Servicing

FirstPlus Financial Group, Irving, Texas, has announced a $1 million debenture agreement with its subsidiary Rutgers Investment Group to enable Rutgers to expand its mortgage banking operations "more aggressively." Under the agreement, FirstPlus issued to Rutgers 10 million shares of common stock secured by a $1 million subordinate debenture issued by Rutgers. "This infusion permits Rutgers to more aggressively pursue its plans for licensing and expansion as a mortgage banking firm in selected areas of the United States," FirstPlus said. The parent company can be found on the Web at http://www.firstplusgroup.com.

In order to address the claims of commercial paper investors, KKR Financial Holdings LLC, San Francisco, has agreed to give them triple-A rated residential mortgage-backed securities supporting CP issued by asset-backed conduits. "This agreement and the sale of our REIT subsidiary mark a constructive resolution to an issue created by the unprecedented disruption in the credit markets," said Saturnio Fanlo, KKR Financial's chief executive officer. "Reflecting these conditions, our board of directors has approved an incremental charge of approximately $5.5 million, which we believe is an appropriate amount to resolve both the refinancing issues relating to the [commercial paper] notes issued by the REIT's two asset-backed conduits and complete the exit of our mortgage-related businesses."

Thornburg Mortgage Inc., Santa Fe, N.M., says it has completed a key $1.35 billion private-placement capital raise from the sale of senior subordinated secured notes, warrants to purchase common stock, and a participation in certain mortgage-related assets. The company said it has received $1.15 billion of the proceeds from the offering and that the remaining $200 million is being held in escrow, to be delivered to the company upon the successful completion of a tender offer for its preferred stock. Thornburg had said it had to raise at least $948 million in capital within seven days to keep in place a key 364-day agreement with some counterparties involved in potentially "material" margin calls it has been facing. The company had to extend the deadline twice before the capital raise was completed. Thornburg can be found online at http://www.thornburg.com.

Lehman Brothers has priced a $4.0 billion offering of convertible preferred shares that boosted its common stock price to levels above $40 Tuesday morning from a Monday close just over $37. The preferred shares are convertible at the option of the holder into a specified amount of common stock at an initial conversion price of about $49 per common share. Rumors about the effect of the U.S. mortgage-sparked credit crunch on certain Wall Street players have put downward pressure on Lehman's stock price in the wake of the Bear Stearns merger deal with JPMorgan Chase. Lehman has a policy of not commenting on market rumors.

National City Corp., Cleveland, says it is exploring "strategic alternatives," a corporate euphemism for putting the company up for sale. NatCity, which has hired Goldman Sachs as the adviser for the review, said it would make no further statements until its board has approved a specific course of action. Even though NatCity sold the First Franklin subprime originations and servicing platforms to Merrill Lynch at the end of 2006, the company has still suffered in the current credit crisis. According to its 10-K filing, NatCity had $1.0 billion in loans at the end of last year that were not eligible for sale to Fannie Mae or Freddie Mac. "Declining real estate prices and higher interest rates have caused higher delinquencies and losses on certain mortgage loans, particularly second lien mortgages and home equity lines of credit and especially those that have been sourced from brokers that are outside National City's banking footprint," the 10-K says. "These trends could continue. These conditions have resulted in losses, write downs and impairment charges in the mortgage business, especially in the fourth quarter of 2007." NatCity finished 2007 as the nation's 10th-largest servicer, with a portfolio of $187.5 billion, and the 12th-largest originator, with volume of $46.4 billion for the year, according to the Quarterly Data Report. The company can be found on the Web at http://www.nationalcity.com.

UBS AG -- once a major warehouse lender to the subprime industry -- says it will take a $19 billion writedown on its mortgage-related investments in the first quarter, including charges against its structured finance positions. The Swiss bank also announced that its chairman, Marcel Ospel, is stepping down. (On Tuesday morning, the German bank Deutsche Bank announced $4 billion in mortgage-related writedowns.) UBS also said it is forming a new unit "to hold certain currently illiquid U.S. real estate assets." The bank/investment bank said it expects to lose $12 billion in the first quarter. UBS estimated that it has $15 billion in financial exposure to subprime-related assets, compared with $28 billion at the end of December. The bank plans to raise $15 billion in new capital.

Classes B-3, B-4, and B-5 of Sequoia Mortgage Trust 11 mortgage pass-through certificates have been placed on Rating Watch Negative by Fitch Ratings. Fitch also affirmed the ratings on three other classes from Sequoia Mortgage Trust 11. The negative rating actions were attributed to "possible deterioration" in the relationship between credit enhancement and expected losses in the future. The collateral consists of adjustable-rate prime mortgage loans.

Class B3 of DLJ Mortgage Acceptance Corp. series 1994-3 mortgage pass-through certificates has been downgraded from CCC/DR2 to C/DR3 by Fitch Ratings. Fitch also affirmed the ratings on 10 classes from four DLJ transactions. The downgrade was based on deterioration in the relationship between credit enhancement and expected losses, the rating agency said. The collateral consists of fixed- and hybrid adjustable-rate residential mortgage loans.

Seventy additional classes of subprime mortgage pass-through certificates were downgraded by Fitch Ratings on March 28 as a result of changes to its subprime loss forecasting assumptions. Fitch also placed four classes of subprime pass-throughs on Rating Watch Negative and affirmed the ratings on classes with outstanding balances of approximately $1.6 billion. The securities affected by the latest downgrades were: 30 classes from four issues of Centex Home Equity Loan Trust mortgage pass-throughs; 18 classes from two issues of CSFB Home Equity pass-throughs; 12 classes from one issue of SG Mortgage Securities Trust pass-throughs; nine classes from two issues of Countrywide pass-throughs; and one class from an issue of Aames Mortgage Investment 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 Ratings has downgraded the short-term Issuer Default Rating of Regions Bank from F1-plus to F1, citing "increased concerns" about the bank's residential homebuilder portfolio. Fitch also downgraded the Individual ratings of Regions Bank and its holding company, Regions Financial Corp., from A/B to B, but affirmed the holding company's long-term IDR at A-plus. The rating outlook was revised from stable to negative. The rating agency said Regional Financial has reported deterioration in its residential homebuilder loan portfolio, which represents approximately 8% of its total loans, and is projecting further deterioration.