Servicing

Twenty-three 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 two classes on Rating Watch Negative and affirmed the ratings on classes with outstanding balances of about $2.4 billion. Securities affected by the latest downgrades were as follows: 11 classes from two issues of HASCO mortgage pass-through certificates; six classes from two issues of Fieldstone mortgage pass-throughs; four classes of RASC mortgage pass-throughs; and two classes of NovaStar Mortgage Funding Trust 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 rating agency can be found online at http://www.fitchratings.com.

Zions Bancorp, Salt Lake City, says it will take a $94 million pretax charge in the fourth quarter because the collateral backing some of its investments in collateralized debt obligations is "impaired."According to a new filing with the Securities and Exchange Commission, Zions said the collateral backing the CDOs includes debt issued by residential mortgage real estate investment trusts, commercial mortgage-backed securities, home builder debt, and commercial income REITs. Seven REIT-related CDOs are of concern to the bank. (It has investments in 12.) Even though it expects to take a large hit, Zions said five of the seven CDOs are rated "investment grade."

Morgan Stanley, a top player in home equity and asset-backed securities, took a $9.4 billion writedown in its fiscal fourth quarter, citing declining values in the subprime market.In November the Wall Street firm disclosed $3.7 billion in subprime writedowns, but on Wednesday it revealed $5.7 billion in additional charges. In its earnings statement, Morgan blamed the writedowns on "continued deterioration and lack of liquidity in the market for subprime and other mortgage-related securities." Roughly $7.8 billion of the writedowns are tied to subprime trading positions. For the quarter, Morgan posted a $3.58 billion operating loss. Morgan owns Saxon Mortgage, a nonprime wholesaler that recently cut back its loan menu. Morgan Stanley can be found online at http://www.morganstanley.com.

Nearly 202,000 foreclosure filings were reported nationwide in November, down 10% from the level recorded in October but up 68% from that of a year earlier, according to RealtyTrac, an online foreclosure marketplace based in Irvine, Calif.The nation's foreclosure rate stood at one foreclosure filing for every 617 households, the company said in its November 2007 U.S. Foreclosure Market Report. (Foreclosure filings include default notices, auction sale notices, and bank repossessions.) "The 10% drop in November is the first double-digit monthly decrease we've seen since April 2006," said James J. Saccacio, chief executive officer of RealtyTrac. "This could indicate that foreclosure activity has topped out for the year, but the test of whether this ceiling will hold will come at the beginning of next year -- when we anticipate that a seasonal surge in foreclosure filings and another possible wave of resetting mortgages could place further pressure on the housing market." RealtyTrac said Nevada, Florida, and Ohio recorded the highest foreclosure rates in November. The company can be found online at http://www.realtytrac.com.

The House has passed a mortgage tax relief bill that encourages loan modifications and extends a deduction for mortgage insurance premiums -- clearing the way for the legislation to be sent to the president for his signature.The Senate passed the same bill (H.R. 3648) on Dec. 14. It ensures that homeowners are not penalized when a lender reduces the principal amount of their mortgage in a restructuring or foreclosure. Currently, any reduction in mortgage debt by a lender is treated as income for tax purposes. The tax relief is temporary, as requested by the Bush administration, and it applies to a discharge of debt on a principal residence before Jan. 1, 2010. Meanwhile, the bill extends the deduction on MI premiums for three years. Continuing this tax deduction is an "important step forward as Congress seeks solutions to the current housing and mortgage crisis," said Kevin Schneider, president of Genworth Financial Inc. "Many potential buyers can't make a traditional 20% downpayment, and a loan with tax-deductible mortgage insurance may make the difference in their ability to become homeowners safely."

Twenty-two classes of mortgage pass-through certificates from five First Horizon Alternative securitizations have been downgraded by Fitch Ratings.Fitch also placed one class on Rating Watch Negative, removed four classes from Rating Watch Negative, and affirmed the ratings on eight classes from the five First Horizon transactions. The negative rating actions were attributed to deterioration in the relationship between credit enhancement and expected losses. The collateral for the deals generally consists of adjustable-rate, first-lien, fully amortizing and interest-only, alternative-A mortgage loans.

Moody's Investors Service has downgraded the ratings of 55 tranches from 12 securitizations backed primarily by first-lien, adjustable-rate, negative-amortizing, alternative-A mortgage loans.Moody's also placed 15 tranches from the deals under review for possible downgrade. The downgraded securities are as follows: 32 tranches from four transactions issued by CHL Mortgage Pass-Through Trust in 2006; 17 tranches from six transactions issued by RALI Series in 2006 and late 2005; four tranches from one transaction issued by American Home Mortgage Assets Trust in 2006; and two tranches from one transaction issued by MortgageIT Trust in 2005. Moody's said the negative rating actions were based on higher-than-expected rates of delinquency, foreclosure, and real estate owned in the underlying collateral relative to credit enhancement levels. The rating agency said it also applied its published methodology updates to the nondelinquent portion of the transactions. Moody's can be found online at http://www.moodys.com.

Fitch Ratings has raised its residential servicer ratings on American Home Mortgage by one notch, reflecting the company's post-bankruptcy restructuring under new ownership.Fitch raised the company's ratings as a primary servicer of prime loans, alternative-A loans, and home equity loans and lines of credit from RPS4 to RPS3-minus. Fitch also removed American Home Mortgage Servicing from Rating Watch Negative. American Home filed for bankruptcy protection in August of this year. WL Ross & Co., a firm that specializes in turning around distressed companies, acquired the servicing unit in November. As of Oct. 31, American Home Mortgage Servicing managed a portfolio totaling $48 billion of home loans. Fitch rates servicers on a scale of one to five, with one being the highest rating.

Real Estate Radio USA, an Internet talk radio show based in Ft. Lauderdale, Fla., has launched a nationwide promotion offering listeners with homes in foreclosure a chance to reinstate their mortgage.Beginning on Jan. 28, Real Estate Radio will enable one listener per month to stay in his or her home. Homeowners in foreclosure who have an auction or sale date looming can register to win by logging onto the Reinstate My Mortgage! website. The radio show said it will pick one registrant at random each month. Further information can be found online at http://www.realestateradiousa.com.

JER Investors Trust Inc., a McLean, Va.-based company that originates and acquires commercial real estate structured finance products, and JER Partners have announced the closing of a $220 million private equity fund that will invest in loans secured directly or indirectly by real estate.The fund will invest in B-notes, mezzanine loans, whole mortgage loans, preferred equity, commercial mortgage-backed securities, and CMBS-related products. However, nonperforming loans and single-family residential debt and mortgages are outside the scope of the targeted investments, the companies said. Both companies will receive management fees and a percentage of aggregate profits. JER Investors and JER Partners, the private equity arm of J.E. Robert Cos., can be found on the Web at http://www.jer.com.