Servicing

Smarting from a $7.9 billion writedown related to subprime and collateralized debt obligation assets, Merrill Lynch & Co. on Tuesday announced the "immediate" retirement of chairman and chief executive Stanley O'Neal.Mortgage bankers that have done business with Merrill Lynch say Mr. O'Neal is being blamed, in part, for the Wall Street giant's foray into the subprime market. About a year ago, according to one banker, Merrill had about $10 billion in outstanding warehouse lines of credit or repos with subprime nondepositories. Merrill Lynch has elected director Alberto Cribiore as its interim nonexecutive chairman. He will spearhead Merrill's search for a new CEO.

Six classes of Banc of America Funding Corp. mortgage pass-through certificates, series 2006-D, have been downgraded by Fitch Ratings.The downgrades were as follows: class 1-M-4, from A to BBB-plus; class 1-M-5, from BBB-plus to BB; class 1-M-6, from BBB-minus to B; class X-B-3, from BBB to BBB-minus; class X-B-4, from BB to B-plus; and class X-B-5, from B to C/DR4. In addition, Fitch placed classes 1-M-2, 1-M-3, 1-M-4, and 1-M-5 on Rating Watch Negative and affirmed the ratings on 15 other classes in the deal. The negative rating actions were attributed to a deterioration in the relationship between credit enhancement and loss expectations.

Seven classes from two Harborview Mortgage Loan Trust Inc. securitizations have been downgraded by Fitch Ratings and one has been placed on Rating Watch Negative.The downgrades were as follows: series 2006-4, class B-7, from A-minus to BBB, class B-8, from BBB-plus to BBB-minus; class B-9, from BBB to BB, and class B-11, from B to CC/DR4; and series 2006-6, class B-3, from BBB to BBB-minus, class B-4, from BB-minus to B, and class B-5, from CCC/DR2 to C/DR5. Class B-2 of series 2006-6 was placed on Rating Watch Negative, and class B-3 was removed from Rating Watch Negative. In addition, Fitch affirmed the ratings on nine other classes in the two transactions. The rating agency attributed the negative rating actions to a deterioration in the relationship between credit enhancement and loss expectations. The deal is backed by adjustable-rate mortgage loans secured by first liens on residential properties.

Ten classes from two Wells Fargo home equity asset-backed securities have been downgraded by Fitch Ratings as a result of changes in the rating agency's subprime loss forecasting assumptions.Fitch also affirmed the ratings on 19 other classes in three Wells Fargo deals. The revised assumptions in Fitch's subprime loss model "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 said.

Twenty classes of Residential Accredit Loan Inc. mortgage securities have been downgraded by Fitch Ratings, and four classes have been placed on Rating Watch Negative.In addition, Fitch affirmed the ratings on 40 classes from 10 RALI securitizations and removed three classes from Rating Watch Negative. The negative rating actions were attributed to a deterioration in the relationship between credit enhancement and loss expectations. The collateral for the deals consists primarily of 15- and 30-year fixed-rate mortgage loans extended to alternative-A borrowers, the rating agency said.

Moody's Investors Service has placed on review for possible downgrade the servicer quality ratings of First Horizon Home Loans as a primary servicer of prime and second-lien mortgage loans.Moody's said the action was prompted by the rating agency's recent placement of the long-term ratings of First Horizon National Corp. and its subsidiaries under review for possible downgrade. The rating agency said it "believes the most likely downside scenario would be a reduction in First Horizon's servicing stability assessment from strong to above average," which would drop its primary servicer ratings from SQ2-plus to SQ2 for prime loans and from SQ2 to SQ2-minus for second-lien loans.

Delinquency rates rose while prepayment speeds slowed in August for home equity and jumbo mortgage loans that have been pooled into securities, according to a pair of reports from Moody's Investors Service.The composite delinquency rate on home equity securitizations continued to weaken, with the percentage of loans at least 60 days overdue rising to 15.2%, up from 14.2% in July. The foreclosure and chargeoff rates also rose. For jumbo mortgages in securities, the percentage of loans more than 60 days past due rose to 0.53%, up from 0.50% in July. Moody's said the cumulative prepayment rate declined in August for both home equity and jumbo mortgage securitizations. Moody's can be found online at http://www.moodys.com.

Zacks Equity Research, Chicago, announced Oct. 29 that Liberty Property Trust, Malvern, Pa., had been designated its "Bear of the Day," a stock expected to underperform the markets over the next three to six months.Zacks said the commercial real estate investment trust "paid a steep price" to get into the Washington, D.C. office market with its acquisition of Republic Property Trust for over $900 million. The acquisition will be dilutive to earnings over the next several quarters, the research firm said. "We expect rental rates to remain flat through 2008, as the company has assets in office markets that still have high vacancies," Zacks said. "The company has a large development pipeline that is only 41% pre-leased, which poses a real risk if the economy softens in 2008." Zacks can be found online at http://www.zacks.com, and Liberty Property Trust can be found at http://www.libertyproperty.com.

Stanley O'Neal, executive chairman and chief executive of Merrill Lynch & Co. -- once a huge financier of subprime firms -- is expected to resign from the Wall Street firm as early as Monday.According to combined news reports, Laurence Fink of Black Rock Financial, which is 49% owned by Merrill, is being interviewed about replacing Mr. O'Neal. Back in the 1980s, while at First Boston, Mr. Fink was an important player in the mortgage-backed securities market. Merrill has long been a financier of mortgage companies but became an aggressive player in banking subprime firms when Mr. O'Neal took over the reins of the company six years ago. Merrill recently took a stunning $7.9 billion writedown on subprime and collateralized debt obligation assets in the third quarter, 75% more than it had forecast just a few weeks earlier. Merrill posted a net loss of $2.3 billion and hinted that more writedowns are to come.

Three classes from two EquiFirst Mortgage Loan Trust securitizations have been downgraded by Fitch Ratings.The downgrades were as follows: EquiFirst 2003-1, class M-3, from BBB to B; and EquiFirst 2003-2, class M6, from BBB-minus to BB-plus, and class B1, from BB-plus to BB-minus. In addition, Fitch affirmed the ratings on nine classes from the two deals. The downgrades were attributed to deterioration in the relationship between credit enhancement and loss expectations. The mortgage pools consist of first-lien, fixed- and adjustable-rate residential mortgage loans.