Servicing

Fifteen classes from three subprime mortgage-backed securities issued by New Century Home Equity Loan Trust have been downgraded by Fitch Ratings. Fitch also affirmed the ratings on classes with outstanding balances of $501 million.

Twenty-two classes from seven subprime mortgage-backed securities issued by Aegis Mortgage Corp. Asset Backed Securities Trust have been downgraded by Fitch Ratings. Fitch also affirmed the ratings on classes with outstanding balances of $556 million. Fitch can be found online at http://www.fitchratings.com.

Bank of America, Charlotte, N.C., has announced plans to modify or work out at least $40 billion in troubled mortgages over the next two years and to expand its 10-year community development goal to $1.5 trillion. Both goals assume the successful completion of BoA's proposed merger with Countrywide Financial Corp., slated for the third quarter. BoA also said it will locate the companies' combined national mortgage operations under the BoA name in Countrywide's Calabasas, Calif. headquarters. "We believe the financial strength, security, and stability of the combined company will allow us to enable people to buy homes and stay in homes, and to assist many of those affected by the current mortgage troubles," said Liam McGee, BoA's president of global consumer and small business banking, in testimony at a Federal Reserve Board hearing in Los Angeles on the merger. The $1.5 trillion community development goal will focus on affordable housing, economic development, and consumer and small-business lending. BoA can be found on the Web at http://www.bankofamerica.com.

Over 9% of securitized subprime loans were 90 days or more past due in February, 11% were in foreclosure, and over 6% were real estate owned, according to a Friedman Billings Ramsey Investment Management report. Overall the default rate on subprime loans stood at 26.6% in February, up from 25.2% in the previous month. Only 60% of subprime borrowers are current on their loans. The default rate on private-label securitized alternative-A mortgages jumped to 9.3% in February, up 103 basis points from the previous month's level. Of these alt-A mortgages, 3% were 90 days or more past due and 4.35% were in foreclosure. "We continue to expect default rates ... to rise persistently in 2008," said FBRIM managing director Michael Youngblood. Mr. Youngblood said he expects the default rate on securitized subprime loans to hit 30.3% by year's end. (The default rate includes loans 90 days or more past due, in foreclosure, and REO.)

Servicers provided nearly 503,000 loan workouts for homeowners in the first quarter, bringing to nearly 1.4 million the total number of workouts since the Hope Now alliance was created last July. Of the 502,500 prime and subprime loan workouts that servicers provided to homeowners during the first quarter, about 323,000 were repayment plans and 179,500 were loan modifications. The Hope Now alliance said that among subprime mortgage loans, loan modifications accounted for 44% of workouts in the first quarter, double the 2007 rate. Some consumer advocates say that modifications, in which loan terms are changed, are a better long-term solution than repayment plans that attempt to bring a borrower current over a shorter-term period.

The Census Bureau has reported that the inventory of vacant homes listed for sale rose to 2.3 million in first quarter, up 4.6% from that of the previous quarter, and that the homeownership rate was unchanged. Listings of vacant homes rose dramatically in 2006 to 2.1 million, and this overhang on the real estate market continues to exert downward pressure on house prices. Since 2006 it has remained above the 2 million mark, and over the past two quarters there has been an uptick in listings -- probably reflecting bank sales of more foreclosed properties. The Census Bureau report also indicates that the homeownership rate held steady at 67.8% in the first quarter. However, the rate is down from 68.4% in the first quarter of 2007. The homeownership rate for blacks fell from 47.7% in the fourth quarter to 47.1% in the first quarter, while the rate for Hispanics rose from 48.5% to 48.9%.

The Department of Housing and Urban Development has determined that market conditions prevented Fannie Mae and Freddie Mac from reaching two affordable housing subgoals in 2007, and it will not require the two government-sponsored enterprises to take corrective action. The two home-purchase subgoals are supposed to measure the GSEs' efforts in financing low-and moderate-income homebuyers. Fannie and Freddie submitted market data to HUD showing that rising home prices reduced the availability of affordable housing. In addition, the subprime meltdown and tighter credit conditions made the barriers to achieving the subgoals "insurmountable," Freddie Mac said. In letters to the chief executives of the two mortgage companies, HUD Assistant Secretary Brian Montgomery reported that information provided by the GSEs is "consistent" with HUD's market research. HUD has determined that the achievement of the two subgoals was "not feasible," Mr. Montgomery says in the April 24 letters. He also notes that HUD also considered the "financial stability" of Fannie and Freddie in evaluating their affordable housing performance.

Thirteen classes of subprime mortgage pass-through certificates issued by UBS Mortgage Asset Securitization Transaction Asset Backed Securities Trust have been downgraded by Fitch Ratings. Fitch also removed one class from Rating Watch Negative and affirmed the ratings on classes with outstanding balances of $456 million. Fitch can be found online at http://www.fitchratings.com.

Standard & Poor's Ratings Services has lowered its ratings on 184 classes of residential mortgage-backed securities from 27 deals backed by closed-end second-lien mortgage collateral. Of the total, 166 classes were removed from CreditWatch negative, S&P reported. The rating agency said the actions stem from its belief that losses on U.S. RMBS backed by closed-end second-lien collateral issued in 2007 "will significantly exceed historical precedent and because recent performance data indicates that performance is likely to be worse than previously anticipated." S&P can be found online at http://www.standardandpoors.com.

Helios AMC LLC, San Francisco, has been assigned a special servicer rating of CSS3 for commercial mortgage-backed securities by Fitch Ratings. The rating reflects "the extensive workout experience of the company's veteran management team, its thorough policies and procedures, and the development of its robust special servicing system," Fitch said. Fitch rates commercial mortgage servicers on a scale of 1 to 5, with 1 being the highest rating.