Servicing

Impac Mortgage Holdings, Irvine, Calif., a top-ranked nonprime lender, lost $153 million in the second quarter, citing higher delinquencies, deteriorating market conditions, and a large increase in its loan loss reserves.Last week the publicly traded real estate investment trust -- the subject of margin calls from its warehouse lenders -- suspended originations of alternative-A loans, which until recently accounted for most of its production. During the quarter Impac funded or bought $1.3 billion in mortgages, a 41% decline from the levels recorded in both the previous quarter and the second quarter of last year. Over the past two weeks its shares have traded as low as $0.95, compared with a 52-week high of almost $10. In the second quarter of 2006, it posted a $26 million profit. Impac, a mortgage REIT, can be found online at http://www.impaccompanies.com.

The senior unsecured debt of Thornburg Mortgage Inc. has been downgraded from Ba3 to B2 by Moody's Investors Service, and Thornburg's preferred stock has been downgraded from B2 to Caa1.The ratings remain under review for possible downgrade. "These rating actions reflect further deterioration in Thornburg's liquidity position due to significant funding and valuation volatility in the single-family mortgage market, even for the prime-quality assets in which Thornburg Mortgage invests," said Moody's analyst Brian Harris. Thornburg, a real estate investment trust, focuses on originating and investing in prime jumbo single-family mortgages, and Moody's said the REIT's access to the capital markets "continues to be constrained by dislocations in mortgage pricing in the jumbo mortgage market." Moody's can be found online at http://www.moodys.com.

Eleven certificates issued by Terwin Mortgage Trust have been placed on review for possible downgrade by Moody's Investors Service.The affected securities are as follows: series 2004-1HE, class B-3; series 2004-3HE, classes M-2, M-2-X, M-3, M-3-X, B-1, B-2, and B-3; series 2004-5HE, classes B-2 and B-3; and series 2004-13ALT, class M-3. "The actions are based on the analysis of the credit enhancement provided by subordination, overcollateralization, and excess spread relative to expected losses," Moody's said. Ten of the classes are backed by subprime fixed- and adjustable-rate mortgage loans. One class, from 2004-13ALT, is backed by alternative-A adjustable-rate mortgages.

The ratings on 12 tranches of mortgage-backed securities issued by Structured Asset Investment Loan Trust in 2004 have been placed on review for possible downgrade by Moody's Investors Service.The affected securities are as follows: series 2004-1, classes M5 and M6; series 2004-3, class M5; series 2004-4, classes M7 and M8; series 2004-5, class B; series 2004-7, class M7; series 2004-8, class M9; and series 2004-BNC1, classes M5, M6, M7, and B1. "The tranches being reviewed have experienced a decrease in available credit enhancement, and the recent pace of losses in each deal has eroded overcollateralization below its targeted level," Moody's said. The collateral backing each deal consists primarily of first-lien, subprime fixed- and adjustable-rate mortgage loans. Moody's can be found online at http://www.moodys.com.

Six classes of notes from American Home Mortgage Investment Trust series 2004-1 and series 2006-3 have been downgraded by Standard & Poor's Ratings Services.The downgrades were as follows: series 2004-1, class IV-M-3, from BBB to B; and series 2006-3, class IV-M-6, from A-minus to BBB-plus, class IV-M-7, from BBB-plus to BB, class IV-M-8, from BBB-plus to BB, class IV-M-9, from BBB-minus to B, and class IV-M-10, from BB to CCC. In addition, S&P placed class II-M-3 of series 2004-1 on Credit Watch with negative implications and affirmed the ratings on 285 classes from 16 transactions issued by American Home Mortgage Investment Trust and American Home Mortgage Assets Trust. The negative rating actions on series 2004-1 were attributed to recent losses that have caused a deterioration in credit support and reduced overcollateralization to below their respective targets. The downgrades affecting series 2006-3 reflect S&P's recently revised closed-end second-lien surveillance assumptions, which currently project losses of approximately $6.75 million on the delinquency pipeline, the rating agency reported. "We expect the transaction to realize these losses over the next six months, which will result in a continuous erosion of credit enhancement," S&P said. American Home Mortgage Investment Corp. filed for bankruptcy on Aug. 8, but its servicing operations remain open. S&P can be found online at http://www.standardandpoors.com.

