Servicing

The class A-1 floating-rate notes of Ballantyne Re PLC, which holds "significant" amounts of subprime residential asset- and mortgage-backed securities, has been downgraded from BB to B-plus and placed on Rating Watch Negative by Fitch Ratings. Fitch also placed the class B-1 subordinated notes and class B-2 subordinated floating-rate notes on Rating Watch Negative. The actions were attributed to "Fitch's heightened concern about subprime and alt-A ABS/RMBS."

Thirty tranches from five subprime mortgage deals issued by Structured Asset Investment Loan Trust in 2005 have been downgraded by Moody's Investors Service, and eight tranches have been placed under review for possible downgrade. The actions were based on the fact that the number of seriously delinquent loans in the pools continues to grow for all five transactions, Moody's said. "In addition, pending stepdown on some of the transactions may make certain securities more vulnerable to pool deterioration in the future," the rating agency said. The deals are backed by first- and second-lien subprime mortgage loans.

Moody's Investors Service has downgraded 163 tranches from 15 transactions issued by Bear Stearns ALT-A Trust. Seventy-eight downgraded tranches remain on review for possible further downgrade. Additionally, 155 tranches were placed on review for possible downgrade. The downgrades, 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, fixed- and adjustable-rate alternative-A mortgage loans. Moody's can be found on the Web at http://www.moodys.com.

Freddie Mac's board of directors has announced a dividend of $0.25 per share on the corporation's voting common stock for the first quarter. The board also declared the following preferred stock dividends per share: $0.53 on 1996 and 1998 variable-rate stock; $0.72625 on 1997, 2001, and 2002 5.81% stock; $0.625 on 5% stock; $0.6375 on 1998 and 1999 5.1% stock; $0.6625 on 5.3% stock; $0.72375 on 5.79% stock; $0.4475 on 1999 variable-rate stock; $0.585 on January 2001 variable-rate stock; $0.63194 on March 2001 variable-rate stock; $0.645 on May 2001 variable-rate stock; $0.66 on 2006 variable-rate stock; $0.75 on 6% stock; $0.7125 on 5.7% stock; $0.8025 on 6.42% stock; $0.36875 on 5.9% stock; $0.348125 on 5.57% stock; $0.35375 on 5.66% stock; $0.37625 on 6.02% stock; $0.409375 on 6.55% stock; and $0.67465 on 2007 fixed- to floating-rate stock. The dividends will be payable on March 31 to stockholders of record as of March 17. Freddie Mac can be found online at http://www.freddiemac.com.

InsideValuation, a real estate valuation company based in Reno, Nev., has announced a partnership with International Financing Engineering Group, Rockville, Md., that has created a ZIP code-level mortgage default projection. The two companies offer combined access to millions of recent loan histories and "a large quantity" of subprime loan default information, according to InsideValuation. "This product presently allows mortgage risk managers to determine the relative safety of loans based on econometric and demographic variables relating to property location, such as median home price, median household income, affordability, unemployment, and rent-versus-price ratios," the company said. InsideValuation can be found online at http://www.insidevaluation.com.

Fannie Mae will begin purchasing fixed-rate jumbo mortgages on April 1, but the single-family loans will have to be manually underwritten until its automated underwriting system is updated. Purchases of adjustable-rate mortgages will begin May 1, the secondary-market agency told lenders in posting its underwriting criteria for the temporary jumbo program authorized by Congress in the economic stimulus bill. On purchase mortgages, loan-to-value ratios (including second liens) cannot exceed 90% on fixed-rate jumbos and 80% on ARMs, which means a homebuyer has to put up a 20% downpayment on a jumbo ARM. On refinancings, the cash take-out is limited to $2,000, and the LTV ratio cannot exceed 75% on the first mortgage or 95% with second liens. Despite the conservative lending standards, Fannie is charging a special fee of 25 basis points on fixed-rate jumbos and a 75-bp fee on ARMs. The government-sponsored enterprise can be found on the Web at http://www.fanniemae.com.

The long-term Issuer Default Ratings of First Horizon National Corp., National City Corp., and Washington Mutual Inc. have been downgraded by Fitch Ratings as a result of concerns about home equity portfolios. Fitch also downgraded the individual rating of Wells Fargo & Co. and placed the long-term IDRs and other ratings of Bank of America Corp., Citigroup Inc., Fifth Third Bancorp, and Sun Trust Banks Inc. and their affiliates on Rating Watch Negative in connection with its home equity concerns. It also downgraded or affirmed various other ratings of First Horizon, National City, WaMu, and Wells Fargo and their affiliates. The IDR downgrades were as follows: First Horizon, from A-minus to BBB-plus; National City, from A-plus to A; and WaMu, from A-minus to BBB. Wells Fargo's individual rating was downgraded from A to A/B. "Recent developments and information Fitch has gained from a variety of internal and external sources suggest that evidence of deterioration within home equity portfolios will clearly emerge in first-quarter 2008, which is earlier than Fitch previously expected," the rating agency said. "More important, pressures from home equity portfolios may very well exceed Fitch's expectations at the time the negative outlook was assigned to the industry [in late 2007]."

An economic adviser to former President Ronald Reagan has proposed a way to help struggling homeowners lower their mortgage payments, and it has caught the eye of White House officials because it could reduce defaults, cushion falling house prices, and lower the loan-to-value ratios of existing mortgages. The federal government would provide an unsecured loan equal to 20% of the homeowner's existing mortgage with a low rate that is payable in 15 years under the proposal outlined by Harvard University Professor Martin Feldstein in a Wall Street Journal editorial. With the pay-down mortgage loan, borrowers would pay less in total interest and have less incentive to default or walk away due to falling house prices because they could not escape repayment of the government loan. The lender/investor ends up with a more secure mortgage and a check for 20% of the mortgage. President Bush's economic adviser Edward Lazear said the White House is looking at "Feldstein's idea." The Harvard professor said the government could implement his "substitution loan" program in a few months without creating a large bureaucracy.

A new professional association has been formed in Alexandria, Va., by U.S. regional bond dealers, some of which are active in the mortgage-backed securities market. The new group, the Regional Bond Dealers Association, says it plans to focus on issues of interest to U.S. regional fixed-income securities dealers. It has 14 members, among them Wells Fargo, Southwest Securities, and First Tennessee.

Citing rapid deterioration in the U.S. housing market in the past several months, Fitch Ratings has announced an "extensive review" of alternative-A residential mortgage-backed securities originated from 2005 to 2007. The review involves 417 alt-A RMBS deals with an outstanding balance of $160 billion, all of which have been placed on Rating Watch Negative. The rating agency said the review will focus first on $10 billion of subordinate alt-A RMBS that face "substantial pressure" from rising mortgage defaults. The review is expected to be "substantively completed" by April 30. "Accelerating home price declines partly due to the recent dramatic contraction in the nonagency mortgage origination and securitization markets [have] been the primary catalyst of the alt-A performance downturn," said Glenn Costello, Fitch managing director and RMBS co-head.