Servicing

Three classes from three Amresco Residential Securities Corp. transactions have been downgraded by Fitch Ratings.The downgrades were as follows: series 1998-1 group 1, class M-2F, from A to BBB; series 1998-3 group 1, class B-1F, from BBB to BB; and series 1999-1, class B, from BBB-minus to BB. The downgrades were attributed to a deterioration in the relationship between credit enhancement and loss expectations. The certificates are backed by conventional fixed- and adjustable-rate mortgage loans.

Ryan J. Marshall has been named to oversee the investment analysis desk of KKR Financial LLC, the San Francisco-based manager of KKR Financial Corp., a real estate investment trust.Mr. Marshall was most recently managing director and global head of fixed-income research at Morgan Stanley, and he was previously global head of credit research and head of securitized products trading at Morgan Stanley. KKR can be found on the Web at http://www.kkrfinancial.com.

NovaStar Financial Inc., Kansas City, Mo., has announced an agreement to buy approximately $940 million of nonconforming mortgage loans that it plans to include in an asset-backed securitization structured as a financing.The seller of the loans was not disclosed. NovaStar, a real estate investment trust, said it intends to "maintain flexibility" in structuring securitizations as either sales or financings. "This flexibility allows us to continue providing shareholders with the tax benefits associated with NovaStar's REIT status, while complying with certain income and asset tests to maintain our tax-advantaged structure," said Greg Metz, NovaStar's chief financial officer. "In order to satisfy these tests in a variety of interest rate environments, it may be necessary to periodically add additional real estate assets to our GAAP and tax balance sheets through securitizations treated as financings." The residential mortgage lender and portfolio investor can be found online at http://www.novastarmortgage.com.

Clayton Holdings has announced the sale of $127.5 million of stock through an initial public offering.The 7.5 million shares sold at $17 per share, at the high end of a projected range of $15-$17 per share. Clayton, based in Shelton, Conn., provides services to the mortgage-backed securities market. Clayton said it will use the funds raised in the IPO to pay down debt and redeem preferred shares. TA Associates, a private equity fund, retains a 45.7% stake in Clayton after the IPO. The offering was made through an underwriting syndicate led by William Blair & Co. as sole book-running manager and Piper Jaffray & Co. as co-lead manager.

Eleven classes from seven Morgan Stanley mortgage-backed security transactions have been downgraded by Fitch Ratings and one class has been placed on Rating Watch Negative.The downgrades were as follows: series 2001-AM1, class M-2, from A-plus to A-minus, and class B-1, from BB-minus to B; series 2001-NC3, class M-2, from A-plus to A-minus, and class B-1, from BBB-minus to BB; series 2002-AM1, class B-1, from BB to B-plus; series 2002-AM2, class B-1, from BB-plus to B-plus, and class B-2, from BB-plus to B-plus; series 2002-HE1, class B-2, from BBB-minus to BB-plus; series 2002-NC4, class B-2, from BBB-minus to BB-plus; and series 2002-OP1, class B-1, from BBB to BB-plus, and class B-2, from BBB-minus to BB. The rating on class B-2 of series 2002-HE2 was placed on Rating Watch Negative. In addition, Fitch affirmed the ratings on 308 classes in 54 Morgan Stanley deals. The negative rating actions were attributed to deterioration in the relationship between credit enhancement and loss expectations. The loans consist of fixed- and adjustable-rate mortgages extended to subprime borrowers, Fitch said. The rating agency can be found online at http://www.fitchratings.com.

RealtyTrac, an online foreclosure marketplace based in Irvine, Calif., has reported that the number of new properties in some stage of foreclosure rose 13% in February.The company's Monthly U.S. Foreclosure Market Report indicates that 117,259 new foreclosure properties were added to the rolls in February. "This is the third straight month the U.S. foreclosure rate has moved higher, and it's the second straight month new foreclosures have topped 100,000," said James J. Saccacio, RealtyTrac's chief executive officer. "However, several states, including California, Florida, Texas, and New York, reported a dip in foreclosures in February." The company said Georgia recorded the highest foreclosure rate of any state in February, jumping 28% (to 9,421 new foreclosures) from January's level and more than 100% from the level recorded a year earlier. RealtyTrac can be found online at http://www.realtytrac.com.

Standard & Poor's has announced that it is joining forces with MacroMarkets and Fiserv to publish the S&P/Case-Shiller Metro Area Home Price Indices.The indices, scheduled to launch in the second quarter, will include 10 individual metropolitan area indices and a weighted composite index of home prices, S&P said. The Chicago Mercantile Exchange will list futures and options contracts on the indices. The foundation of the new, tradable indices are the Fiserv Case-Shiller Indexes produced commercially by Case Shiller Weiss Inc. since 1991. (Fiserv bought CSW in 2002 to form Fiserv CSW.) "For the vast majority of Americans, their home is their largest and most valuable asset, and in a period of rising housing prices and increased concerns about a possible housing bubble, reliable information on their biggest asset is extremely important," said David Blitzer, managing director and chairman of S&P's Index Committee. The companies can be found online at http://www.standardandpoors.com, http://www.macromarkets.com, http://www.fiserv.com, and http://www.cme.com.

Standard & Poor's has announced the introduction of what it says is the first service using cash flow analysis and modeling to evaluate prices of European structured finance securities.The S&P Evaluated Pricing Service provides fund managers and securities firms with daily and intraday evaluations of the prices of securities -- initially asset- and mortgage-backed bonds -- based on collateral and cash flows, S&P said. "The rapid growth in securitization issuance in Europe in recent years has not been matched by the development of a liquid secondary market, and this has raised concerns about the transparency, reliability, and consistency of valuing many structured bonds," said Peter Jones, director of European securities evaluations at S&P. "Our new service provides an independent, rigorous, and credible answer for daily valuation and mark-to-market problems within this important but thinly traded market." S&P can be found online at http://www.standardandpoors.com.

The Federal Home Loan Bank of Cincinnati has reported earnings of $219.7 million for 2005, down 3.2% from the level of the previous year when it reaped $68.9 million in prepayment fees."We achieved solid financial results, posted near-record earnings, while fulfilling our housing mission," said David Hehman, president and chief executive of the Cincinnati bank. Excluding the advance prepayment fees in 2004, net income improved by $43.3 million in 2005 due to a rapid and continual rise in short-term interest rates, according to the unaudited earnings report. The bank recently announced that it is paying a first-quarter dividend of 5.75%. The Cincinnati FHLBank also reported that its mortgage purchase portfolio grew by 0.6% to $8.4 billion in 2005. The bank executed $1.72 billion in new mortgage purchase commitments, while principal paydowns totaled $1.70 billion. The FHLBank said it will file an audited financial report with the Securities and Exchange Commission by the end of March. The FHLBank can be found online at http://www.fhlbcin.com.

The Financial Accounting Standards Board has formally opened the door for mortgage companies to adopt "fair-value" accounting for mortgage servicing rights.Under the new guidance, Statement of Financial Accounting Standards No. 156, lenders will be required to initially account for the servicing asset on a fair-value basis when practical. Thereafter, they can either use the old "amortization method" or the fair-value method. FASB said the rule simplifies the accounting for servicing rights and makes it easier for servicers to offset changes in the value of MSRs with changes in the fair market value of instruments used to hedge those assets. "The Board specifically designed the statement to simplify and encourage more consistent accounting in this area," said FASB member Edward Trott. He said SFAS 156 is the latest in a series of projects aimed at reducing the complexity of using financial instruments to hedge servicing assets. The organization can be found online at http://www.fasb.org.