Servicing

Nine certificates from Carrington Mortgage Loan Trust series 2007-HE1 have been downgraded by Moody's Investors Service. Four of the downgraded certificates will remain on review for possible further downgrade. The downgrades were based, in general, on higher-than-expected rates of delinquency, foreclosure, and real estate owned in the underlying collateral relative to credit enhancement levels, Moody's said.

Eleven certificates issued by Home Equity Loan Trust 2007-FRE1 have been downgraded by Moody's Investors Service. Three of the downgraded certificates will remain on review for possible further downgrade. The downgrades were based, in general, on higher-than-expected rates of delinquency, foreclosure, and real estate owned in the underlying collateral relative to credit enhancement levels, Moody's said.

The servicer quality ratings of SN Servicing Corp., Eureka, Calif., have been downgraded by Moody's Investors Service from SQ3-plus to SQ3-minus as a primary servicer of subprime loans and from SQ2-minus to SQ3 as a special servicer. Moody's attributed the downgrades mainly to a change in the company's servicing stability assessment from average to below average. SN is a wholly owned subsidiary of Security National Master Holding Co. LLC, whose core business is purchasing and servicing distressed residential and small-balance commercial mortgages. Moody's can be found on the Web at http://www.moodys.com.

The Federal Agricultural Mortgage Corp., Washington, has reported net income available to common stockholders of $21.4 million ($2.13 per share) for the second quarter, compared with $18.4 million ($1.74 per share) in the second quarter of 2007. Farmer Mac said its preferred measure of income, core earnings, was also higher than that of a year earlier, coming in at $7.1 million ($0.70 per share), up 28% from $5.5 million ($0.53 per share) in the second quarter of 2007. "To date, the credit issues that have arisen in the housing and consumer sectors of the economy have not affected the agricultural economy in general, or Farmer Mac's guarantee portfolio in particular," said Henry D. Edelman, Farmer Mac's president and chief executive officer. The government-sponsored enterprise can be found online at http://www.farmermac.com.

JPMorgan Chase has warned in a Securities and Exchange Commission filing that trading conditions "have substantially deteriorated" in the third quarter, affecting spreads on mortgage-backed securities and loans. These spreads have "sharply widened, causing the company to incur losses (net of hedges) of approximately $1.5 billion for the quarter to date," according to a company 10-Q report filed Aug. 11. "The firm's current expectations are for the global and U.S. economic environments to continue to be weak, for capital markets to remain under stress and for a continued decline in U.S. housing prices," JPMorgan Chase said. JPMorgan Chase can be found on the Internet at http://www.jpmorganchase.com.

In the second quarter, 97% of prime borrowers who originally had a one-year conforming adjustable-rate mortgage chose a conforming fixed-rate mortgage when they refinanced, according to Freddie Mac. Freddie's Refinance Product Transition Report also indicated that 87% of prime borrowers who initially had a conforming hybrid ARM refinanced into a conforming fixed-rate loan. (The comparable figures in the first quarter were 92% and 80%, respectively.) Furthermore, nearly all borrowers who had a fixed-rate loan refinanced into another long-term fixed-rate loan. "Even though refinancing borrowers who take out a one-year adjustable-rate mortgage today would save about three-quarters of a percentage point in rate relative to a five-year ARM or 15-year fixed-rate mortgage, the concerns about inflationary pressures leading to future interest rate increases may be causing borrowers to choose the safety and certainty of fixed rates," said Frank Nothaft, chief economist for Freddie Mac. ".... Teaser rates on ARMs have largely disappeared. During the second quarter, the initial interest rate on one-year ARMs averaged three-tenths of a percentage point higher than the fully indexed rate. Without an extra discount, ARMs just aren't attracting many borrowers in today's market." Freddie can be found on the Web at http://www.freddiemac.com.

Pre-foreclosures hit record highs in July, according to ForeclosureS.com, a Fair Oaks, Calif.-based investment advisory firm. Foreclosures climbed 7.3% in July from the previous month's level, and were up 88.6% from the level recorded in July 2007, the company said. "Looking at pre-foreclosure filings as a [percentage] of households -- the best way to judge future foreclosure trends -- this year 7.2 out of every 1,000 households nationwide faced possible foreclosure," said Alexis McGee, president of the firm. ".... Short term, there's no question that the foreclosure outlook is grim. But longer term there is promising news. Foreclosures tend to peak well after the housing market has bottomed, which may be forming as we speak." The company can be found online at http://www.foreclosures.com.

The IAS360 House Price Index rose 1.1% on a national level in June and was 11.5% below the level recorded a year earlier, according to Integrated Asset Services LLC, Denver. The index tracks monthly changes in the median sales price of detached single-family residences in "neighborhoods" in 360 counties across the United States, the company said. Three of the four U.S. regions designated by the index experienced house price appreciation in June, while the West recorded a 0.5% decline, IAS reported. The gains in the other regions were 4.7% in the Midwest, 1.7% in the South, and 0.4% in the Northeast. "The IAS360 HPI is not a seasonally adjusted or smoothed index," said Dave McCarthy, president and chief executive of IAS. "Typically, small month-to-month appreciation is present in the summer due to increased seasonal housing demand. Therefore, strengthening of the market in the summer can occur even when the longer-term market trend might be downward." The company, a provider of default management and residential collateral valuation services, can be found online at http://www.iasreo.com.

Only 32% of 50 banks in a Federal Reserve Board survey said they have securitized or sold "conforming jumbo" mortgages to Fannie Mae or Freddie Mac in the past three months. But 44% of the banks expect to securitize or sell jumbo loans to the government-sponsored enterprises over the next six months, according to the Fed's July survey of senior loan officers. Congress raised the maximum loan limit for the GSEs from $417,000 to $729,050 in high-cost areas as part of an economic stimulus package President Bush signed into law Feb. 13. The two GSEs began purchasing jumbos in April and, according to securities filings, Fannie purchased $947 million in jumbos in the second quarter and Freddie $471 million. In its 10-Q filing, Freddie said it does "not anticipate purchasing material amounts of conforming jumbo product in 2008," due to increased competition, especially from the Federal Housing Administration. The Fed's survey also found that 75% of domestic banks tightened their lending standards on prime mortgages -- up from 60% in the April survey. And 80% of respondent banks tightened their standards for approving applications for home equity lines of credit.

Effective immediately, Fannie Mae has increased the cash incentives it will pay servicers for successfully completing workouts, such as repayment plans and making "HomeSaver" advances to help delinquent borrowers catch up on their payments. Fannie has doubled the cash incentive for repayment plans to $400, provided that the mortgage is "brought current upon the successful completion of the repayment plan," the company's Aug. 11 servicing guide says. Fannie also raised the incentive fee for the new HomeSaver Advance from $600 to $700. However, the servicer will be paid in installments -- $200 for delivering the note on the unsecured advance to Fannie and the remaining $500 once the borrower makes three timely payments on the first mortgage. Servicers made 17,900 HomeSaver advances to delinquent borrowers in the second quarter, and the average size of the personal note was $7,100, according to the government-sponsored enterprise. Fannie Mae also started paying $700 for loan modifications on Aug. 11, and it instructed servicers to stop charging borrowers $500 for processing loan modifications. Incentive fees for short sales range from $1,000 to $1,500, depending on the loss severity to Fannie. The incentive paid for a deed-in-lieu transaction is $1,000. The GSE can be found online at http://www.fanniemae.com.