Servicing

Nine classes of United Companies Financial Corp.'s manufactured housing deals have been downgraded by Fitch Ratings.The downgrades are as follows: series 1997-3, class A-4, from BBB to BB-plus; series 1997-4, class A-4, from A-minus to BBB-plus; series 1998-1, class A-3, from AA-minus to A-minus; series 1998-2, class A-3, from AA to A-minus, class A-4, from BB to B-plus, and class M-1, from B-minus to CCC; and series 1998-3, class A-1, from BB to B-plus, class M-1, from B to CCC, and class M-2, from CCC to CC. In addition, Fitch affirmed the ratings on seven classes from five UCFC securitizations. The downgrades were attributed to deterioration in the relationship between credit enhancement and expected losses. Fitch can be found online at http://www.fitchratings.com.

Class M-3 of Structured Asset Securities Corp. residential mortgage-backed certificates, series 2002-BC1, has been downgraded from BBB to BB by Fitch Ratings.In addition, Fitch upgraded four classes from two other SASCO issues and affirmed the ratings on 43 classes from 11 issues. The downgrade was attributed to a deterioration in the relationship between credit enhancement and expected losses. "The transaction has experienced monthly losses that have exceeded excess spread in six out of the last 12 months," Fitch reported.

Four classes of securities issued by E*Trade ABS CDO I Ltd., a collateralized debt obligation supported in part by residential and commercial mortgage-backed securities, have been downgraded by Fitch Ratings.The downgrades are as follows: classes C-1 and C-2, from CCC to CC; and $12.50 million of preference shares and approximately $4.97 million of composite securities, from CC to C. The rating agency said the downgrade of the class C notes was due to a low projected principal recovery for the notes. The downgrade of the preference shares "reflects the likelihood that there will not be future distributions to this class," Fitch said, and the downgrade of the composite securities was based on the likelihood that they will be limited to interest distributions from class C-1. The CDO is supported by RMBS, CMBS, CDOs, and asset-backed securities. Fitch can be found online at http://www.fitchratings.com.

CapitalSource Inc., a real estate investment trust based in Chevy Chase, Md., has reported changes to its balance sheet of Dec. 31, 2005, involving the accounting treatment of about $2.3 billion of mortgage-backed securities and about $2.2 billion of related repurchase agreements.The REIT said the accounting treatment was based on investments simultaneously financed with repurchase agreements with the same counterparty. But the company said it has determined that approximately $323.4 million of the MBS were not acquired from and financed with the same counterparty. Therefore, it has recorded them as assets on its Dec. 31 balance sheet, and approximately $311.3 million of associated repurchase financing has been recorded as a liability, CapitalSource reported. The company said it plans eventually to record "substantially all" its MBS on its balance sheet as assets and all associated repurchase agreements as liabilities. CapitalSource also announced that it has received commitments for a $520 million unsecured credit facility, with Wachovia Bank NA as agent and Wachovia Capital Markets LLC as lead arranger for a syndicate of 11 financial institutions. The REIT can be found online at http://www.capitalsource.com.

Prepayment rates for conventional 30-year fixed-rate mortgages in agency mortgage-backed securities recorded "modest gains" in the February reporting period, according to Bear Stearns & Co.Overall speeds for 30-year collateral came in at a constant prepayment rate of 11.2 CPR for Fannie Maes, up 0.5 CPR from January's level, and 9.7 CPR for Freddie Macs, up 0.7 CPR, Bear Stearns analysts Dale Westhoff and V. S. Srinivasan reported. Prepayments on 30-year Freddie collateral rose a little more than for corresponding Fannie collateral, but continued to be "marginally slower" across most coupons and vintages, the analysts said. Meanwhile, overall speeds for 30-year Ginnie Mae collateral held fairly steady, with discount coupons rising by over 10% and premiums recording comparable declines. "The March prepayment report should reflect the onset of the spring/summer increase in housing turnover activity, which should be a barometer for the housing market and expectation for discount speeds through the summer months," the analysts said. They predicted an increase of over 25% in March prepayments. Bear Stearns can be found online at http://www.bearstearns.com.

