Servicing

More than 100 additional classes of subprime mortgage pass-through certificates were downgraded by Fitch Ratings on April 7 as a result of changes to its subprime loss forecasting assumptions. Fitch also placed five classes of subprime pass-throughs on Rating Watch Negative and affirmed the ratings on classes with outstanding balances of more than $3 billion. The securities affected by the latest downgrades were: 78 classes from 10 issues of Soundview Home Loan Trust mortgage pass-throughs; 15 classes from three issues of Wells Fargo Home Equity Asset-Backed Securities pass-throughs; nine classes from one issue of CSFB Home Equity Asset Trust pass-throughs; and eight classes from one issue of Meritage Mortgage Loan Trust pass-throughs. The rating actions were attributed to changes to Fitch's subprime loss forecasting assumptions that "better capture the deteriorating performance of pools from 2006 and late 2005 with regard to continued poor loan performance and home price weakness." Fitch can be found online at http://www.fitchratings.com.

Moody's Investors Service has downgraded more than 750 tranches in 77 subprime residential mortgage-backed security transactions from three issuers. Of the downgraded tranches, 162 remain on review for possible further downgrade. The negative rating actions affected the following securities: 315 tranches from 31 subprime RMBS deals issued by ACE Securities Corp. Home Equity Loan Trust; 238 tranches from 22 RMBS deals supported by subprime loans originated by Long Beach; and 218 tranches from 24 subprime RMBS deals issued by Merrill Lynch Mortgage Investors Trust. The downgrades were generally 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 subprime mortgage loans. Moody's can be found on the Web at http://www.moodys.com.

The current response to the foreclosure crisis is "inadequate," and a federally funded program to restructure subprime mortgages in bulk is crucial to avoid the wave of impending foreclosures, according to the National Housing Conference, which is supported by major mortgage lenders and affordable housing advocates. "A bulk restructuring plan, administered and funded by a new agency or division specially empowered to administer this process, would be the most effective solution to the nation's economic crisis," the NHC says in spelling out principles for addressing the mortgage and foreclosure crisis. The housing policy group calls for "substantial principal reductions" along with government assistance to close the affordability gap, which could include a "silent" second mortgage. Freddie Mac, Bank of America, Wells Fargo Home Mortgage, and HSBC Bank USA are key contributors to the nonpartisan council, which was founded in 1931. The NHC noted that the bipartisan housing bill being debated in the Senate "omits any bold plan" for restructuring existing mortgages. The NHC is urging its members to contact their senators and representative and "ask them to take more action in helping families at risk of foreclosure."

More than 50 certificates in 10 second-lien mortgage-backed security transactions from three issuers have been downgraded by Moody's Investors Service. The downgrades affected the following securities: 37 certificates from eight Terwin Mortgage Trust deals; seven certificates from Soundview Home Loan Trust 2006-A; and seven certificates from IndyMac Home Equity Mortgage Loan Asset-Backed Trust, INDS 2006-A. Moody's also placed four certificates on review for possible further downgrade. The rating actions were taken because "credit enhancement levels, including excess spread and subordination, were too low" when compared with projected losses, Moody's said. The actions take into account the "continued and worsening performance" of transactions backed by closed-end second-lien loans and home equity lines of credit.

Over 150 additional classes of subprime mortgage pass-through certificates were downgraded by Fitch Ratings on April 4 as a result of changes to its subprime loss forecasting assumptions. Fitch also placed 12 classes of subprime pass-throughs on Rating Watch Negative, removed two from Rating Watch Negative, and affirmed the ratings on classes with outstanding balances of nearly $4 billion. The securities affected by the latest downgrades were: 54 classes from nine issues of Barclays Capital mortgage pass-throughs; 47 classes from seven issues of Asset Backed Securities Corp. pass-throughs; 31 classes from six issues of Bear Stearns Asset Backed Securities I Trust pass-throughs; and 30 classes from four issues of CSFB Home Equity Asset Trust pass-throughs. The rating actions were attributed to changes to Fitch's subprime loss forecasting assumptions that "better capture the deteriorating performance of pools from 2006 and late 2005 with regard to continued poor loan performance and home price weakness." Fitch can be found online at http://www.fitchratings.com.

