Servicing

Fitch Ratings has downgraded C-BASS Investment Management LLC's CDO asset manager rating from CAM1-minus to CAM3.Fitch said the rating remains on Rating Watch Negative pending the expected near-term resolution of the company's future operational status. Fitch rates asset managers of collateralized debt obligations by asset class on a scale of 1 to 5, with 1 being the highest rating. Fitch can be found on the Web at http://www.fitchratings.com.

The federal regulator of Fannie Mae and Freddie Mac has blasted New York Attorney General Andrew Cuomo for subpoenaing the two GSEs in connection with an appraisal fraud probe, arguing that "they have no economic incentive to knowingly purchase or guarantee mortgages with inflated appraisals.""I am disappointed that your office did not contact OFHEO before or even after subpoenaing the GSEs and issuing certain threats regarding their future business activities," writes OFHEO Director James Lockhart in a Nov. 8 letter to AG Cuomo. Mr. Lockhart wants an explanation from Mr. Cuomo in regard to his demand that the government-sponsored enterprises cease doing business with Washington Mutual, a large seller of mortgages to the GSEs. Earlier this week the New York AG said his office would subpoena the GSEs as part of a wider probe into mortgage industry practices. OFHEO is the safety-and-soundness regulator of Fannie and Freddie.

Standard & Poor's has changed its ratings outlook for Morgan Stanley and related entities from stable to negative due to the Wall Street firm's subprime mortgage-related multibillion-dollar revenue decline.S&P said it believes that, given offsetting gains in other business lines, Morgan Stanley "could at least have break-even net earnings for the quarter." However, the subprime-related writedowns have left "little leeway in the ratings to sustain additional setbacks," the rating agency said. Standard & Poor's can be found on the Web at http://www.standardandpoors.com.

Morgan Stanley has written down its revenue by $3.7 billion (about $2.5 billion after taxes) due to the deterioration in value of U.S. subprime mortgage-related exposures since August.The company said the writedowns would likely hurt its fixed-income business' fourth-quarter results, but that relative gains in other business lines may offset the concern. Morgan Stanley also said its subprime-related exposures will likely fluctuate further, but that it does not expect to provide any more updates before its regularly scheduled earnings reports. Morgan Stanley can be found online at http://www.morganstanley.com.

Class B-1 of GSC Capital Corp. Mortgage Trust 2006-2 has been placed on Rating Watch Negative by Fitch Ratings.Fitch also affirmed the ratings on 15 classes from two GSC Capital transactions. The negative rating action was attributed to a deterioration in the relationship of credit enhancement to loss expectations. The mortgage pools consist of adjustable-rate, first-lien mortgage loans.

Moody's Investors Service has downgraded 60 tranches from 11 deals issued by Countrywide in 2006 and placed 39 tranches under review for possible downgrade.Three downgraded tranches from the CWALT Inc. issues of mortgage pass-through certificates remain on review for possible downgrade. The negative rating actions were based on higher-than-expected rates of delinquency, foreclosure, and real estate owned relative to credit enhancement levels, Moody's said. The collateral backing the affected classes consists chiefly of first-lien, fixed- and adjustable-rate, alternative-A mortgage loans.

More than 200 classes of mortgage- and asset-backed securities have been downgraded by Fitch Ratings as a result of changes to its subprime loss forecasting assumptions.In addition to the 224 downgrades, Fitch placed 95 classes on Rating Watch Negative and affirmed the ratings on classes with outstanding balances of approximately $14 billion. Among the securities affected by the latest downgrades were: 36 classes from three Structured Asset Securities Corp. mortgage pass-through certificates; 30 classes from three Credit Based Asset Servicing & Securitization transactions; 29 classes from three Securitized Asset Backed Receivables transactions; 26 classes from two issues of Soundview asset-backed certificates; and 20 classes from two issues of HASCO mortgage pass-through certificates. 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."

Citing exposure to mortgage, home equity, and residential construction lending, Fitch Ratings has downgraded National City Corp. and revised downward the rating outlooks of Wells Fargo & Co., Washington Mutual Inc., Countrywide Financial Corp., and three other large banks.The long-term issuer default rating of National City was downgraded from AA-minus to A-plus, and its short-term IDR was downgraded from F1-plus to F1. The rating outlook is negative. Fitch cited NatCity's "weakened core financial performance" and opined that its remaining mortgage banking business "is likely to remain pressured." The rating outlooks of Wells Fargo, KeyCorp, Zions Bancorporation, and Capital One Financial Corp. were revised from positive to stable because of "strong reliance on consumer lending businesses such as mortgages and home equity credit as well as exposure to residential construction," Fitch said. The same factors were cited in the revision of WaMu's outlook from stable to negative. Similar factors were also cited in removing Countrywide from Rating Watch Evolving and assigning it a negative outlook, with the additional concern that the company is repositioning its main business, mortgage banking, amid "extremely difficult conditions." Fitch can be found online at http://www.fitchratings.com.

MountainView Capital Holdings, Denver, a player in the red-hot "scratch-and-dent" market, has raised $65 million in equity capital.Led by president and chief executive officer Mike Morgan, MountainView is an investor and trader of delinquent, performing, and subperforming mortgages. It also functions as a servicing broker and offers analytics. Chris Rooker, a principal in the firm, likened the current mortgage crisis to the savings-and-loan mess of the late 1980s and early 1990s, noting, "We are seeing opportunities in the mortgage space unprecedented since the days of the Resolution Trust Corp." The RTC was a government agency that helped liquidate $500 billion in assets belonging to failed thrifts. MountainView's new investors include Union Square Partners, CLAC Industries, and MountainView management.

New York Attorney General Andrew Cuomo said Wednesday that his office will subpoena Fannie Mae and Freddie Mac as part of a widening probe of the residential mortgage industry.Among other things, the subpoenas seek information on mortgages purchased by the government-sponsored enterprises from their seller/servicers, including Washington Mutual of Seattle. The GSEs also agreed to a demand by the New York AG that they hire an independent examiner to conduct a review of all WaMu appraisals on mortgages they purchased. In 2006, according to the eMortgage Industry Directory, WaMu sold north of $30 billion in loans to the GSEs. "In order to fulfill their duty to consumers and investors, Fannie Mae and Freddie Mac must ensure that Washington Mutual's mortgages have not been corrupted by inflated appraisals," the attorney general said in a statement. At deadline time, only Fannie had commented on the matter, saying it would fully cooperate.