Servicing

Class M-2 of American Residential HELT series 1998-1 has been downgraded from A-minus to BBB by Fitch Ratings, and class B of the deal has been downgraded from CCC to C.Fitch also affirmed the AA rating on class M-1 in the transaction. The downgrades stemmed from concerns about the adequacy of credit enhancement in the light of declining collateral performance, the rating agency said. Fitch can be found online at http://www.fitchratings.com.

Residential Capital Corp., Minneapolis, has announced the closing of a $4 billion private offering of senior notes.The debt was issued in three parts: $1 billion of floating-rate notes due 2007; $2.5 billion of 6.375% notes due 2010; and $500 million of 6.875% notes due 2015. ResCap said it plans to use the net proceeds from the offering to repay debt owed to its parent company, General Motors Acceptance Corp., and for general corporate purposes. GMAC recently established ResCap as a holding company and transferred to it the ownership of GMAC Mortgage Corp. and Residential Funding Corp. GMAC said the move would provide added operational and financial flexibility and improve the liquidity of the operations.

Class BF of Bear Stearns Asset Backed Securities Inc. series 1999-2 has been downgraded from B2 to Ca by Moody's Investors Service.Moody's said the securitization is backed by fixed-rate and adjustable-rate subprime mortgage loans that have multiple originators, including ContiMortgage Corp., Amresco Residential Mortgage Corp., and Provident Funding Associates LP. Class BF, the subordinate fixed-rate certificate, was downgraded because the transaction has taken "significant losses" -- the fixed-rate pool had realized cumulative losses of 6.41% as of May 25 -- that have gradually eroded the overcollateralization, the rating agency said. Moody's can be found online at http://www.moodys.com.

KKR Financial Corp., a San Francisco-based specialty financing company that invests in mortgage-related assets among others, has priced an initial public offering of approximately 33.33 million shares of common stock at $24 per share.The offering included 28,750 shares being sold by existing stockholders. The company's shares began trading June 24 on the New York Stock Exchange under the ticker symbol "KFN." KKR said it has granted the underwriters an option to buy up to 4.17 million additional shares to cover any overallotments. The joint book-running managers of the offering are Citigroup Global Markets; Bear, Stearns & Co.; Credit Suisse First Boston; Lehman Brothers; J.P. Morgan Securities; and Friedman, Billings, Ramsey & Co.

The Federal Home Loan Bank of Seattle has reported receiving regulatory approval for a capital plan amendment that will expand the ability of its members to access Seattle FHLBank funding based on their stock holdings.The FHLBank said its board of directors is expected to consider the amendment at its June 30-July 1 meeting, after which the capital adjustment would likely be accessible to members beginning in July. The Seattle FHLBank said the capital plan change could expand members' capacity for new advance borrowings by approximately $14.3 billion (based on stock already invested in the bank) without requiring members to buy additional FHLBank stock. Under the amended plan, Seattle FHLBank members can use available "membership stock" (which must be purchased to participate in the bank cooperative) to support advances from the bank. The available membership stock may be accessed once all the member's excess class B(1) and class B(2) stock has been used. Before the amendment, the membership stock requirement portion of a member's stock holdings could not be used toward securing advances, the FHLBank said.

RealtyTrac, an online foreclosure marketplace based in Irvine, Calif., has reported that the number of new properties in some stage of foreclosure decreased 2.5% nationwide in May.The company's Monthly U.S. Foreclosure Market Report indicates that 62,432 new foreclosure properties were added to the rolls in May, compared with 64,057 in April. "Although there were significant monthly fluctuations in some states, May's foreclosure numbers should help curb any immediate concerns of a nationwide real estate bubble," said James J. Saccacio, RealtyTrac's chief executive officer. The company said new reported foreclosures in New Mexico soared in May, giving it the nation's highest foreclosure rate. One property was in foreclosure in New Mexico for every 554 households, more than three times the national rate of one in 1,853, the company reported. RealtyTrac can be found online at http://www.realtytrac.com.

The rating of class B-1 of Terwin Mortgage Trust series 2004-EQR1 has been placed under review for possible downgrade by Moody's Investors Service.The rating action was based on the worse-than-expected performance of the underlying mortgage pool as well as the deterioration of credit enhancement in relation to expected losses, Moody's said. The collateral for the transaction is nonperforming mortgage loans, which are typically defined as loans that are delinquent by 90 days or more, are subject to bankruptcy or foreclosure proceedings, or are held as real-estate-owned properties.

Four classes of Truman Capital Mortgage Loan Trust mortgage-backed securities have been placed on review for possible downgrade by Moody's Investors Service.The affected classes are as follows: series 2002-1, classes M-1, M-2, and B; and series 2002-2, class B. The rating actions were attributed to worse-than-expected performance by the underlying pool of mortgage loans. The underlying collateral consists of subprime and re-performing residential mortgage loans. The latter consist primarily of previously delinquent and defaulted loans that had made at least three out of four of the most recent regular scheduled or bankruptcy plan payments, Moody's explained.

Class BF of Bear Stearns asset-backed certificates series 1999-2 group 1 has been downgraded from CCC to C by Fitch Ratings.In addition, Fitch affirmed the ratings on nine other classes in the securitization. The downgrade was attributed to poor collateral performance, losses incurred, and loss expectations in relation to credit support levels. Series 1999-2 is backed by fixed-rate (group 1) and adjustable-rate (group 2) loans originated by Conseco Finance Corp., Amresco Residential Mortgage Corp., and five other originators, the rating agency said. Fitch can be found on the Web at http://www.fitchratings.com.

Meanwhile, Standard & Poor's Ratings Services has announced revised criteria for U.S. option adjustable-rate mortgage loans that increase the required credit enhancement for such loans to account for the default risk stemming from "payment shock."S&P said it will first assess default risk by analyzing the effect of the adjustable interest rates. "Then, to address the potential payment shock to the borrower when the minimum payment is reset to make a fully amortizing principal and interest payment, a 20% increase in foreclosure frequency will be applied," S&P said. Finally, additional foreclosure-frequency adjustments will be applied to loans with FICO scores less than 695. The new option ARM criteria will be effective for all S&P-rated transactions closing on or after Aug. 1, the rating agency said. S&P can be found online at http://www.standardandpoors.com.