Servicing

More than 250 additional classes of subprime mortgage pass-through certificates were downgraded by Fitch Ratings on March 3 as a result of changes to its subprime loss forecasting assumptions. Fitch also affirmed the ratings on classes with outstanding balances of over $15 billion. The securities affected by the latest downgrades included 100 classes from eight Securitized Asset Backed Receivables LLC Trust deals; 56 classes from four HSI Asset Securitization Corp. Trust deals; 32 classes from two IndyMac deals; 28 classes from two Natixis deals; 28 classes from two Washington Mutual deals; seven classes from one Morgan Stanley deal; and five classes from two GSAMP deals. Fitch also placed 11 classes from one UBS MASTR Asset Backed Securities Trust deal on Rating Watch Negative. 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 on the Web at http://www.fitchratings.com.

The long-term issuer default rating and the senior unsecured debt rating of Residential Capital LLC have been downgraded from BB-plus to BB-minus by Fitch Ratings. In addition, Fitch downgraded ResCap's subordinated debt rating from BB-minus to B-minus. All the ratings, including the company's short-term IDR and short-term debt rating (both B) remain on Rating Watch Negative, Fitch said. "This action follows ResCap's extremely difficult 2007 and uncertain prospects for 2008," the rating agency said. "While ResCap has aggressively addressed near-term liquidity issues, the company's return to even a modicum of sustainable profitability in 2008 would be difficult if mortgage market dislocation continues."

Fremont General Corp., Brea, Calif., has received notifications from two affiliated third-party purchasers of $3.15 billion of residential subprime mortgage loans alleging that Fremont is in default in connection with the loan sales. "To support the bank's obligation to repurchase any loans that were sold in the transaction, ... Fremont General provided each of the purchasers with a guaranty to honor any of the bank's obligations under such loan sale agreements," Fremont said. The company said it has failed to deliver specified financial statements and certifications as required under the covenants, but stressed that the notifications do not allege that Fremont is in breach of its obligations under the loan sale agreements. Fremont said it cannot confirm its ability to satisfy a tangible net worth covenant due to its efforts to complete its 2007 consolidated financial statements. The company said it is in discussions with the purchasers to seek a waiver of the requirement. Fremont can be found online at http://www.fremontgeneral.com.

Irwin Financial Corp., a mortgage lender based in Columbus, Ind., has announced the suspension of quarterly dividends on its common, preferred, and trust preferred securities. Will Miller, chairman and chief executive officer of Irwin Financial, said the company's dividends have exceeded its earnings over the past two years. "Until we return to normal levels of profitability, that is neither a sustainable nor a wise strategy," he said. Irwin can be found on the Web at http://www.irwinfinancial.com.

Thornburg Mortgage Inc., a troubled real estate investment trust based in Santa Fe, N.M., has completed a collateralized mortgage debt transaction backed by $992 million of the company's prime hybrid adjustable-rate mortgages. Thornburg said it expects "an increased use of collateralized mortgage debt financing and reduced reliance on reverse repurchase financing." The company has recently faced hundreds of millions of dollars in margin calls related to reverse repurchase financing that it said could potentially have a negative "material" impact on its finances if the company is unable to meet the payment demands from its counterparties. Thornburg can be found online at http://www.thornburg.com.

FDIC Chairman Sheila Bair says she expects loan modifications to increase, but she is still concerned that servicers continue to rely too heavily on repayment plans. Repayment plans may be "unsustainable for borrowers and lead to delinquencies down the road and ongoing borrower distress," the Federal Deposit Insurance Corp. chairman told the Senate Banking Committee. Hope Now servicers reported that they modified 45,320 subprime loans in January and placed 48,155 subprime borrowers in repayment plans. The FDIC chairman testified that additional approaches may be needed to reduce foreclosures, including writedowns of the principal amount of the "underwater" mortgages. Meanwhile, Federal Reserve Board Chairman Ben S. Bernanke spoke favorably about an Office of Thrift Supervision proposal that would encourage writedowns by giving investors a share in future appreciation. "A writedown that is sufficient to make borrowers eligible for a new loan would remove downsize risk to investors of additional writedowns or a re-default," the Fed chairman told the annual convention of the Independent Community Bankers of America.

Four classes of notes (and three classes of loan interests) issued by Westways Funding XI Ltd., a mortgage market value collateralized debt obligation, have been downgraded by Fitch Ratings. The downgraded notes were as follows: class A-PT, from AAA to AA and placed on Rating Watch Negative; class A-2, from AAA to AA and placed on Rating Watch Negative; class B, from AA to A (and remains on Rating Watch Negative); and class C, from A to BB (and remains on Rating Watch Negative). In addition, the class LA loan interests have been downgraded from AAA to AA and placed on Rating Watch Negative; the class LB loan interests have been downgraded from AA to A (and remain on Rating Watch Negative); and the class LC loan interests have been downgraded from A to BB (and remain on Rating Watch Negative). The negative rating actions were attributed to "the uncertainty in the proceeds that will be achieved during a sale of assets given the price volatility that even highly rated securities have seen in the current market environment."

More than 300 additional classes of subprime mortgage pass-through certificates were downgraded by Fitch Ratings on Feb. 29 as a result of changes to its subprime loss forecasting assumptions. Fitch also affirmed the ratings on classes with outstanding balances of over $7 billion. The first-lien securities affected by the latest downgrades were 112 classes from 11 Carrington Mortgage Loan Trust deals; 38 classes from three GMAC Residential Funding Co. deals; 38 classes from three Credit Suisse First Boston Home Equity Asset Trust deals; 19 classes from four Residential Asset Mortgage Product Inc. deals; 13 classes from one Goldman Sachs deal; 12 classes from one New Century deal; and 12 classes from one Equifirst Loan Securitization Trust deal. The first- and second-lien securities affected were 63 classes from six Credit-Based Asset Servicing and Securitization LLC deals and 29 classes from two Asset Backed Securities Corp. Home Equity Loan Trust deals. 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 on the Web at http://www.fitchratings.com.

Fremont General Corp., the Brea, Calif.-based holding company for mortgage servicer Fremont Investment & Loan, will be removed from the S&P SmallCap 600 index after the close of trading March 3, Standard & Poor's has announced. S&P said Fremont has fallen below the $300 million minimum market capitalization required for listing on the index. As of the close of trading on Feb. 29, Fremont's capitalization stood at approximately $79 million, S&P reported. In addition, S&P said Pennsylvania Real Estate Investment Trust will be added to the SmallCap 600 after the close of trading on March 5. S&P can be found online at http://www.standardandpoors.com.

Private equity firm WL Ross & Co. LLC, New York, has agreed to purchase $250 million in common shares of Assured Guaranty Ltd., Hamilton, Bermuda, one of the bond insurers with mortgage exposures that has looked to boost capital as a means of bolstering its ratings. "We believe that Assured has an excellent opportunity during this time of uncertainty in the financial markets," said Wilbur Ross, chairman and chief executive officer of WL Ross. Assured Guaranty can be found online at http://www.assuredguaranty.com.