Three classes of securities issued by Independence II CDO Ltd., a collateralized debt obligation, have been downgraded by Fitch Ratings.The downgrades were as follows: class A notes, from AA-minus to A-minus; class B notes, from BB-minus to CCC; and class C notes, from CCC to C. Fitch attributed the downgrades to a deterioration of collateral quality and "the compression of the spread between the interest from the collateral and interest paid on the notes." Independence II is composed of approximately 42.3% commercial mortgage-backed securities, 34.5% residential MBS, 16.2% asset-backed securities, 6.4% CDOs, and 0.6% real estate investment trusts.

Three classes of notes issued by Independence I CDO Ltd., a collateralized debt obligation partly composed of residential and commercial mortgage-backed securities, have been downgraded by Fitch Ratings.The downgrades were as follows: class A, from AA to A; class B, from BB to B; and class C, from CC to C. Fitch attributed the downgrades to deteriorating collateral. Assets rated BBB-minus or lower represented approximately 26.8% of the portfolio as of the latest trustee report, Fitch said, adding that "mezzanine and subordinate tranches from underperforming manufactured housing securitizations have taken principal writedowns and, in Fitch's opinion, over 6.5% in collateral that was considered performing from the previous review is now considered distressed." The CDO consists of approximately 44% asset-backed securities, 30.9% CMBS, 16.1% RMBS, and 9% CDOs, the rating agency said.

Freddie Mac's board of directors has announced a dividend of $0.47 per share on the corporation's voting common stock for the first quarter, the same as in the fourth quarter.The board also declared the following preferred stock dividends per share: $0.50 on its 1996 and 1998 variable-rate stock; $0.7675 on its 6.14% stock; $0.72625 on its 1997, 2001, and 2002 5.81% stock; $0.625 on its 5% stock; $0.6375 on its 1998 and 1999 5.1% stock; $0.6625 on its 5.3% stock; $0.72375 on its 5.79% stock; $0.4475 on its 1999 variable-rate stock; $0.49125 on its January 2001 variable-rate stock; $0.46511 on its March 2001 variable-rate stock; $0.48125 on its May 2001 variable-rate stock; $0.75 on its 6% stock; and $0.7125 on its 5.7% stock. The dividends will be payable on March 31 to stockholders of record as of March 10.

CDS IndexCo LLC and Markit Group Ltd., both based in New York, have announced the launch of CMBX, a synthetic index of U.S. commercial mortgage-backed securities.The index consists of five subindices based on the 25 most recent CMBS deals. To qualify for inclusion in the index, a deal must total at least $700 million and an issuer must have ratings from at least two of the following rating agencies: Moody's Investors Service, Fitch Ratings, and Standard & Poor's Ratings Services. CDS IndexCo is a consortium of 16 investment banks licensed as market makers in the Dow Jones CDX indices, and Markit Group is a provider of independent mark-to-market pricing and valuations. The market-makers in the new CMBX index are Bank of America, Bear Stearns, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Lehman Brothers, Merrill Lynch, Morgan Stanley, Nomura International, RBS, Greenwich Capital, UBS, and Wachovia. Markit Group can be found online at http://www.markit.com.

The Federal Home Loan Bank of Seattle has posted a $1.7 million profit for 2005 and says it "no longer anticipates a loss in 2006" as the bank continues to recover from a plunge into the mortgage purchase business and rebuilds its advance business.The Seattle bank reported a net loss of $9.1 million loss in the fourth quarter after taking an $11.8 million loss due to restructuring. "We've significantly grown our advance volumes and we have reduced out risk profile, even though we incurred some costs in the process," said Seattle FHLBank president James Gilleran. "Now, we believe we have positioned ourselves to strengthen our earnings growth and our profitability." During 2005, advance borrowing at the FHLBank grew by 44%, to $21.4 billion as of Dec. 30. The bank also reduced its mortgage purchase portfolio by $3.2 billion, to $7.2 billion as of year-end. The Seattle bank is still carrying $360 million in unrealized losses, however, due to mismatches between the cash flows of its short-term and long-term assets and liabilities. These mismatches "will continue to depress earnings in 2006 and to a lesser extent in future years," the bank said.