Servicing

Eleven classes of Securitized Asset Backed Receivables mortgage pass-through certificates have been downgraded by Fitch Ratings. The downgrades came in SABR series 2004-DO1 and series 2004-NC3. Fitch also placed two of the downgraded classes on Rating Watch Negative and affirmed the ratings on three classes in the deals. The downgrades were attributed to the release of overcollateralization and principal payments to the subordinate classes, which have put pressure on the capital structure for both series. The collateral consists primarily of first-lien subprime mortgage loans.

The residential servicer ratings of Option One Mortgage Corp. have been downgraded by Fitch Ratings, and they remain on Rating Watch Negative.Option One's residential primary servicer rating for subprime products was downgraded from RPS1 to RPS2-plus, and its residential primary special servicer rating was downgraded from RSS1 to RSS2-plus. Fitch said the actions reflect the corporate rating of Option One's parent, Block Financial Corp, and its ultimate parent, H&R Block Inc., whose senior debt was recently downgraded to A-minus and placed on Rating Watch Negative. The rating actions also reflect the effect on Option One's servicing platform of decreased loan originations, changes in credit lines, and uncertainties regarding the sale of the servicing platform to Cerberus Capital Management LP, the rating agency said. The Rating Watch placement indicates that further downgrades are possible, depending on the outcome of the proposed sale. Fitch said the actions were also based on the operational challenges facing Option One in the subprime market. Fitch rates residential servicers on a scale of 1 to 5, with 1 being the highest rating.

Unrated commercial real estate loans represent a growing proportion of U.S. CRE collateralized debt obligations, and the key to promoting transparency in such transactions is "consistent, enhanced, ongoing loan-level reporting," Derivative Fitch says in a new report."By providing more standardized information, asset managers can increase the transparency and, consequently, the liquidity of their transactions," said Fitch senior director Karen Trebach. In the report, Fitch describes the information it requests from asset managers and explains the value of each report. Enhanced reporting provides early warning signals to alert asset managers when to step in to modify a loan or pursue other remedies, the rating agency said. One advantage of a CRE CDO structure over commercial mortgage-backed securities REMIC structures is that the CDO "allows asset managers more flexibility to modify loan terms even prior to an actual default," Fitch said. The rating agency can be found online at http://www.derivativefitch.com.

Countrywide Financial Corp., Calabasas, Calif., has unveiled a $16 billion effort to help ailing mortgage customers -- subprime and prime alike -- to refinance out of loans that are either delinquent or run the risk of going bad over the next 15 months.As a share of subprime loans Countrywide services, the effort represents 13% of its A-minus to D portfolio, according to the Quarterly Data Report. The company, which is scheduled to report earnings on Oct. 26, said it hopes to refinance $10 billion in subprime loans (52,000 Countrywide customers), offering its clients a Federal Housing Administration or Fannie Mae/Freddie Mac loan. Additionally, it hopes to refinance $4 billion in prime and subprime loans where the borrower is current but unable to refinance or might have difficultly making the payment once the loan rate resets. On $2.2 billion in subprime loans where the borrower is actually delinquent because of a recent reset, Countrywide said it will implement what it calls a "simplified loan modification process" that reduces the interest rate. National Mortgage News recently reported that nonprofits ACORN and the National Training Information Center are increasingly finding it difficult to work with the loss mitigation staff of Countrywide. The company has a 20% delinquency rate on its subprime portfolio. It can be found online at http://www.countrywide.com.

Moody's Investors Service also issued a flood of negative rating actions Oct. 19, downgrading over 30 classes of mortgage-backed securities and placing over 50 MBS classes on review for possible downgrade.Among the securities affected by the downgrades were: 16 classes of Nomura Asset Acceptance Corp. Alternative Loan Trust certificates; 11 classes of Merrill Lynch Mortgage Investors Trust certificates; and six classes of Morgan Stanley Mortgage Loan Trust certificates. Among those placed under review were: 13 classes issued by Structured Asset Investment Loan Trust; and 11 classes issued by Credit Suisse. The rating actions were attributed to an analysis of the credit enhancement provided by subordination, overcollateralization, and excess spread relative to expected losses. Moody's can be found online at http://www.moodys.com.

