Servicing

Nine classes from five issues of Structured Asset Securitization Corp. mortgage pass-through certificates have been downgraded by Fitch Ratings. Fitch also placed one SASCO class on Rating Watch Negative and affirmed the ratings on 35 classes from the five deals. The downgrades were attributed to deterioration in the relationship between credit enhancements and expected losses.

Nine classes from four subprime, second-lien issues of GS Mortgage Securities Corp. mortgage pass-through certificates have been downgraded by Fitch Ratings. Fitch also placed six GSAMP classes on Rating Watch Negative, removed one classes from Rating Watch Negative, and affirmed the ratings on five classes. The downgrades were attributed to deterioration in the relationship between credit enhancements and expected losses.

Thirty-five additional classes of first-lien subprime mortgage pass-through certificates were downgraded by Fitch Ratings on Feb. 21 as a result of changes to its subprime loss forecasting assumptions. Fitch also affirmed the ratings on classes with outstanding balances of over $1.4 billion. The securities affected by the latest downgrades were: 13 classes from one Bear Stearns Asset Backed Securities I Trust deal; 12 classes from one GS Mortgage Securities Corp. deal; and 10 classes from one Option One deal. 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."

The issuance of U.S. mortgage-related securities managed to increase slightly in 2007 to $2.04 trillion, from $1.99 trillion in 2006, despite a sharp drop in volume in the fourth quarter, according to data from the Securities and Industry Financial Markets Association. "While private-label MBS issuance decreased by 15.2% to $655.6 billion from 2006's $773.2 billion, agency MBS issuance became the more dominant portion of the market," the association said. SIFMA can be found on the Web at http://www.sifma.org.

Despite its exposure to the deteriorating subprime mortgage market, the U.S. life insurance industry is "well-positioned to withstand current market volatility," according to Fitch Ratings. The rating agency estimated that unrealized mark-to-market losses on investments related to subprime and alternative-A mortgages range from $7 billion to $8 billion in the industry. That represents approximately 13% of exposure and 3% of aggregate industry statutory capital, Fitch said in a report titled Subprime Mortgage Exposure for U.S. Life Insurers -- Update and Outlook. "While Fitch expects further deterioration in the performance of subprime residential mortgages, particularly for 2006 and 2007 vintage years, our analysis suggests that the industry is well positioned to withstand current market volatility given its focus on high-investment-grade securities, relatively stable liability profile, and positive cash flow," the rating agency said. "Despite the significant deterioration of subprime mortgage markets and increased credit risk in other fixed-income markets, Fitch views the U.S. life insurance industry as well capitalized." Fitch can be found online at http://www.fitchratings.com.

Senate Democrats are pushing for a cloture vote Feb. 26 on a foreclosure prevention bill that would allow bankruptcy judges to restructure mortgages for distressed homeowners, and the financial services industry is mobilizing to defeat it. If the Democrats can get 60 votes, it opens the door to debate and amendments before final passage. But industry groups like the Mortgage Bankers Association are adamantly opposed to giving bankruptcy courts the leeway to reduce the principal amount or interest rate on a single-family mortgage. "We are fighting this," said MBA vice president Francis Creighton. "There is not a lot of room for compromise." The bill also provides funding for refinancing subprime borrowers and for grants to cities to purchase and rehabilitate foreclosed properties. In addition, it has a tax sweetener that allows lenders, homebuilders, and other companies to carry back 2006 and 2007 losses and receive refunds on taxes paid in prior years. Mr. Creighton said the outcome of Tuesday's vote is "really up in the air" and that the MBA is calling on its members to contact their senators.

Seventy-eight additional classes of first-lien subprime mortgage pass-through certificates were downgraded by Fitch Ratings on Feb. 20 as a result of changes to its subprime loss forecasting assumptions. Fitch also affirmed the ratings on classes with outstanding balances of more than $800 million. The securities affected by the latest downgrades were 67 classes from five Long Beach deals and 11 classes from one Washington Mutual deal. 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.

DBRS, a Toronto-based rating agency, has downgraded 202 classes from 40 residential mortgage-backed securities transactions. Citing a "significant increase in serious delinquencies," DBRS said excess spread for the classes backed chiefly by first-lien collateral is not expected to be sufficient to cover anticipated losses. The downgrades of classes backed by second-lien collateral reflect "rapid deterioration in credit enhancement" resulting from a significant increase in collateral delinquencies and losses, the rating agency said. "Overcollateralization has been depleted in many transactions, and excess spread continues to diminish," DBRS said. "Additionally, in many cases, subordinate classes have already been impaired, further weakening the available credit support for the remaining senior and mezzanine classes."

Mission Capital Advisors is taking bids on a $131.2 million portfolio of nonperforming mortgages secured by commercial and residential properties in western Florida. Buyers can bid on individual loan pools or the entire portfolio. According to the New York-based Mission, most of the loans have recent appraisals, and all carry "personal guarantees that are expected to add significant value." Preliminary bids are due March 4.

The long- and short-term issuer default ratings of Citizens Republic Bancorp Inc. and its principal subsidiaries have been downgraded by Fitch Ratings, which cited increased losses and nonperforming loans in its commercial real estate loan portfolio. The company's long-term IDR was downgraded from BBB to BBB-minus, and the short-term IDR was downgraded from F2 to F3. The rating outlook is stable. The downgrades were attributed to a deterioration of asset quality "evidenced by the sharp rise and sheer volume" of nonperforming assets and loan losses. "Credit problems are generally concentrated in the land development, land hold, and construction portions of the commercial real estate loan portfolio, and largely represent loans originated by Republic Bancorp Inc., which CRBC acquired on Dec. 29, 2006," Fitch said.