Servicing

Franklin Credit Management Corp., Jersey City, N.J., has reported the receipt of a noncompliance notice from the NASDAQ Stock Market regarding the listing of Franklin's common stock. The notice said the stock has failed to maintain a minimum bid price of $1 or more per share for the preceding 30 business days. Compliance would be restored if the stock closes at $1 or more per share for at least 10 consecutive trading days before Aug. 18, Franklin said. If the stock has not returned to compliance by that date, NASDAQ will provide a written notification that Franklin's stock will be delisted. Franklin can be found online at http://www.franklincredit.com.

Morris/Hardwick/Schneider, an Atlanta-based real estate closing law firm, has announced the formation of two new mortgage service divisions: National Default Services and National REO. The default services unit was established through a merger with Wittstadt & Wittstadt, a Baltimore-based law firm. M/H/S said the merger enables the firm to "offer the full spectrum of end-to-end lender services -- from loss mitigation to foreclosure to REO to resale." In addition, it broadens the area served by M/H/S and its title company, LandCastle Title, by adding Maryland, Virginia, West Virginia, Delaware, and Washington, D.C., to its existing area, which includes Alabama, Florida, Mississippi, North Carolina, Ohio, South Carolina, and Tennessee. M/H/S can be found on the Web at http://www.closingsource.net.

To expedite loan modifications, Congress may need to "step in" and shield mortgage servicers from investor lawsuits, according to FDIC Chairman Sheila Bair. "My hope is investors wake up to what's going on and push hard for loan modifications, not fight them," the Federal Deposit Insurance Corp. chairman told an audience in California's Silicon Valley. But she noted that servicers are reluctant to write down the principal amount of distressed mortgage because it could expose them to litigation. "But in this environment of declining home prices, writing down the values of loans to an amount the borrowers can pay in a sustainable manner may result in smaller losses to investors than foreclosure," Ms. Bair said.

Common shares of Fannie Mae and Freddie Mac declined Friday after analysts at Merrill Lynch downgraded the companies from Neutral to Sell. Shares of Fannie Mae declined by 27 cents, closing at $28.72. Freddie Mac's shares fell $1.14, closing at $26.61. In a report, Merrill Lynch said the companies' share prices did not fully reflect the "severity or duration of financial headwinds facing the companies." Merrill Lynch suggested that both firms could see their share prices fall below lows that were hit in 2007 as the housing and credit crisis became apparent. Overall, the Dow Jones industrial average rose 96 points, or 0.79%, on the day, fueled by an afternoon rally.

Class B-3 of Salomon Brothers Mortgage Securities VII Inc. mortgage pass-through certificates, series 2000-UP1, has been placed on Rating Watch Negative by Fitch Ratings. Fitch also affirmed the ratings on 63 classes from 15 issues of Salomon Brothers pass-throughs. The collateral in the transaction consists of first-lien prime mortgage loans.

Nine classes from five issues of Structured Asset Securitization Corp. mortgage pass-through certificates have been downgraded by Fitch Ratings. Fitch also placed one SASCO class on Rating Watch Negative and affirmed the ratings on 35 classes from the five deals. The downgrades were attributed to deterioration in the relationship between credit enhancements and expected losses.

Nine classes from four subprime, second-lien issues of GS Mortgage Securities Corp. mortgage pass-through certificates have been downgraded by Fitch Ratings. Fitch also placed six GSAMP classes on Rating Watch Negative, removed one classes from Rating Watch Negative, and affirmed the ratings on five classes. The downgrades were attributed to deterioration in the relationship between credit enhancements and expected losses.

Thirty-five additional classes of first-lien subprime mortgage pass-through certificates were downgraded by Fitch Ratings on Feb. 21 as a result of changes to its subprime loss forecasting assumptions. Fitch also affirmed the ratings on classes with outstanding balances of over $1.4 billion. The securities affected by the latest downgrades were: 13 classes from one Bear Stearns Asset Backed Securities I Trust deal; 12 classes from one GS Mortgage Securities Corp. deal; and 10 classes from one Option One deal. 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."

The issuance of U.S. mortgage-related securities managed to increase slightly in 2007 to $2.04 trillion, from $1.99 trillion in 2006, despite a sharp drop in volume in the fourth quarter, according to data from the Securities and Industry Financial Markets Association. "While private-label MBS issuance decreased by 15.2% to $655.6 billion from 2006's $773.2 billion, agency MBS issuance became the more dominant portion of the market," the association said. SIFMA can be found on the Web at http://www.sifma.org.

Despite its exposure to the deteriorating subprime mortgage market, the U.S. life insurance industry is "well-positioned to withstand current market volatility," according to Fitch Ratings. The rating agency estimated that unrealized mark-to-market losses on investments related to subprime and alternative-A mortgages range from $7 billion to $8 billion in the industry. That represents approximately 13% of exposure and 3% of aggregate industry statutory capital, Fitch said in a report titled Subprime Mortgage Exposure for U.S. Life Insurers -- Update and Outlook. "While Fitch expects further deterioration in the performance of subprime residential mortgages, particularly for 2006 and 2007 vintage years, our analysis suggests that the industry is well positioned to withstand current market volatility given its focus on high-investment-grade securities, relatively stable liability profile, and positive cash flow," the rating agency said. "Despite the significant deterioration of subprime mortgage markets and increased credit risk in other fixed-income markets, Fitch views the U.S. life insurance industry as well capitalized." Fitch can be found online at http://www.fitchratings.com.