Servicing

Eight classes of Finance America mortgage pass-through certificates from series 2004-1 and series 2004-3 have been downgraded by Fitch Ratings.Fitch also placed three classes on Rating Watch Negative, removed two classes from Rating Watch Negative, and affirmed the ratings on 10 other classes in the two deals. The negative rating actions were attributed to deterioration in the relationship between credit enhancement and expected losses.

Sixty classes of mortgage-backed securities from four issuers have been downgraded by Fitch Ratings as a result of changes to its subprime loss forecasting assumptions.Fitch also placed seven classes on Rating Watch Negative, removed two classes from Rating Watch Negative, and affirmed the ratings on classes with outstanding balances of approximately $6.8 billion. Securities affected by the latest downgrades were as follows: 28 classes from five issues of SAIL mortgage pass-through certificates; 26 classes from eight issues of Morgan Stanley mortgage pass-throughs; five classes from one issue of Saxon Asset Securities Trust mortgage pass-throughs; and one class of SASCO mortgage pass-throughs. The rating actions were attributed to changes in 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 long- and short-term Issuer Default Ratings of Canadian Imperial Bank of Commerce have been placed on Rating Watch Negative by Fitch Ratings, which cited the bank's exposure to subprime residential mortgage-backed securities.The bank's IDRs stand at AA-minus/F1-plus. (Certain other ratings of CIBC and Canadian Imperial Holdings Inc. were also placed on Rating Watch Negative.) CIBC has "significant exposure" to U.S. collateral debt obligations composed largely of subprime RMBS, and its portfolio has been hedged with credit default swaps, Fitch reported. A "significant portion" of the swap protection, $3.5 billion, was written by a now-weak financial guarantor, and the bank will "most likely take a significant charge" against the exposure, Fitch said.

Citing sensitivity to the residential mortgage market, Fitch Ratings has revised the rating outlook on Bank of America Corp. and its subsidiaries from stable to negative, while affirming all their outstanding ratings.The rating agency noted that the management of BoA recently announced that it will "increase provisions substantially to offset deterioration in home equity loans, and negative mark-to-market valuations in its mortgage-related holdings of collateralized debt obligations will be larger than previously anticipated." BoA said its earnings in the fourth quarter will decline "substantially" from previous levels. Fitch said it believes that unfavorable conditions in the credit markets will continue beyond the fourth quarter and "could put significant pressure on earnings into 2008." Fitch can be found on the Web at http://www.fitchratings.com.

The Individual rating of Fifth Third Bancorp has been lowered from A/B to B by Fitch Ratings, which cited concerns about the company's exposure in its home equity and commercial mortgage portfolios, among other factors.The rating outlook for Fifth Third has been revised from stable to negative, although its long- and short-term Issuer Default Ratings have been affirmed at AA-minus/F1-plus. The negative rating actions stem from "deteriorating trends in asset quality and expectations for higher credit costs that will continue to pressure earnings," Fitch said. (Individual ratings, assigned only to banks, assess how a bank would be viewed if it could not rely on external support, and are designed to assess a bank's exposure to and management of risk, Fitch says.) The rating agency said there had been "broad-based deterioration" in net chargeoffs and nonperforming assets since March. "While Fitch had anticipated some deterioration given the Midwestern footprint and exposure to residential and construction lending, the unprecedented stress (particularly in Florida) and difficult market conditions exceeded Fitch internal estimates and support Fitch's outlook revision," the rating agency said.

The Federal Trade Commission has published a four-page report advising consumers to continue making mortgage payments "as usual" in the event that their lender closes or files for bankruptcy.The FTC informed consumers that loans and the rights to service loans are often bought and sold, so that the originating lender may not end up servicing its loan. The FTC noted that even if a servicer files for bankruptcy, its assets are typically sold under the supervision of a bankruptcy court and the servicing rights will be transferred to another lender.

Equifax Inc., Atlanta, has introduced a loan modification system aimed at streamlining the determination of who qualifies for assistance under the HOPE NOW alliance of counselors, servicers, investors, and other mortgage market participants.HOPE NOW recently developed a plan to help financial institutions direct borrowers into four categories: those eligible for refinancing; those eligible for a loan modification; those who need intensive analysis of their debts and income; and those who can afford the higher reset rate and therefore require no assistance. "Leveraging the power of our vast data and advanced analytics, we are equipping lenders with a systematic solution that offers a clear and concise way to segment their portfolios, evaluate loan modification requests, and streamline the qualification process," said Dann Adams, president of U.S. consumer information solutions at Equifax. the company can be found on the Web at http://www.equifax.com.

Barclays Bank of London, which lent $400 million to two subprime hedge funds managed by Bear Stearns & Co., has sued the Wall Street firm, charging that Bear misled it about the performance of the funds.The funds -- High-Grade Structured Credit Strategies Fund, and High-Grade Structured Credit Strategies Enhanced Leverage Fund -- filed for bankruptcy protection in the Cayman Islands this summer. Barclays is owed money by the firms. The funds were managed by two Bear executives: Ralph Cioffi and Matthew Tannin. Mr. Cioffi recently left Bear. At deadline time, Bear Stearns had not commented on the suit. The failure of the funds is the subject of a criminal probe and an investigation by the Securities and Exchange Commission.

Bear Stearns & Co. posted an $854 million loss in the fourth quarter and increased its provision for subprime writedowns to $1.9 billion, a 60% hike from its previous damage estimate.Bear was a major player in the subprime asset-backed securities market, funding nondepository mortgage bankers, buying their loans, and then securitizing them. Bear Stearns currently owns a nonprime shop in Texas called EMC Mortgage. The Wall Street firm made headlines this summer when two subprime-related hedge funds it had started filed for bankruptcy protection. The London-based Barclays Bank -- which had lent $400 million to the funds -- sued Bear on Wednesday, saying the Wall Street firm misled it about the funds' performance. Bear Stearns can be found online at http://www.bearstearns.com.

Classes M-10 and M-11of Ameriquest Mortgage Securities Inc. series 2005-R2 have been placed on review for possible downgrade by Moody's Investors Service.The actions were based on an analysis of the credit enhancement provided by subordination, overcollateralization, and excess spread relative to expected losses, the rating agency said. The transactions are backed by subprime mortgage loans. Moody's can be found online at http://www.moodys.com.