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Congressionally chartered mortgage giant Freddie Mac says its second-quarter earnings fell 45% to $764 million, blaming the performance on higher credit losses caused by rising loan foreclosures.In a statement, the company said the credit losses reflect "credit deterioration on 2006 and 2007 loan originations," citing "transition rates from delinquency to foreclosure and higher loan loss severities from slower home price appreciation and higher unpaid principal balances." Freddie's revenue was flat compared with that of a year earlier, but increased fourfold from revenue in the first quarter, a period in which Wall Street was still buying subprime loans. In the second quarter, many Street firms either stopped buying altogether or slowed their purchases to a trickle, sending lenders back into the conventional market. Even though Freddie's earnings fell in the quarter, its management and guarantee income increased 22% from that of the same period last year. After the earnings announcement, the company's stock had fallen approximately 4.5% as of midday Thursday. Freddie can be found online at http://www.freddiemac.com.

Forty-six classes of mortgage pass-through certificates in subprime securitizations by five 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 nearly $5 billion. Among the downgrades were the following securities: 18 classes from three IndyMac ABS Inc. issues; 11 classes from one GE-WMC Mortgage Securities LLC issue; nine classes from two Terwin Mortgage Trust issues; six classes from three Asset Backed Funding Corp. issues; and two classes from one GS Mortgage Securities Corp. issue. 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 Ratings has downgraded the issuer default ratings of six homebuilders -- Centex Corp., Hovnanian Enterprises Inc., Lennar Corp., Meritage Homes Corp., M/I Homes Inc., and Standard Pacific Corp. -- and revised the rating outlook from stable to negative for Centex, Lennar, and Meritage.The rating outlook remains negative for the other three companies as well. The IDR downgrades were as follows: Centex, from BBB-plus to BBB; Hovnanian, from BB-plus to BB-minus; Lennar, from BBB-plus to BBB; Meritage, from BB to BB-minus; M/I Homes, from BB to BB-minus; and Standard Pacific, from BB to BB-minus. Fitch also downgraded other ratings for the six homebuilders. In addition, the rating agency revised from stable to negative the rating outlooks of four other homebuilders -- D.R. Horton Inc., KB Home, MDC Holdings Inc., and Ryland Group Inc. -- while affirming their IDRs. Fitch said the new ratings and outlooks reflect its expectations for the housing market as well as company-specific performance. The rating agency said it expects the housing contraction to be "more severe" than originally anticipated for the rest of 2007, due chiefly to "tighter mortgage standards and disrupted mortgage markets," and that 2008 is likely to be "another challenging year for this sector." Fitch can be found on the Web at http://www.fitchratings.com.

The banking industry's increased exposure to mortgage-backed securities was a contributing factor to the recent liquidity disruptions in financial markets, according to a special report by A.M. Best Co., Oldwick, N.J.Volatile interest rates and greater MBS exposure may lead to lower asset valuations for banks, A.M. Best said. "Anticipation of this has contributed to recent liquidity disruptions in the financial markets, which have forced the Federal Reserve to reassert its status as lender of last resort to assure stability in the U.S. banking system," the company said. The report cites various factors contributing to the disruptions, including greater exposure to MBS stemming from "an effort to enhance yield, which has also added risk to their balance sheets." Among the other factors is the fact that the banking industry has "taken advantage of additional funding options" in recent years, "relying less on the securities portfolio for liquidity, which has led to a steady decline in highly liquid Treasury holdings," according to A.M. Best. The company can be found online at http://www.ambest.com.

Five classes of notes issued by Oceanview CBO I Ltd. have been downgraded by Fitch Ratings, and three of the classes have been removed from Rating Watch Negative.The downgrades were as follows: class A-1B, from AAA to BB-minus; class A-2, from BB-minus to CCC/DR4; class B-F, from CC/DR6 to C/DR6; class B-V, from CC/DR6 to C/DR6; and "combination securities," from AAA to BB-minus. Classes A-2, B-F, and B-V were removed from Rating Watch Negative. The rating on one other class in the deal was affirmed. Fitch attributed the downgrades to the deteriorating credit quality of the Oceanview portfolio. The transaction, a collateralized debt obligation managed by Deerfield Capital Management, is supported by a portfolio of residential mortgage-backed securities, other CDOs, commercial MBS, asset-backed securities, and corporate debt, according to Fitch. The rating agency can be found online at http://www.fitchratings.com.

First American LoanPerformance, San Francisco, has announced that its mortgage securities database now contains loan-level information on more than $2 trillion worth of active nonagency securitized mortgages.That represents 85% of all nonagency mortgage securities, the company said. "This important milestone truly highlights the unprecedented growth experienced by the nonagency mortgage-backed securities market in recent years," said Dan Feshbach, president and chief executive officer of First American LoanPerformance. The company said its mortgage securities database, which provides a 16-year historical perspective on the nonagency securities market, is the industry's largest repository of nonagency MBS and asset-backed securities data. The company can be found online at http://www.loanperformance.com.

The National Foundation for Credit Counseling, Silver Spring, Md., has announced that it is stepping up its counseling and education efforts across the country to help homeowners avoid foreclosure.The NFCC, which boasts a network of nonprofit, community-based agencies with nearly 1,000 offices, said consumers can receive immediate assistance by calling its toll-free hotline at 866-557-2227. The group said the number of foreclosed homes surged by 58% in the first six months of 2007, representing approximately 573,400 homes in danger. The organization can be found online at http://www.nfcc.org.

Two classes of notes issued by Pacific Coast CDO Ltd. have been downgraded by Fitch Ratings and removed from Rating Watch Negative.The class A notes were downgraded from AA to A, and the class B notes were downgraded from B/DR4 to CCC/DR4. Pacific Coast is a collateralized debt obligation that consists of 46% residential mortgage-backed securities, 20% commercial MBS, 19% asset-backed securities, 13% other CDOs, and 3% corporate bonds. The rating agency cited a continued decline in overcolllateralization, a drop in interest coverage, and the use of principal proceeds to pay interest as factors in the downgrades.

Three classes of notes issued by Glacier Funding CDO III, a collateralized debt obligation that includes mortgage-backed securities, have been downgraded by Fitch Ratings.The downgrades were as follows: class B notes, from AA to A; class C notes, from BBB to BB; and class D notes, from BB-plus to B (and removed from Rating Watch Negative). Fitch also affirmed the ratings on two other classes in the CDO. "Fitch's rating actions reflect the significant collateral deterioration within the portfolio, specifically subprime residential mortgage-backed securities, since the last rating action on March 13, 2007," the rating agency said. "Further, Glacier III's portfolio contains a sizable exposure (39%) to subprime [residential MBS] of 2005, 2006, and 2007 vintages, which are experiencing higher levels of delinquencies and defaults."

Three classes of notes issued by Glacier Funding CDO II, a collateralized debt obligation that includes mortgage-backed securities, have been downgraded by Fitch Ratings.The downgrades were as follows: class B notes, from AA to A; class C notes, from BBB to BB (and removed from Rating Watch Negative); and class D notes, from BB to B (and removed from Rating Watch Negative). Fitch also affirmed the ratings on two other classes in the CDO. "Fitch's rating actions reflect the significant collateral deterioration within the portfolio, specifically subprime residential mortgage-backed securities, since the last rating action on March 13, 2007," the rating agency said.