Servicing

Eleven states had registered triple-digit increases in real estate owned filings (representing homes taken back by their lenders) on a year-over-year basis as of August, with California far in the lead, according to ForeclosureS.com, a Fair Oaks, Calif.-based investment advisory firm.As of August, California had recorded an increase of 471% in REO filings over the levels of the comparable period in 2006, the company reported. The rest of the top five states with triple-digit increases, according to ForeclosureS.com, were as follows: Arizona, up 217%; Nevada, up 192%; New Mexico, up 157%; and Florida, up 141%. The company also reported that the five states with the most people (on a per capita basis) losing their homes this year were: Michigan, with 11.1 foreclosures per 1,000 population; Nevada, 11.0 per 1,000; Georgia, 9.9 per 1,000; Colorado, 9.8 per 1,000; and Indiana, 8.8 per 1,000. The company can be found online at http://www.foreclosures.com.

Two classes of ACE mortgage pass-through certificates, series 2002-HE2, have been downgraded by Fitch Ratings.Class M-3 was downgraded from BBB-minus to B-minus/DR1, and class M-4 was downgraded from BB-plus to B-minus/DR1. Fitch also affirmed the ratings on two other classes in the transaction. The downgrades were attributed to deterioration in the relationship between credit enhancement and loss expectations. The collateral for the transaction consists of fixed- and adjustable-rate residential first-lien mortgage loans.

Two classes of PPT Asset-Backed Certificates LLC Trust series 2004-1 have been downgraded by Fitch Ratings.Class B-2 was downgraded from BBB to BB-plus, and class B-3 was downgraded from BBB-minus to B. Fitch also affirmed the ratings on four other classes in the transaction. The downgrades were attributed to deterioration in the relationship between credit enhancement and loss expectations. The underlying collateral of the deal consists of fixed-rate, seasoned, small-balance mortgage loans secured by first and second liens on residential properties.

Three classes of notes in Ballantyne Re PLC have been downgraded by Fitch Ratings because certain reserve funds backing the transaction have "material exposure" to subprime residential asset- and mortgage-backed securities that have experienced significant market declines.The downgrades were as follows: class A-1 floating-rate notes, from AA to A-plus; class B-1 subordinated notes, from BBB-plus to BB-plus; and class B-2 subordinated floating-rate notes, from BBB-plus to BB-plus. The ratings remain on Rating Watch Negative. The rating agency said interest payments to classes B-1 and B-2 were suspended under the terms of the indenture on Sept. 4. "The class A-1 notes were downgraded because Fitch believes the risk profile of the notes is no longer consistent with the AA rating category," Fitch said. "Similarly, classes B-1 and B-2 were downgraded because Fitch does not consider the suspension of interest to be consistent with an investment-grade rating." Ballantyne Re is a special-purpose company incorporated in Ireland.

In addition to the more than 200 additional classes of subprime mortgage-backed securities downgraded because of revised subprime loss assumptions (see item above), Fitch Ratings has also downgraded more than 90 additional classes of B&C MBS that it did not link to the changed assumptions.Fitch also affirmed the ratings on more than 120 classes from the same transactions. Among the MBS affected by the downgrades were: 52 classes from 14 issues of Credit Suisse First Boston Home Equity Asset Trust deals; 12 classes from five Option One issues; eight classes from five Asset Backed Securities Corp. issues; and eight classes from two Countrywide Asset-Backed Securitization Trust issues. The downgrades were attributed to deterioration in the relationship between credit enhancement and loss expectations.

More than 200 additional classes of subprime mortgage- and asset-backed securities have been downgraded by Fitch Ratings as a result of changes to its subprime loss forecasting assumptions.Fitch also affirmed the ratings on classes with outstanding balances of nearly $9 billion. Among the mortgage pass-through certificates affected by the latest downgrades were: 70 classes from nine Structured Asset Securities Corp. issues; 27 classes from two SACO issues; 23 classes from three Terwin issues; 21 classes from four Credit Suisse First Boston Home Equity Asset Trust issues; 19 classes from two Countrywide issues; 17 classes from one Fremont Home Loan Trust issue; and 15 classes from two GS Mortgage Securities Corp. issues. 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.

Anworth Mortgage Asset Corp., Santa Monica, Calif., has announced the recent sale of approximately $692 million (in face value) of mortgage-backed security holdings, resulting in a loss of about $21 million.The sales consisted of approximately $637 million of agency MBS and approximately $55 million of triple-A rated nonagency MBS, Anworth reported. "Given the higher rates [relative to agency MBS financings], limited liquidity, and increase uncertainty surrounding the company's borrowings relative to its agency MBS and nonagency MBS holdings, the proceeds from the company's MBS sales have [been] and will be used to reduce its outstanding repurchase agreement borrowings and reduce the company's financial leverage in the near term," the company said. Anworth, a mortgage real estate investment trust, can be found online at http://www.anworth.com.

Onshore/offshore business process outsourcer Zenta has launched a set of default management services to support residential mortgage servicers and attorneys.The services include early- and late-stage collections, assistance and recommendations for loss mitigation options, assurance of proper investor delinquency reporting, management of the foreclosure file from referral to sale of property, bankruptcy processing and management, claim filing, loss analysis, and default mortgage servicing consulting and training. Zenta can be found on the Web at http://www.zenta.com.

Like banks and thrifts, Fannie Mae and Freddie Mac are now bound by federal underwriting guidelines when they purchase subprime mortgages and private-label securitizations backed by subprime loans, according to the Office of Federal Housing Enterprise Oversight.OFHEO Director James Lockhart said the two government-sponsored enterprises have completed their implementation of the subprime guidance that federal banking regulators issued on June 29. The guidance requires lenders to qualify borrowers at the fully indexed rate and restricts stated-income loans and risk-layering features. Meanwhile, Treasury Under Secretary Robert Steel told a congressional panel last week that he is urging the two GSEs to develop loan products that can help refinance troubled subprime borrowers. He cited studies indicating that a large number of borrowers ended up in subprime loans when they could have qualified for a prime mortgage. "In those cases, the GSEs could help," Mr. Steel told the House Financial Services Committee. A Fannie Mae spokesman said, "Conversations are occurring. So we will see where they go."

IndyMac Bancorp, the nation's eighth-largest funder of residential loans, said Sept. 7 that it will cut 10% of its staff in coming months -- roughly 1,000 workers -- as it prepares to lose money in the current quarter.In a statement, IndyMac chief executive Mike Perry predicted that the company's loan production will fall by one-half in the fourth quarter, "although we are experiencing some pricing power on new loans such that our margins are improving." The Pasadena, Calif.-based IndyMac recently transformed its production from mostly alternative-A loans to mostly loans eligible for securitizing by the government-sponsored enterprises. Mr. Perry blamed "illiquidity in the secondary markets" for IndyMac's woes. He said the company will report third-quarter earnings of break-even to a loss of 50 cents a share. IndyMac Bancorp is a holding company of a federally insured depository.