Servicing

Eight classes of notes issued by Abacus 2005-CB1 Ltd., a synthetic collateralized debt obligation based primarily on subprime residential mortgage-backed securities, have been downgraded and removed from Rating Watch Negative by Fitch Ratings. The downgrades were as follows: class A-1, from A-minus to CCC; class A-2, from BBB-plus to CCC; class B, from BBB to CC; class C, from BBB-minus to CC; class D, from BBB-minus to CC; class E-1, from BB-plus to CC; class E-2, from BB to CC; and class F, from BB-minus to CC. The downgrades were attributed to "significant" collateral deterioration of subprime RMBS in the portfolio. Fitch said the synthetic CDO was created to enter into credit default swaps with Goldman Sachs Capital Markets. The rating agency can be found on the Web at http://www.fitchratings.com.

Moody's Investors Service has downgraded the ratings of 40 tranches from 10 alternative-A transactions issued by Countrywide in 2006. In addition, the ratings on 18 senior tranches of CWALT Inc. mortgage pass-through certificates were confirmed. The downgrades, in general, were based 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 collateral consists primarily of first-lien, adjustable-rate, alt-A mortgage loans. The rating agency can be found on the Web at http://www.moodys.com.

Citigroup Inc., New York, took $6.67 billion in largely mortgage-related writedowns in the second quarter and has reported a net loss of $2.5 billion that it said marked a relative improvement given that it was half the size of the first-quarter loss. The company said $3.4 billion of its writedowns stemmed from subprime-related direct exposures, $2.4 billion was related to exposure to monoline insurers, $545 million was linked to commercial real estate positions, and $325 million was tied to alternative-A credit mortgages, net of hedges. "The cost of credit increased by 20% from the first quarter, but writedowns in our securities and banking business dropped by 42%," said Vikram Pandit, Citi's chief executive officer. "Additionally, headcount and expenses declined sequentially. While there is still much to do, we are encouraged by our progress in delivering on our commitment to the re-engineering efforts." Citigroup can be found on the Web at http://www.citigroup.com.

Merrill Lynch has reported a $4.7 billion net loss in the second quarter and saw more than $9 billion in writedowns and losses that were partly mortgage-related, but says it is making progress in reducing its problem assets and bolstering its liquidity. Writedowns and losses during the quarter included $3.5 billion related to U.S. super-senior asset-backed security collateralized debt obligations, as well as credit valuation adjustments of negative $2.9 billion related to hedges with financial guarantors, about half of which were linked to U.S. super-senior ABS CDOs. Other losses and writedowns included $1.3 billion from "certain residential mortgage exposures" and $1.7 billion from the investment portfolio of Merrill's U.S. banks. "Our core franchise continues to perform well despite the extremely challenging market environment," said John A. Thain, chairman and chief executive officer. "Against this backdrop, we increased our excess liquidity pool to a record level of $92 billion and significantly reduced our exposures in key asset classes." Merrill can be found online at http://www.ml.com.

Keefe, Bruyette & Woods Inc., New York, has announced that First American Corp. will replace IndyMac Bancorp in the KBW Mortgage Finance Index as of July 18. The move follows IndyMac's recent seizure by the Federal Deposit Insurance Corp. KBW, an investment bank, can be found on the Web at http://www.kbw.com.

The American Securitization Forum has launched ASF Project Restart, an industry-developed initiative to help rebuild investor confidence in mortgage- and asset-backed securities, restore capital flows to the securitization markets, and increase the availability of affordable credit to borrowers The first phase of the project is a proposed ASF RMBS Disclosure Package that standardizes and expands issuer disclosure to investors and credit rating agencies, particularly on mortgage loan-level information. It is geared toward producing uniform data that are reliable, understandable, consistent, and equally available to all market participants. ASF says the package will enable investors to more easily compare loans and transactions across issuers and perform loan-level analysis to evaluate residential MBS transactions based on the features and performance of the underlying mortgage loans. The loan-level detail will aid rating agency evaluations by enhancing the quality, consistency, and comparability of information relating to securitized assets. Comments on the proposal are due by Aug. 22. ASF said it expects to issue a final version before year's end for implementation in 2009.

JPMorgan Chase & Co. took losses on partially mortgage-related writedowns and the Bear Stearns merger during the second quarter, but it ultimately earned $2.0 billion and saw increases in mortgage banking income. The company took $1.1 billion in mortgage-related and leveraged lending writedowns and recorded a $540 million after-tax net loss on items related to the Bear Stearns merger during the period. JPMorgan Chase set aside a $1.3 billion provision for credit losses during the quarter, citing housing price declines that "have continued to result in significant increases in estimated losses, particularly for high loan-to-value home equity and mortgage loans." Mortgage banking net income was up 138% from that of a year earlier at $169 million due to gains in both production and net mortgage servicing revenues.

The triple-A long-term Issuer Default Ratings and senior debt ratings of Fannie Mae and Freddie Mac have been affirmed by Fitch Ratings, but Fannie's preferred stock rating has been downgraded and Freddie's has been placed on Rating Watch Negative. Fannie Mae's preferred stock rating was downgraded from AA-minus to A-plus and remains on Rating Watch Negative. Freddie Mac's preferred stock rating stands at A-plus. The affirmations of the government-sponsored enterprises' IDRs and senior debt ratings "reflect the high probability of external support" as well as the GSEs' "importance to the U.S. housing market," the rating agency said. The downgrade of Fannie's preferred stock "reflects the higher proportion of preferred stock to core capital" following the "recent erosion of core capital due to operating losses," Fitch said. The placement of Freddie's preferred stock rating on Rating Watch Negative "reflects the uncertainties surrounding the U.S. Treasury's plans, in general, and potential impact on preferred shareholders specifically, from any needed equity investment from the Treasury," the rating agency said. Fitch can be found online at http://www.fitchratings.com.

The sole classes of notes issued by seven Cloverie PLC collateralized debt obligations have been downgraded by Fitch Ratings and removed from Rating Watch Negative. The affected transactions -- all partially funded, static, synthetic CDOs -- are Cloverie PLC 2005-78, 2005-79, 2005-80, 2005-81, 2006-1, 2006-2, and 2006-3. The 2005 series have reference portfolios consisting primarily of subprime residential mortgage-backed securities, commercial MBS, and other structured finance assets. The 2006 series have reference portfolios consisting primarily of subprime RMBS, alternative-A RMBS, and other structured finance assets. The downgrades reflect "significant collateral deterioration" in the portfolios with regard to the subprime RMBS and, in the 2006 series, the alt-A RMBS, Fitch said.

Thirteen classes from three Attentus collateralized debt obligations have been placed on Rating Watch Negative by Fitch Ratings. The managed CDOs -- Attentus CDO I Ltd./LLC, Attentus CDO II Ltd./LLC, and Attentus CDO III Ltd./LLC -- are supported by portfolios of trust preferred securities and subordinated debt issued by subsidiaries of real estate investment trusts, real estate operating companies, homebuilders, and specialty finance companies, as well as senior debt securities, commercial mortgage-backed securities and, in some cases, commercial real estate loans. Fitch attributed its rating actions to "heightened concern related to continued negative portfolio credit migration," as well as a collateral balance reduction stemming from one credit risk sale for Attentus CDO I and additional default activity for Attentus CDO II.