Servicing

Four classes of notes issued by Orion 2006-1 Ltd./LLC, a collateralized debt obligation linked to subprime residential mortgage-backed securities, have been downgraded by Fitch Ratings. The downgrades in the hybrid cash and synthetic structured finance CDO were as follows: class A, from BB-minus to CC; class B, from B to CC; class C, from CCC to CC; and class D, from CCC-minus to CC. All four classes were removed from Rating Watch Negative. Fitch said the downgrades stemmed from "significant collateral deterioration" in the portfolio, especially from U.S. subprime RMBS and structured finance CDOs with underlying exposure to subprime RMBS.

Fitch Ratings has announced that it will introduce Rating Outlooks for U.S. structured finance transactions to provide more forward-looking information to the market. Rating Outlooks, which are already used with many other Fitch ratings, indicate the likely direction of any rating change over a one- to two-year period. They may be Positive, Negative, Stable, or Evolving. "Fitch will assign Rating Outlooks to each rated tranche to offer investors a forward-looking opinion about the medium-term prospects of a tranche's performance," said John Bonfiglio, a group managing director who is the head of U.S. structured finance for Fitch. "Rating Outlooks may be influenced by factors that are quantitative, including performance relative to expectations, and more qualitative in nature, including prospective economic and sector developments affecting collateral." The rating agency can be found online at http://www.fitchratings.com.

Markit, New York, has announced plans to launch a tradable synthetic index of U.S. subprime asset-backed securities referencing 20 qualifying residential mortgage deals issued in the first half of 2005. "The addition of a new index, following a majority vote of licensed dealers, will provide institutional investors with a greater ability to gain or hedge exposure to an earlier vintage of U.S. residential mortgage-backed securities," the company said. Markit said it would make the new index, ABX.HE 05-2, available on Oct. 2.

Lend America, a direct-to-consumer FHA lender based in Melville, N.Y., has announced the launch of a "premier exit strategy" to help Wall Street firms and hedge funds quickly monetize their residential mortgage portfolios. Lend America offers investors both the opportunity to refinance performing mortgage portfolios within 10 days and work with nonperforming portfolios to maximize cash flow and deliver a profitable exit strategy. "Lend America is already working with leading Wall Street firms and hedge funds who are trading and or holding adjustable-rate or other performing paper," said Michael Ashley, chief business strategist of Lend America. The company said it has over 300 trained loan specialists in Federal Housing Administration lending, as well as the ability to place loans directly into Ginnie Mae mortgage-backed securities.

Fannie Mae has announced that it has received the consent of its conservator, the Federal Housing Finance Agency, and the Treasury Department to pay the previously declared but unpaid dividends on all its outstanding preferred stock on Sept. 30, as scheduled. The dividends were declared before the government-sponsored enterprise was placed in conservatorship. The record date is Sept. 15. "Treasury's consent is limited solely to the payment of this previously declared but unpaid preferred stock dividend," Fannie said. Future common and preferred stock dividends will be eliminated, as announced on Sept. 7.

Three classes of notes issued by Enhanced Mortgage Backed Securities Fund III Ltd. have been downgraded by Fitch Ratings and withdrawn. The downgrades were as follows: class A-3, from B-minus to C/DR4; class A-4, from CCC to C/DR6; and the preference shares, from CCC to C/DR4. "These actions reflect EMBS III's portfolio liquidation," Fitch said. ".... The class A-3 notes are expected to receive approximately 40% of note value at the end of September. Class A-4 will not receive any principal payments."

Two classes of subprime second-lien residential mortgage-backed securities insured by XLCA have been downgraded by Fitch Ratings. Classes A1 and A2 of C-BASS series 2007-SL1 were downgraded from BB to CCC. The downgrades were based on Fitch's recent downgrade of XLCA's insurer financial strength rating to CCC, the rating agency said.

Twenty-eight classes from eight mortgage-related transactions insured by Financial Guaranty Insurance Co. have been downgraded by Fitch Ratings, and two classes have been placed on Rating Watch Negative. The downgrades affected deals issued by Ameriquest Mortgage Securities, Aegis, Ace Securities Corp., Morgan Stanley ABS Capital, GMAC Mortgage Corp., and CSFB. Most involve subprime residential MBS. Fitch attributed the downgrades to its recent downgrade of FGIC's insurer financial strength rating to CCC.

Thirty-eight classes of notes issued by five collateralized debt obligations linked to alternative-A and subprime residential mortgage-backed securities have been downgraded by Fitch Ratings. The affected securities include 10 classes from Maxim High Grade CDO I Ltd. and eight classes from Maxim High Grade CDO II Ltd, both static high-grade cash flow structured finance CDOs; and eight classes from Nautilus RMBS CDO I Ltd./LLC, six classes from Nautilus RMBS CDO II Ltd./LLC, and six classes from Nautilus RMBS CDO V Ltd./LLC, all static cash flow structured finance CDOs. Twenty-three of the downgraded classes were removed from Rating Watch Negative. The downgrades were attributed in all cases to collateral or credit deterioration in the portfolios' alt-A RMBS and, in four of the five cases, in their subprime RMBS. Fitch can be found online at http://www.fitchratings.com.

EMC Mortgage Corp. has agreed to $28 million settlement with the Federal Trade Commission for allegedly engaging in "unlawful" servicing practices, abusive collection practices, and charging unauthorized fees. The FTC conducted a multiyear investigation of the Lewisville, Texas, servicing company and found that the subsidiary of Bear Stearns & Co. "allegedly paid inadequate attention to the integrity of consumers' loan information" and made inaccurate claims on consumers. "Like other companies that send a bill, mortgage servicers must make sure that the amount they say is due is really the amount due," said Lydia Parnes, the FTC's director of consumer protection. "Consumers have a right to expect accuracy from the company that collects their mortgage payments." The $28 million will be distributed to homeowners affected by EMC's practices. JPMorgan Chase & Co. acquired Bear Stearns and EMC last May following the collapse of Bear Stearns. The settlement does "not apply" to JPMorgan Chase, the final order says. JPMorgan Chase declined to comment on the settlement. EMC serviced $86.5 billion in mortgage loans as of March 31.