Stockton, Calif., Detroit, and Las Vegas posted the three highest U.S. metropolitan foreclosure rates in the first half of 2007, according to RealtyTrac, an online foreclosure marketplace based in Irvine, Calif.The company's 2007 Midyear Metropolitan Foreclosure Market Report ranks the foreclosure rates of the nation's 100 largest metro areas. The foreclosure rates for the three cities were one filing for every 27 households in Stockton, one for every 29 households in Detroit, and one for every 31 households in Las Vegas, the company reported. "While foreclosure activity has skyrocketed over the past year in many cities, particularly in California, Ohio, and the Northeast, foreclosure activity seems to be subsiding in parts of Texas, South Carolina, and other states," said James J. Saccacio, RealtyTrac's chief executive officer. "Still, the overall trend is toward escalating foreclosure rates, with 82 of the top 100 metro areas reporting year-over-year increases in the number of homes affected by foreclosure." The rest of the top 10 cities were as follows: Riverside-San Bernardino, Calif.; Sacramento, Calif.; Denver; Miami; Bakersfield, Calif.; Memphis; and Cleveland. RealtyTrac can be found online at http://www.realtytrac.com.

Countrywide Home Loans, Calabasas, Calif., funded $39 billion in mortgages during July, a 6% gain from the level recorded a year earlier, but a 14% drop from that of the previous month.Figures released by the company also show that purchases by its capital markets group plummeted by 86% to just $508 million during the month. So far this year, Countrywide's capital markets group has bought $14.8 billion, compared with $44 billion for the same period last year, a 66% decline. Company president David Sambol said the lower volume "reflects our tighter lending guidelines that have significantly curtailed total production." Countrywide can be found on the Web at http://www.countrywide.com.

A number of investors, including builder KB Home's founder Eli Broad, have put a total $3 billion cash infusion into a closely watched Goldman Sachs "quantitative strategy fund" that has been pressured by the credit crunch sparked by subprime mortgage woes."Many funds employing quantitative strategies are currently under pressure," Goldman said, noting that -- in addition to the Global Equity Opportunities Fund that received the multibillion-dollar investment -- it has a couple of other funds in this category that have suffered. In addition to Mr. Broad, others who have invested in GEO include C.V. Starr & Co. Inc., a global investment firm with ties to AIG, and Perry Capital LLC, a private investment management firm founded by former Goldman equity trading executive Richard C. Perry.

The current mortgage market crisis is likely to far exceed that of the early 1990s because of surging defaults and foreclosures related to interest rate resets on adjustable-rate mortgages, according to Robert Dunn, president of Oxford Funding Corp., a Houston-based asset resolution company."During the mortgage crisis of the early 1990s, I personally managed the acquisition, restructure, and resale of over $750 million in secondary mortgage assets," Mr. Dunn said in a statement. "I expect that our current mortgage market crisis will dwarf what we saw back then for a number of reasons. We see defaults and foreclosures rising dramatically in the near future, as over $650 billion of loans to subprime borrowers are scheduled to reset at higher interest rates by 2009." Mr. Dunn also said the Federal Reserve "seems intent on raising interest rates to fight inflation, and we've seen before what a rising interest rate environment does to all debt markets, especially mortgages. As underwriting standards have also been tossed to the wind over the past few years, we feel a significant spillover of defaults to the alt-A market and even into the prime credit market is highly likely." Oxford Funding can be found online at http://www.oxfordfunding.com.

Freddie Mac said Tuesday that it will add liquidity to the alternative-A market by providing 90-day forward commitments on a negotiated basis to what it calls "experienced" lenders.A spokesman for the company said the loans will not be held on its balance sheet. "We'll facilitate their securitization with our guarantee," he said. In a statement, company senior vice president Paul Mullings said, "Freddie Mac continues to be an active force in the alt-A market," adding that it will accept reduced documentation loans "underwritten with appropriate credit risk offsets." Freddie's announcement comes a few days after its regulator denied Fannie Mae's request to increase its balance sheet in an effort to provide some liquidity to the nonprime market. Freddie Mac can be found on the Web at http://www.freddiemac.com.