Fitch Ratings also issued a flurry of additional downgrades Oct. 19, involving 55 classes of subprime mortgage-backed securities and seven classes of other MBS.Fitch also placed 10 classes of subprime MBS on Rating Watch Negative and affirmed the ratings on 91 such classes, as well as nine other classes of MBS. Among the securities affected by the downgrades were: 20 classes from six issues of Ameriquest Mortgage Securities Inc. mortgage pass-through certificates; eight classes from two issues of Asset Backed Funding Corp. mortgage pass-throughs; five classes from two issues by Credit-Based Asset Servicing and Securitization LLC; five classes from two issues of CDC Mortgage Capital Trust mortgage pass-throughs; four classes of Residential Asset Securities Corp. mortgage pass-throughs; and four classes of Countrywide Asset-Backed Securitization mortgage pass-throughs. The rating actions were attributed to a deterioration in the relationship between credit enhancement and loss expectations.

Seventy-eight more classes of mortgage- and asset-backed securities 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 more than $8 billion. Among the securities affected by the latest downgrades were: 26 classes from four issues of IndyMac INABS certificates; 18 classes from three issues of IXIS Real Estate Capital mortgage pass-through certificates; 14 classes from four issues of Asset Backed Funding Corp. mortgage pass-throughs; eight classes from one issue of Ameriquest mortgage pass-throughs; and seven classes from one issue of ACE mortgage pass-throughs. 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." Fitch can be found online at http://www.fitchratings.com.

Standard & Poor's Ratings Services has announced downgrades of 1,413 classes of U.S. residential mortgage-backed securities (with an original par value of $22.0 billion) backed by first-lien subprime mortgage loans issued from the fourth quarter of 2005 through the fourth quarter of 2006.S&P also affirmed its ratings on securities representing $531.6 billion of original par value of such RMBS from the same period. S&P said the rating actions were based on expected further delinquencies and losses on the underlying loans, resulting reductions in credit support, and continued declines in home values. "While cumulative losses to date remain low, they have increased since our July 2007 review and we expect them to increase further," the rating agency said. For the downgraded transactions, overall delinquencies averaged 15.7% and serious delinquencies (loans that are delinquent by more than 90 days, in foreclosure, or real estate owned) averaged 23.3%, according to S&P. The rating agency said it expects the downgraded securities to be especially vulnerable to greater losses because 60%-70% of the loans backing them are subject to some type of payment adjustment in the near future. S&P can be found online at http://www.standardandpoors.com.

The Federal Home Loan Bank of New York is boosting its dividend to 8.05% after experiencing a 23% surge in borrowings in the third quarter.Members of the New York FHLBank increased their borrowings by $6.5 billion in August, when the subprime meltdown finally hit Wall Street and sparked a credit crunch. Members borrowed another $8 billion in advances in September. As of Sept. 30, the New York bank had $75.1 billion in outstanding advances, up 27% from the level at the start of the year. Over 70% of member banks and thrifts turned to the FHLBank's advance window this year. "This significant increase in advances demonstrates the important role we play as we help members serve their communities regardless of the economic environment. Critics, who have forgotten the importance of the assured liquidity mission of the Home Loan Banks, now have a mnemonic," NY FHLBank president Alfred DelliBovi said. The bank paid a 7.5% dividend in the second quarter.

Accredited Home Lenders Holding Co., a San Diego-based nonprime mortgage company, and its Accredited Mortgage Loan REIT Trust subsidiary have announced plans to delist and deregister the subsidiary's preferred shares from the New York Stock Exchange.The real estate investment trust subsidiary has provided written notice to the NYSE of its intent to voluntarily delist its 9.75% series A perpetual cumulative preferred shares. "Current market conditions do not warrant the significant annual costs associated with our being a reporting company," said James A. Konrath, chairman and chief executive officer of the parent and subsidiary companies. "Our board of directors and board of trustees believe it is prudent to use these funds to enhance Accredited's and REIT's financial performance." Accredited can be found on the Web at http://www.accredhome.com.