Servicing

The class A-3 notes from Enhanced Mortgage-Backed Securities Fund V Ltd., a collateralized debt obligation, have been downgraded from CC/DR3 to C/DR4 by Fitch Ratings.In addition, Fitch withdrew its ratings on classes A-4 and B. The rating agency said the CDO had violated overcollateralization tests, and its portfolio of mortgage- and asset-backed securities was liquidated.

The class A notes from Brit Alliance ABSpoke 2005-X and 2005-XI, collateralized debt obligations tied to mortgage-backed securities, have been downgraded from AA to A-minus by Fitch Ratings.The transactions are unfunded managed synthetic CDOs that reference portfolios of various asset-backed securities, Fitch said. They are "designed to provide credit protection for realized losses on the reference portfolio[s] through a credit default swap between the issuer and the swap counterparty, Morgan Stanley Capital Services Inc.," the rating agency said. The downgrades were attributed to deterioration in the credit quality of the reference portfolios, which total $462 million of ABS assets for series 2005-X and $673 million of ABS assets for series 2005-XI. The swaps reference prime and subprime residential MBS in the case of series 2005-X, and RMBS, ABS, and commercial MBS in the case of series 2005-XI, Fitch reported.

Four classes of notes issued by Duke Funding High Grade II-S/EGAM I Ltd., a collateralized debt obligation used to acquire mortgage-backed securities, have been downgraded by Fitch Ratings and placed on Rating Watch Negative.The downgraded notes were as follows: class C and series 2 class C, from A to BB; and class D and series 2 class D, from BBB to B. Also placed on Rating Watch Negative were classes B1, series 2 class B1, class B2, and series 2 class B2. The downgrades were attributed to a reduction in credit enhancement from realized losses and a drop in the market value of the underlying assets. The watchlist placements were based on concerns about the continued availability of repo funding at current terms, the rating agency said. Fitch said the proceeds of the notes are used to buy a diversified portfolio of triple-A rated, primarily private-label residential MBS.

Forty-eight classes from 14 structured finance collateralized debt obligations have been placed on Rating Watch Negative by Fitch Ratings.The actions, which affect approximately $1.2 billion of notes in CDOs issued in 2006 and 2007, were attributed to Fitch's ongoing review of structured finance CDOs in which "significant portions" of the portfolio have been downgraded or watchlisted by Fitch or other major rating agencies. "In addition to public rating actions, this collateral portfolio review identified concentrations of subprime [residential mortgage-backed securities] bonds issued in 2006 where expected losses may be significantly higher than the ratings suggest," Fitch said. The rating agency said CDO tranches watchlisted as a result of recent subprime RMBS credit deterioration now represent approximately 20.2% of Fitch-rated U.S. structured finance CDOs. Fitch can be found on the Web at http://www.fitchratings.com.

Citing rising six-month default rates, Moody's Investors Service says the fallout from aggressive mortgage underwriting and a prolonged housing downturn will produce downward ratings pressure on subprime and alternative-A tranches of recent-vintage U.S. residential mortgage-backed securities.Moody's said six-month default rates have continued to rise significantly for loans backing RMBS issued in the third and fourth quarters of 2006. In addition, Moody's said new data show that deteriorating performance is also evident in 12-month default rates. For example, 12-month collateral defaults for subprime RMBS issued in the second quarter of 2006 rose to 7.39%, more than three times the average of 2.00% for subprime RMBS issued between the first quarter of 2002 and the second quarter of 2005, Moody's reported. The rating agency can be found on the Web at http://www.moodys.com.

Phoenix Capital Inc., a Denver-based provider of mortgage servicing brokerage and advisory services, has announced an alliance with Stewart Lender Services Inc. that makes Phoenix a single-source provider of fulfillment for mortgage servicing portfolios.Stewart will provide services such as pulling, imaging, labeling, bar coding, packaging, and shipping loan files; reorganizing files to meet a buyer's requirements; and inventorying documents. Files are shipped to the buyer, supported by file re-creation insurance to cover any losses that may occur in transit, Phoenix said. "Sellers can now rely on one entity for all their portfolio sale requirements," said Michael Lau, executive vice president of Phoenix Capital. "This spectrum of services will ensure support from the valuation and marketing of the portfolio to the consultation, negotiation, and execution of the Purchase and Sale Agreement." The companies can be found online at http://www.phnxcap.com and http://www.stewartlenderservices.com.

Fixed-income revenues at Bear Stearns & Co. plunged 88% in the company's third fiscal quarter because of rising residential subprime delinquencies and a lack of liquidity in the secondary market.Bear -- a major player in subprime mortgage-backed securities -- reported fixed-income revenues of $118 million for the quarter, compared with $945 million in the previous quarter. "Market conditions in both the mortgage and credit businesses were extremely challenging this quarter," the Wall Street giant said in a statement. Over the past few years, Bear has financed nonprime lenders and bought loans from many nonbanks as a way to secure a steady flow of product for its subprime securitization business. A few months ago, Bear closed down two hedge funds that had invested billions in subprime assets, only to later discover those assets were almost worthless. Bear Stearns can be found online at http://www.bearstearns.com.

Two classes of notes from Triaxx Funding High Grade I Ltd., which invests in residential mortgage-backed securities, have been placed on Rating Watch Negative by Fitch Ratings.The affected securities are classes C and D mezzanine floating-rate deferrable-interest notes. Triaxx invests in triple-A rated RMBS assets using proceeds raised by issuing notes and equity and using repo funding, Fitch said. The negative rating actions were attributed to "concerns about continued availability of repo funding with terms similar to those that are currently in place with respect to haircuts and funding rates," the rating agency said. "Credit quality of the underlying assets has remained stable, but the manager has deleveraged the structure because of the decline in price of these assets." Fitch can be found online at http://www.fitchratings.com.

Forty-five tranches from 11 U.S. collateralized debt obligations have been downgraded by Derivative Fitch, which cited exposure to trust preferred securities and other debt issued by mortgage lenders, real estate investment trusts, and homebuilders.The issuance amount of the affected tranches totals approximately $1.2 billion. Fitch also affirmed the ratings on $6.8 billion of notes from the same CDOs and two others. The rating agency attributed the downgrades to "rapid deterioration in the credit and liquidity profiles of a number of REITs, homebuilders, and financial institutions underlying these CDOs. In four cases, underlying issuers of trust preferred securities filed for bankruptcy protection." Those four are New Century Financial Corp., American Home Mortgage Investment Corp., Homebanc Corp., and First Magnus Financial Corp. Derivative Fitch Inc., a subsidiary of Fitch Ratings Ltd., can be found on the Web at http://www.derivativefitch.com.

Ginnie Mae has granted an extension to R&G Mortgage Corp. allowing it to continue servicing Ginnie mortgage pools until Oct. 9, according to R&G Financial Corp., the San Juan, Puerto Rico-based parent company of R&G Mortgage.However, R&G Mortgage may not issue additional Ginnie Mae-guaranteed mortgage-backed securities. R&G Mortgage has also received notice from Fannie Mae placing conditions and limitations on the company's selling and servicing relationship with Fannie. Fannie Mae also said it will require R&G Mortgage to sell its servicing portfolio to another Fannie-approved servicer if Fannie Mae does not approve an application by R&G Financial's banking subsidiary, R-G Premier Bank of Puerto Rico, to be a Fannie Mae seller/servicer. R&G reported in July that it was no longer able to originate loans insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs because of the company's failure to submit timely audited financial statements. R&G can be found on the Web at http://www.rgonline.com.