years and has built a servicing portfolio of 7,500 loans. RMS says it will soon roll out a front-end reverse mortgage origination system dubbed RM Compass. "It's fully integrated with the servicing components in what we think is a better solution than what has been out there," chief operating officer Marc Helm said at the National Reverse Mortgage Lenders Association's eastern regional conference in Philadelphia. "We have had the opportunity to stand back, look at the industry, and build a state-of-the-art, integrated origination system and servicing system from scratch."

The troubled Chicago Federal Home Loan Bank is formulating a plan to continue to operate on a "stand-alone" basis now that merger discussions with the Dallas FHLBank have ended, and its president and chief executive, Mike Thomas, is stepping down as of April 11. The merger talks blew hot and cold over the past seven months as the Chicago FHLBank's financials continued to deteriorate. The Chicago bank recently said it expects to report a loss in the first quarter. "After extensive analysis and due diligence of the feasibility of combining the banks' business operations, the FHLB Chicago was unable to reach an agreement to merge with the Dallas Bank that would have maximized value to FHLB Chicago members," chairman David Kuhl said in a letter to the Chicago bank's members. Executive vice president Matthew Feldman will serve as acting president while a search is conducted to replace Mr. Thomas, who will receive a $1.1 million lump sum severance payment. Mr. Thomas was hired in August 2004 after a federal supervisor halted the growth of the bank's mortgage purchase program. Meanwhile, the Chicago bank is working on several initiatives, including a "new capital plan to stabilize the capital base and to restructure the balance sheet to improve long-term profitability," Mr. Kuhl said.

Texas Pacific Group, an investment fund managed by a former director of Washington Mutual, is talking to the Seattle thrift about injecting money into the troubled institution, industry sources have told MortgageWire. "We're trying to get it done quickly," said one source, requesting anonymity, "but there's no deal yet." It's expected that WaMu chief Kerry Killinger will stay with the organization, but there could be a wholesale restructuring of the savings-and-loan institution, the nation's largest. Other investors are involved as well, said one banker. In trading on Monday, WaMu's share price skyrocketed 25% to $12.76. News of Texas Pacific's interest in WaMu was first reported by The Wall Street Journal. David Bonderman, founding partner of Texas Pacific, served on WaMu's board but left in 2002. Mr. Bonderman used to work for the Bass Brothers, which at one point owned American Savings, a large California S&L that WaMu eventually purchased.

Forty-six tranches in seven subprime transactions issued by First Franklin Mortgage Loan Trust have been downgraded by Moody's Investors Service. The downgrades were attributed to a growing proportion of severely delinquent loans. "Timing of losses and in some cases, pending stepdown, will cause the protection available to the subordinated bonds to be diminished," Moody's said. The collateral consists primarily of first-lien subprime mortgage loans.

Ninety-six tranches from 16 alternative-A transactions issued by J.P. Morgan have been downgraded by Moody's Investors Service. Forty downgraded tranches remain on review for possible further downgrade, and eight other tranches were placed on review for possible downgrade. The negative rating actions, in general, were based on higher-than-expected rates of delinquency, foreclosure, and real estate owned in the underlying collateral relative to credit enhancement levels, Moody's said. The collateral consists primarily of first-lien, alt-A mortgage loans.

Moody's has placed 23 tranches from 11 residential mortgage-backed securitizations under review for possible downgrade following a review of jumbo prime residential MBS deals issued in 2006 and 2007. The actions were based on higher-than-expected rates of delinquency in the collateral relative to credit enhancement levels, Moody's said. Noting that downgrades in the jumbo sector have been rare in the past, the rating agency said the actions affect 5% of the total number of 2006 and 2007 jumbo transactions rated by Moody's. Despite weaker delinquency trends for the 2006-2007 vintages, Moody's said projected cumulative losses based on pipeline delinquencies in jumbo mortgage pools remain within original expectations. "Jumbo mortgages originated in 2006 and 2007 have demonstrated weaker performance than any vintage since 2001, primarily because they did not benefit from home price appreciation and the resulting build-up of homeowner equity," Moody's said. The rating agency can be found online at http://www.moodys.com.