Servicing

The CAM1 structured finance rating of C-BASS Investment Management LLC, an asset manager of collateralized debt obligations, has been placed on Rating Watch Negative by Derivative Fitch.Fitch said the rating action stemmed from the recent announcement by Radian Group Inc. and MGIC Investment Corp. regarding "liquidity challenges" faced by CIM's parent company, Credit-Based Asset Servicing and Securitization LLC. Fitch rates CDO asset managers by asset class on a scale of 1 to 5, with 1 being the highest rating. Derivative Fitch Inc., a subsidiary of Fitch Ratings Ltd., can be found on the Web at http://www.derivativefitch.com.

Citing the poor performance of Option One Mortgage Corp., Fitch Ratings has downgraded the long-term issuer default ratings of Block Financial Corp. and H&R Block Inc. from A to A-minus and placed them on Rating Watch Negative.In addition, Block Financial's short-term IDR was downgraded from F1 to F2, and its senior unsecured debt and commercial paper ratings were also downgraded. Fitch said the rating actions stemmed not only from the performance of Block's Option One subsidiary, but also from a shift in the rating agency's analytical focus from risk-adjusted capitalization to debt service and cash flow coverage. Option One's deteriorating performance led to a "significant increase" in debt and a decline in equity, Fitch said. It estimated that leverage had increased from about 1.3 times in fiscal 2006 to 2.6 times in fiscal 2007 and that debt-to-total-capitalization rose from 30% to 60% over the same period. Fitch can be found online at http://www.fitchratings.com.

The combined earnings of the 12 Federal Home Loan Banks fell 2.8% to $628 million in the second quarter from the level recorded a year earlier, according to a preliminary report by the FHLBanks' Office of Finance.The second-quarter report also shows that assets grew by only 2.0%, to $1.02 trillion, and advances were flat, at $640 billion, over the previous four quarters. The FHLBanks are major investors in Fannie Mae and Freddie Mac mortgage-backed securities, and they are allowed to invest in subprime MBS. "Each FHLBank believes it has limited exposure to subprime loans due to its business model, conservative policies pertaining to advances collateral and investments, and low credit risk due to the design of its mortgage loan programs," the Office of Finance said. In the first quarter, the FHLBanks held $75.5 billion in private-label securities, which are generally rated triple-A. A second-quarter update of their private-label MBS holdings is not yet available. The Office of Finance can be found online at http://www.fhlb-of.com.

Moody's has also refined its approach to analyzing securitizations of payment-option adjustable-rate mortgages.The methodology revisions, stemming from the weaker housing and mortgage markets, also refine the rating agency's credit risk analysis of different option ARM products, Moody's said. "The updated option ARM methodology is expected to increase our loss estimates by up to 20% and Aaa loss estimates by 10% to 40%," Moody's said. The agency said the updated methodology refines its analysis of a loan's negative amortization potential by varying loss estimates based on the difference between a loan's fully indexed interest payment and its minimum payment. In addition, Moody's is enhancing its analysis of how a borrower was qualified by varying loss projections based on the difference between a loan's fully indexed payment and the payment at which the borrower was qualified. Moody's has also increased loss projections for option ARMs in cases where a borrower's income was not verified.

Moody's Investors Service has announced refinements to its methodology for rating residential mortgage securitizations backed by alternative-A mortgage loans.The rating agency said the revisions address the poor performance of subprime-like loans, low- and no-equity loans, and low- and no-documentation loans present in certain alt-A transactions securitized in 2006. Moody's said its increases in loss estimates are projected to range from 10% for stronger alt-A pools to more than 100% for weaker ones. Higher loss estimates for the weakest 5% to 10% of alt-A loans are projected to account for 25% to 50% of the increase in loss estimates. "Actual performance of weaker alt-A loans has in many cases been comparable to stronger subprime performance, signaling that underwriting standards were likely closer to subprime guidelines," said Moody's senior credit officer Marjan Riggi. "Absent strong compensating factors, we will model these loans as subprime loans." Moody's can be found online at http://www.moodys.com.

Fannie Mae plans to provide third-party origination statistics for "substantially all" its mortgage-backed securities beginning with September issuances.For each new-issue MBS, Fannie plans to provide the following: the unpaid principal balance percentage of the underlying collateral originated by a third party and a table with the number of loans, percentage of UPB, and aggregated UPB originated by retail, broker, and correspondent lenders. "By year-end, the company will expand the at-issuance TPO statistics to include all single-family MBS and will provide the same information for ongoing disclosure," the government-sponsored enterprise said. Fannie Mae can be found online at http://www.fanniemae.com.

Oxford Funding Corp., Houston, has announced an agreement with an unnamed major U.S. mortgage lender under which Oxford will acquire a $3 million portfolio of underperforming loans at a substantial discount to market.Ronald Redd, Oxford's chief executive officer, said Oxford hopes to make additional portfolio acquisitions from the lender over the next several months. Citing the subprime crisis, Oxford said it plans to acquire performing, underperforming, and nonperforming loans that it will "restructure and rehabilitate." The company can be found on the Web at http://www.oxfordfunding.com.

Class M10 of Structured Asset Securities Corp. residential mortgage-backed certificates, series 2006-7, has been placed on Rating Watch Negative by Fitch Ratings.In addition, Fitch affirmed the ratings on 10 classes from the SASCO transaction. The negative rating action was attributed to "signs of increasing credit risk."

The commercial mortgage-backed securities primary servicer rating of Washington Mutual Bank has been lowered from CPS2-minus to CPS3-plus by Fitch Ratings.WaMu Bank's master servicer rating of CMS3 and its special servicer rating of CSS3 were affirmed, the rating agency said. The downgrade was attributed to the company's high employee and management turnover rates. Among other factors cited were higher-than-average real estate tax penalties in 2006 and the "relatively limited" CMBS servicing experience of the bank's senior management team. Fitch rates commercial mortgage servicers on a scale of 1 to 5, with 1 being the highest rating. Fitch can be found on the Web at http://www.fitchratings.com.

CU Members Mortgage, Fort Worth, Texas, has announced an exclusive relationship with the Association of Vermont Credit Unions to provide mortgage origination and servicing to the AVCU's 30 member credit unions."Our goal is to provide the support credit unions need to increase their market share of home loans, and CU Members Mortgage has the capabilities and experience to work with credit unions to increase homeownership among their members while creating new income for the credit unions' financial viability," said Bryan Kent, vice president/LSC executive at the AVCU. The mortgage company can be found on the Web at http://www.cumembers.com, and the association can be found at http://www.vermontcreditunions.com.