Servicing

A newly enhanced index that ranks metropolitan statistical areas based on the risk of declining home prices indicates "a shift in risk toward Florida and California, as well as certain areas of the Southwest," according to PMI Mortgage Insurance Co., Walnut Creek, Calif.PMI said its U.S. Market Risk Index now features risk ranks that combine areas with consistent characteristics. The MSAs ranking highest on the index, with at least a 60% chance that home prices will decline over the next two years, are Riverside, Calif.; Phoenix; Las Vegas; and West Palm Beach, Fla. Five of the 11 MSAs facing a greater than 50% (but less than 60%) chance of price decline are in California (Los Angeles, Santa Ana, Oakland, Sacramento, and San Diego) and four are in Florida (Orlando, Fort Lauderdale, Miami, and Tampa), PMI reported. "Our new model gives more weight to the recent volatility of an area's price movements and is better suited for the vastly different market we are in today," said Mark F. Milner, chief risk officer of PMI Mortgage Insurance. "Our prior model, in contrast, was tuned to the rapidly appreciating market we were in from 2002 to 2006." PMI can be found online at http://www.pmigroup.com.

Members of the House Financial Services Committee are asking the Securities and Exchange Commission for guidance on restructuring troubled subprime loans in mortgage-backed securities so that servicers can prevent foreclosures.In a letter to the SEC, the committee members note that a lack of clarity is causing some servicers to refrain from making loan modifications for "fear" of violating the Financial Accounting Standard Board's servicing rule (FAS 140). "Does FAS 140 clearly address whether a loan held in trust can be modified when default is reasonably foreseeable or only once a delinquency or default has already occurred?" the June 15 letter inquires. "If not, can it be clarified in a way that will benefit both borrowers and investors?" Separately, the SEC, federal banking agencies, the Internal Revenue Service, the Big Four accounting firms, and mortgage industry officials are scheduled to meet with FASB members and staff on June 22 to discuss similar servicing issues involving loan modifications.

Three classes of certificates from two transactions issued by Merrill Lynch Mortgage Investors Trust in 2006 have been placed on review for possible downgrade by Moody's Investors Service.The affected securities are class B-5 of series 2006-SL1 and classes B-1 and B-2 of series 2006-SL2. "The projected pipeline loss has increased over the past few months and may affect the credit support for these certificates," Moody's said. Both transactions are backed by closed-end second-lien loans.

Eight certificates from four transactions issued by Bear Stearns Mortgage Funding Trust have been placed on review for possible downgrade by Moody's Investors Service.The affected securities are as follows: series 2006-SL1, classes M-6, B-1, B-2, B-3, and B-4; series 2006-SL2, class B-4; series 2006-SL3, class B-4; and series 2006-SL4, class B-4. "The projected pipeline loss has increased over the past few months and may affect the credit support for these certificates," Moody's said. The transactions are backed by second-lien loans.

Two classes from IndyMac Home Equity Mortgage Loan Asset-Backed Trust INDS 2006-A have been downgraded by Moody's Investors Service and placed on review for possible further downgrade.Class B-2 of series INDS 2006-A was downgraded from Ba1 to Caa1, and class B-3 was downgraded from Ba2 to Caa2. In addition, classes B-1, B-2, and B-3 of series INDS 2006-1 and classes M-8, M-9, and M-10 of series INDS 2006-A have been placed on review for possible downgrade. The negative rating actions were based on credit enhancement levels (including excess spread) that may be too low to maintain current rating levels in view of projected losses, Moody's said. The transaction is backed by second-lien loans.

Three classes of Structured Asset Securities Corp. Trust series 2006-ARS1 have been downgraded by Moody's Investors Service and maintained on review for possible further downgrade.The downgrades were as follows: class M-9, from Baa3 to B3; class B-1, from Ba1 to Caa1; and class B-2, from Ba2 to Caa3. In addition, classes M-4, M-5, M-6, M-7, and M-8 have been placed on review for possible downgrade. "These actions are based on the analysis of the credit enhancement provided by subordination, overcollateralization, and excess spread relative to the expected loss," Moody's said. The transaction is backed by closed-end second-lien loans.

Five certificates from two transactions issued by CSFB Home Equity Mortgage Trust in 2006 have been downgraded and placed on review for possible further downgrade by Moody's Investors Service.The downgrades were as follows: CSFB Home Equity Mortgage Trust 2006-3, class M-10, from Baa3 to B3, class B-1, from Ba1 to Caa1, and class B-2, from Ba2 to Caa2; and CSFB Home Equity Mortgage Trust 2006-4, class B-1, from Ba1 to Caa1, and class B-2, from Ba2 to Caa2. In addition, Moody's placed 10 classes from three CSFB transactions on review for possible downgrade. The negative rating actions were based on the fact that the bonds' credit enhancement levels (including excess spread) may be too low in view of projected losses, Moody's said. The transactions are backed by second-lien loans.

Sixteen certificates from deals issued by SACO I Trust in 2006 have been downgraded and maintained on review for possible further downgrade by Moody's Investors Service.Moody's also placed 29 certificates from seven SACO transactions on review for possible downgrade, the rating agency said. The negative rating actions were based on the fact that the transactions "have seen recent losses that have exceeded the excess spread available, thereby depleting the overcollateralization," Moody's said. The deals are backed by closed-end second-lien loans. The rating agency can be found on the Web at http://www.moodys.com.

Class IV-M-5 of American Home Mortgage Investment Trust series 2006-2 has been placed on review for possible downgrade by Moody's Investors Service.The action was based on the fact that the bonds' credit enhancement levels (including excess spread) may be too low in view of projected losses, Moody's said. The transaction is backed by fixed-rate second-lien loans.

Class B-1 of First Franklin Mortgage Loan Trust series 2006-FFB has been placed on review for possible downgrade by Moody's Investors Service.The action was based on the fact that the credit enhancement levels may be too low to cover projected losses, the rating agency said. The securitization is backed by closed-end subprime second-lien loans.