Servicing

Countrywide Financial Corp., is contemplating slashing its work force by 7,000 to 10,000 workers, according to industry officials close to the situation.If the job cuts become reality, it would be one of the largest layoffs in mortgage history -- outside of a bankruptcy filing. (The nation's largest lender employs about 60,000.) The company is also planning to take a multimillion-dollar writedown on its "held for sale" portfolio of mortgages, one source said. A company spokesman would not comment on specifics, but said the company has "always aligned its organization to best serve the needs of its customers and reflect the market and economic conditions in which we operate." He added that, "While as a matter of policy we don't comment on speculation, any changes to the Countrywide organization will reflect our ongoing strategy to align our business to the marketplace. The company's organizational strategy throughout this year has been consistent with that approach." Countrywide can be found online at http://www.countrywide.com.

Class B-4 of Harborview Mortgage Loan Trust Inc. series 2006-3 has been downgraded from BB to B by Fitch Ratings, and class B-3 has been placed on Rating Watch Negative.In addition, Fitch affirmed the ratings on three other classes in the transaction. 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 residential first liens.

Thirty more classes of mortgage-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 approximately $9 billion. The latest downgrades affect the following securities: 13 classes from two issues of Soundview Home Equity Loan Trust asset-backed certificates; nine classes from three issues of Asset Backed Securities Corp. mortgage pass-through certificates; and eight classes from three issues of J.P. Morgan 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."

House prices appreciated by only 0.1% in the second quarter, but rose at a 3.2% rate over the previous four quarters, which was still a 10-year low, according to a housing price index published by the Office of Federal Housing Enterprise Oversight."Prices in the second quarter of 2007 were 3.2% higher than they were in the same quarter of 2006, the lowest annual price change since the 1996-97 period," OFHEO said. OFHEO Director James Lockhart said the second quarter was marked by tighter credit policies, rising foreclosures, and weakening buyer demand. "Significant price declines appear localized in areas with weak economies or where price increases were dramatic during the housing boom," he said. OFHEO collects its pricing data from Fannie Mae and Freddie Mac, and it includes refinancings and home purchase transactions. OFHEO can be found at http://www.ofheo.gov.

Accredited Home Lenders of San Diego -- but for 43% less than it offered back in the spring.According to a statement issued by Accredited, Lone Star is willing to pay $8.50 a share for the subprime lender/servicer, compared with an original price of $15.10 (or $400 million). Based in Dallas, Lone Star had tried to back out of the original deal but was sued by Accredited. The subprime lender's management is encouraging its board to approve the new offer. In trading Friday, Accredited's shares were trading up 40% at almost $9 a share. The lender recently cut staff and stopped funding many new loans as a way to preserve capital. Among subprime lenders, it ranks 18th, according to the Quarterly Data Report. Accredited can be found online at http://www.accredhome.com.

H&R Block has conceded in its quarterly earnings statement what many had suspected in recent weeks: that a deal to sell Option One Mortgage Corp. to Cerberus Capital Management is in trouble.Kansas City, Mo.-based Block said certain closing conditions upon which the deal is contingent are not being met. Instead of a sale of the entire Irvine, Calif.-based Option One subsidiary, H&R Block said it is working on a deal to sell its servicing platform to Cerberus while Block contemplates "divesting or winding down" its loan origination business. Block executives said the company has already laid off some 615 Option One loan origination employees. About 400 remain on the staff. Block said it is "engaged in discussions" with Cerberus to modify terms of the proposed sale of Option One, which was negotiated before turmoil in the credit markets largely crippled the subprime mortgage origination business. Block said it is negotiating to waive a requirement that Option One fund $2 billion in loans within 60 days of closing and have a minimum of $8 billion in warehouse lines of credit. Block can be found on the Web at http://www.hrblock.com, and Option One can be found at http://www.optiononemortgage.com.

Three classes from Long Beach Mortgage Loan Trust series 2003-4 have been downgraded by Fitch Ratings.The downgrades were as follows: class M-5A, from BBB to BB-plus; class M-5F, from BBB to BB-plus; and class M-6, from BB-minus to CCC/DR1. Fitch also affirmed the rating on six other classes in the deal. The downgrades were attributed to a deterioration in the relationship between credit enhancement levels and loss expectations. The transaction consists of adjustable- and fixed-rate subprime loans backed by first- and second-lien mortgages or deeds of trust.

Thirty more classes of mortgage pass-through certificates in subprime securitizations by two issuers have been downgraded by Fitch Ratings as a result of changes to the rating agency's subprime loss forecasting assumptions.Fitch also affirmed the ratings on classes with outstanding balances of more than $2 billion. The latest downgrades affect the following securities: 20 classes from five Merrill Lynch Mortgage Investors issues and 10 classes from two Long Beach 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."

Ginnie Mae has announced that it will begin securitizing Department of Veterans Affairs guaranteed jumbo loans with balances above the $417,000 conforming loan limit starting Sept. 1.Currently, VA loans going into Ginnie Mae mortgage-backed securities cannot exceed the conforming loan limit. "We expect this change will expand the availability of low-cost financing and increase homeownership opportunities for America's veterans, particularly in high-cost areas, by encouraging lenders to make more VA loans," Ginnie executive vice president Michael Frenz said. Approximately 30% of the loans that back Ginnie MBS are VA-guaranteed loans. Ginnie Mae, a government-owned corporation within the Department of Housing and Urban Development, can be found online at http://www.ginniemae.gov.

Sen. Charles E. Schumer, D-N.Y., is calling on Countrywide Financial Corp. to stop steering customers into high-cost mortgages and to help its troubled subprime borrowers by waiving prepayment penalties and refinancing them into more affordable loans."I am calling on Countrywide -- as the nation's largest lender --- to bury its bad business practices and reverse some of the damage it has already inflicted on our housing market," the Senate Banking Committee member said. The New York senator referred to abusive lending practices reported in a New York Times article, which Countrywide says "contained numerous inaccuracies and 'facts' taken out of context." The Calabasas, Calif.-based lender said its business processes prohibit steering and that it does not pay its loan officers higher commissions for making subprime loans with prepayment penalties. The Office of Thrift Supervision has initiated a review of Countrywide's lending and servicing practices based on complaints by Countrywide borrowers that the Neighborhood Assistance Corporation of America brought to the regulator's attention. Countrywide can be found online at http://www.countrywide.com.