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Middleburg Financial Corp., Middleburg, Va., has announced that it expects to record a noncash impairment charge of approximately $5 million in the fourth quarter in connection with the carrying value of Middleburg Bank's ownership stake in Southern Trust Mortgage LLC.The bank's 41.8% ownership interest in Southern Trust was valued at $9.7 million as of Sept. 30, the company said. "The impairment of value primarily results from earnings declines associated with the slowdown in loan production volume and the increases to loan loss reserves," Middleburg Financial said. The company can be found on the Web at http://www.middleburgbank.com.

Deutsche Bank, a top-ranked issuer of subprime mortgage-backed securities, will conduct a top-to-bottom review of its entire mortgage business in the first quarter, according to officials at the company.A spokeswoman for the bank confirmed that a review will soon be under way, adding that, "there may be a reallocation of assets." Like many Wall Street firms, Deutsche Bank has both an active trading desk and a warehouse lending group that caters to the nonprime sector, a business that is in the throes of a historic correction. Deutsche Bank's trading desk is overseen by Michael Commaroto, who is listed in Securities and Exchange Commission documents as president of Deutsche Mortgage Securities. In 2006 Deutsche Bank purchased Chapel Funding Corp., Lake Forest, Calif., a privately held nonprime lender. It also acquired the publicly traded MortgageIT Holdings Inc., New York, the nation's 21st-largest lender, for $429 million. Deutsche Bank can be found online at http://www.deutsche-bank.com.

Two classes of Renaissance Home Equity Loan Trust series 2002-2 have been downgraded by Fitch Ratings.Class M2 was downgraded from BBB-plus to BBB and placed on Rating Watch Negative, and class B was downgraded from B to CC/DR3. The negative rating actions were attributed to deterioration in the relationship between credit enhancement and loss expectations. The collateral for the transaction consists of first- and second-lien subprime mortgage loans.

Three classes of Chase Funding subprime mortgage pass-through certificates have been downgraded by Fitch Ratings.The downgrades were as follows: series 2001-4 group 2, class IIM-1, from AA to A-plus, and class IIM-2, from A to BBB-plus; and series 2002-3 group 1, class IB, from A-minus to BBB (and placed on Rating Watch Negative). Fitch also placed class IIB of series 2003-6 group 2 on Rating Watch Negative and affirmed the ratings on 35 other classes from 10 Chase subprime deals. The negative rating actions were attributed to deterioration in the relationship between credit enhancement and loss expectations. The collateral consists of subprime loans secured by first- and second-lien mortgages or deeds of trust.

Five classes from three issues of Long Beach Mortgage Loan Trust residential mortgage-backed securities have been downgraded by Fitch Ratings.The downgrades were as follows: series 2003-1, class M-3, from BB-minus to B-minus/DR1; series 2003-3, class M-3, from BB to B, and class M-4, from B to CC/DR3; and series 2004-5, class M-6, from BBB to BB-plus (and placed on Rating Watch Negative), and class M-7, from BBB-minus to B (and placed on Rating Watch Negative). The negative rating actions were attributed to continued deterioration in the relationship between credit enhancement and loss expectations. The collateral consists of subprime loans secured by first- and second-lien mortgages or deeds of trust.

Eight classes from six collateralized debt obligations insured by MBIA Inc. and consisting partly of mortgage-backed securities have been placed on Rating Watch Negative by Fitch Ratings.The ratings of the CDOs are supported by a financial guaranty provided by MBIA Insurance Corp., a subsidiary of MBIA, whose triple-A insurer financial strength rating was recently placed on Rating Watch Negative by Fitch because of exposure to subprime residential MBS. The affected notes are as follows: Endurance CLO I Ltd, class A; Mulberry Street CDO Ltd., class A-1A; Mulberry Street CDO II Ltd., classes A-1A, A-1B, and A-1W; Oceanview CBO I Ltd., class A-1A; Shyppco Finance Co. LLC, class A-2A; and Z-1 CDO 1996 Ltd. (previously Cigna CBO 1996-1 Ltd.), class A-2.

Citing recent rating actions on four financial guaranty insurance companies and their subsidiaries, Fitch Ratings has placed over 200 residential mortgage-backed securities insured by the companies on Rating Watch Negative.Fitch placed the AAA Insurer Financial Strength ratings of Security Capital Assurance Ltd., MBIA Inc., FGIC Corp., Ambac Assurance Corp., and their subsidiaries on Rating Watch Negative following updated assessments of the monoline insurance companies' exposure to RMBS, structured finance collateralized debt obligations backed by subprime mortgage collateral, and CDO-squared transactions. The affected RMBS classes include 19 insured by SCA, 87 insured by MBIA, 36 insured by FGIC, and 64 insured by Ambac. Fitch said the securities will remain on Rating Watch Negative while it conducts a review to determine which classes will be able to maintain their AAA ratings based on subordination, overcollateralization, or additional forms of credit enhancement that are not dependent on the guaranties. The rating agency can be found online at http://www.fitchratings.com.

Over 50% of the subprime 2/28 adjustable-rate mortgages in foreclosure in July were less than two years old and had not yet gone through an upward reset of the interest rate, according to a report sponsored by the Milken Institute.The report by James Barth and three other researchers at the Santa Monica, Calif.-based economic think tank indicates that 57% of 2/28 ARMs and 87% of 3/27 ARMs in foreclosure never went through a reset. And they argue that subprime mortgage foreclosures are going to be a problem because house prices are not rising and subprime borrowers are having trouble refinancing their loans. "Without home price increases, hybrid loans will surely exacerbate the foreclosure problem if interest rates reset upward, but they are not the basic cause of it," the report says. Mr. Barth is a senior fellow at the Milken Institute and Lowder Eminent Scholar in Finance at Auburn University.

Countrywide Financial Corp. and the Association of Community Organizations for Reform Now have entered into discussions to develop a "blueprint" for foreclosure prevention that they expect to release in early January."Countrywide and ACORN anticipate final release of the groundbreaking provisions of the home retention initiative soon after the New Year," says a joint release. The discussions are mainly focused on helping subprime borrowers who have shown an ability and willingness to make their payments. But the parties are also looking at different products, including payment-option adjustable-rate mortgages. "We see actually more borrowers getting into trouble with payment-option ARMs than we are seeing with hybrid ARMs at this point," said Michael Shea, executive director for ACORN Housing Corp. He noted that Countrywide does not have a systematic approach yet for helping option ARM borrowers. "That is one of the things we are talking to them about," Mr. Shea said. Countrywide, based in Calabasas, Calif., can be found online at http://www.countrywide.com, and ACORN can be found at http://acorn.org.

Distressed homeowners who used the equity in their homes to finance debt consolidation or vacations will still face a tax penalty if a lender reduces their mortgage debt under the recently enacted Mortgage Forgiveness Debt Relief Act.Only the forgiveness of mortgage debt used to finance the acquisition of a borrower's primary residence and improvements to the property will escape being treated as ordinary income for tax purposes, according to a mortgage banking alert by two tax attorneys at K&L Gates. Attorneys Kenneth Wear and Roger Wise also point out that only borrowers who have lived in their homes for at least two years can qualify for tax relief. This provision weeds out speculators but it also denies relief for new homeowners who got in over their heads and defaulted early. Meanwhile, the tax relief measure "places no additional burden on lenders," the tax attorneys say. The borrowers have to determine whether they qualify for relief. Lenders simply provide borrowers with Internal Revenue Service Form 1099-C (Cancellation of Debt).