Servicing

More than 750 additional classes of subprime mortgage pass-through certificates have been downgraded by Fitch Ratings as a result of changes to its subprime loss forecasting assumptions. Fitch also affirmed the ratings on classes with outstanding balances of more than $14 billion. Among the securities affected by the latest downgrades were: 177 classes from 16 Morgan Stanley deals; 158 classes from 14 SASCO deals; 87 classes from seven HASCO deals; 84 classes from seven SAIL deals; 64 classes from five Nomura deals; 44 classes from four NovaStar deals; 43 classes from four Soundview deals; 27 classes from two BNC deals; 26 classes from two Renaissance deals; 25 classes from two UBS deals; 22 classes from two Citigroup deals; and 13 classes from one GE-WMC deal. All were first-lien subprime transactions. 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.

Senate Democrats have crafted a second stimulus bill that includes bankruptcy changes lenders will oppose and a net operating loss carry-back supported by homebuilders. "This package is aimed at the bull's-eye of our economic crisis -- the housing market," said Sen. Charles E. Schumer, D-N.Y. Included in the package was a bill by Sen. Richard Durbin, D-Ill., that would allow bankruptcy judges to restructure subprime mortgages. "Small changes to the bankruptcy code could help 600,000 at-risk families keep their homes," the Illinois senator said. The Mortgage Bankers Association said there is "much in this bill to applaud." However, the MBA served notice that it will oppose the bill because the bankruptcy provision will increase the cost of mortgage credit. The National Association of Home Builders has been pushing for an NOL carry-back. But it wants a tax credit for homebuyers even more. The builders have frozen all political contributions because the first stimulus bill did not include a homebuyers' tax credit.

New York Gov. Eliot Spitzer has set a three- to five-day deadline for bond insurers hurt by certain mortgage securities exposures to bolster their flagging ratings, according to the Wall Street Journal. A call to the New York insurance department about the deadline had not been returned by deadline time. Mr. Spitzer indicated in congressional testimony Feb. 14 that he feels officials in his state should take the lead in tackling the bond insurance issue because "insurance is regulated by the states, and most of the bond insurance companies are domiciled in and primarily regulated by New York." Moody's Investors Service on Thursday downgraded some ratings of bond insurer FGIC, a New York-based company in which mortgage insurer PMI owns a 42% stake.

Countrywide Financial Corp., the nation's largest servicer (with a market share of almost 17%), says its foreclosure rate almost doubled in January from that of a year earlier, according to new figures released Friday. At Jan. 31, 1.5% of the loans in its massive $1.48 trillion servicing portfolio ($21.8 billion) had entered the foreclosure process, a 92% increase from the level of a year earlier. Moreover, 7.5% of loans serviced by Countrywide were 30 days or more late. A year ago the ratio stood at 4.3%. Countrywide would not provide separate figures for subprime foreclosures, lumping all its servicing into one number. As for originations, Countrywide funded $21.8 billion in residential loans during January, a 41% decline from the level of a year earlier. Countrywide, which is being sold to Bank of America, saw its wholesale fundings plunge by 65%. Retail production was off 26%, with correspondent purchases falling 38%. Retail originations totaled $9.4 billion and wholesale just $2.5 billion, with correspondent coming in at $9.8 billion. The company also saw its commercial production plunge to just $50 million, a stunning 92% decline from the same month last year.

Two classes of subprime certificates issued by Aames Mortgage Trust have been downgraded by Moody's Investors Service, and nine classes have been placed on review for possible downgrade. Class M-2 of Aames Mortgage Trust 2002-1 has been downgraded from Baa1 to Baa2, and class B has been downgraded from B1 to Caa2. The securities placed under review are classes M-6, M-7, M-8, and M-9 of Aames Mortgage Investment Trust 2004-1 and classes M-5, M-6, M-7, M-8, and M-9 of Aames Mortgage Investment Trust 2005-1. The actions were based on an analysis of the credit enhancement provided by subordination, overcollateralization, and excess spread relative to expected losses, Moody's said.

Eighteen tranches from four deals issued by Fieldstone Mortgage Investment Trust in 2004 and 2005 have been downgraded and placed under review for possible downgrade by Moody's Investors Service. The actions were based on "the analysis of the credit enhancement provided by subordination, overcollateralization, and excess spread relative to expected losses," Moody's said. The transactions are backed primarily by first-lien adjustable subprime mortgage loans originated by Fieldstone Mortgage Co.

Twenty-six classes totaling $1.2 billion from two subprime issues of Ace pass-through certificates have been downgraded by Fitch Ratings. In addition, Fitch affirmed the ratings on Ace classes totaling $250 million. The downgrades were based on changes to Fitch's subprime loss forecasting assumptions that the rating agency says "better capture the deteriorating performance of pools from 2007, 2006, and late 2005 with regard to continued poor loan performance and home price weakness." The collateral for the transactions, both issued in 2006, consists of first-lien subprime mortgage loans.

Thirty-five certificates from seven deals issued by First Franklin Mortgage Loan Trust have been downgraded by Moody's Investors Service, and nine certificates have been placed on review for possible downgrade. The actions were based on complete or near-complete erosion of overcollateralization, "leaving some of the more subordinate certificates exposed to future losses and many of the tranches sequentially above them in a weaker position," Moody's said. Most of the collateral consists of mortgage loans with high loan-to-value ratios. Moody's can be found online at http://www.moodys.com.

Forty-two classes totaling $785 million from seven subprime issues of Credit Suisse First Boston Mortgage Securities Corp. mortgage pass-through certificates have been downgraded by Fitch Ratings. In addition, Fitch placed three classes on Rating Watch Negative, removed two classes from Rating Watch Negative, and affirmed the ratings on 21 CSFB classes. The downgrades were based on deterioration in the relationship between credit enhancement and expected losses, Fitch said. The collateral for the transactions consists of second-lien subprime mortgage loans.

Nearly 100 classes -- totaling $2.1 billion -- from nine subprime issues of C-BASS Mortgage Loan Asset-Backed pass-through certificates have been downgraded by Fitch Ratings. In addition, Fitch affirmed the ratings on C-BASS classes totaling $1.8 billion. The downgrades were based on changes to Fitch's subprime loss forecasting assumptions that it says "better capture the deteriorating performance of pools from 2007, 2006, and late 2005 with regard to continued poor loan performance and home price weakness." The collateral for the transactions, all issued in 2006, consists of first-lien subprime mortgage loans. The rating agency can be found on the Web at http://www.fitchratings.com.