The servicer quality rating of Fremont Investment & Loan as a primary servicer of subprime loans has been downgraded from SQ4 to SQ4-minus by Moody's Investors Service. The rating remains on review for possible further downgrade. In addition, the outlook for Fremont and its parent, Fremont General Corp., remains negative, and the company's servicing stability assessment has been revised from below average to weak, Moody's said. The rating agency said the action was prompted by continued deterioration of financial and operating conditions as well as regulatory actions affecting Fremont and its parent. The Suffolk Superior Court recently issued a preliminary injunction, sought by the Massachusetts attorney general, barring Fremont from initiating or advancing foreclosures on loans that are "presumptively unfair" without first complying with the court's order, Moody's said. The injunction was later modified to further restrict Fremont's efforts to sell mortgage servicing rights on loans serviced in Massachusetts. Moody's said the rating action also stemmed partly from management turnover at Fremont and its parent. Moody's can be found online at http://www.moodys.com.

Anthracite Capital Inc., New York, has announced a $93.5 million capital investment in its common and preferred stock by DLJ Real Estate Capital Partners Inc. Anthracite reported that it has issued and sold to DLJ RECP $23.4 million of common stock at $6.69 per share and $70.1 million of cumulative redeemable convertible preferred stock. In connection with the preferred stock investment, Anthracite's board has been expanded to include Andrew P. Rifkin, managing partner of DLJ Real Estate Capital Partners. Richard M. Shea, Anthracite's president and chief operating officer, said the transaction positions the company to respond to "the dislocations in the global credit markets." He noted that the investment by DLJ RECP represents the resumption of a strategic partnership that began in 1999 and ended in 2002. Anthracite, which is managed by Black/Rock Financial Management, can be found online at http://www.anthracitecapital.com.

Strategic Recovery Group LLC, a national mortgage asset recovery company based in Plano, Texas, has launched a special servicing unit, Acqura Loan Services, to meet the growing needs of lenders, hedge funds, and investors in distressed debt. Acqura, which began hiring personnel and developing proprietary scoring and servicing technology in mid-2007, offers a full spectrum of servicing, loss mitigation, and collection services and creates a customized risk-management solution for each of its clients, the parent company said. "At this stage in the credit cycle, lenders, Wall Street, and MBS/ABS investors realize they are facing a triple threat: the prospect of recession, the credit/liquidity problems, and falling home prices," said David Vida, chief executive officer of both Acqura and its parent. "What investors and issuers are looking for now are focused, innovative partners who can commit to higher service levels and deliver experienced asset managers and the latest technology to achieve better outcomes for both borrowers and investors."

Reverse Mortgage Solutions, Spring, Texas, has announced plans to expand its operations as a technology systems provider. A start-up just one year ago, the multifaceted company has come of age just as the leading edge of the 80 million-member baby boom generation enter their twilight years and has built a servicing portfolio of 7,500 loans. RMS says it will soon roll out a front-end reverse mortgage origination system dubbed RM Compass. "It's fully integrated with the servicing components in what we think is a better solution than what has been out there," chief operating officer Marc Helm said at the National Reverse Mortgage Lenders Association's eastern regional conference in Philadelphia. "We have had the opportunity to stand back, look at the industry, and build a state-of-the-art, integrated origination system and servicing system from scratch."

The troubled Chicago Federal Home Loan Bank is formulating a plan to continue to operate on a "stand-alone" basis now that merger discussions with the Dallas FHLBank have ended, and its president and chief executive, Mike Thomas, is stepping down as of April 11. The merger talks blew hot and cold over the past seven months as the Chicago FHLBank's financials continued to deteriorate. The Chicago bank recently said it expects to report a loss in the first quarter. "After extensive analysis and due diligence of the feasibility of combining the banks' business operations, the FHLB Chicago was unable to reach an agreement to merge with the Dallas Bank that would have maximized value to FHLB Chicago members," chairman David Kuhl said in a letter to the Chicago bank's members. Executive vice president Matthew Feldman will serve as acting president while a search is conducted to replace Mr. Thomas, who will receive a $1.1 million lump sum severance payment. Mr. Thomas was hired in August 2004 after a federal supervisor halted the growth of the bank's mortgage purchase program. Meanwhile, the Chicago bank is working on several initiatives, including a "new capital plan to stabilize the capital base and to restructure the balance sheet to improve long-term profitability," Mr. Kuhl said.