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Nine classes of GS Mortgage Securities GSR mortgage pass-through certificates have been downgraded by Fitch Ratings. Fitch also removed three classes from Rating Watch Negative and affirmed the ratings on 17 classes from several GS securitizations. The downgrades were attributed to deterioration in the relationship between credit enhancement and loss expectations.

Fitch Ratings has removed 87 residential mortgage-backed securities insured by MBIA Inc. from Rating Watch Negative. The action followed Fitch's recent affirmation of the AAA Insurer Financial Strength ratings of MBIA and its subsidiaries. The IFS rating of the financial guaranty insurance company, and the related RMBS ratings, had been placed on Rating Watch Negative following assessments of the company's exposure to RMBS and collateralized debt obligations backed by subprime mortgage collateral.

Twenty-five classes of pass-through certificates from 13 J.P. Morgan Mortgage Trust securitizations have been downgraded by Fitch Ratings. Fitch also placed two classes on Rating Watch Negative and affirmed the ratings on 48 J.P. Morgan classes. The negative rating actions were attributed to deterioration in the relationship between credit enhancement and loss expectations. The collateral for the transactions consist primarily of conventional first-lien prime mortgages.

National City Corp., Cleveland, has reported a fourth-quarter loss of $333 million ($0.53 per share), compared with net income of $842 million ($1.36 per share) a year earlier. NatCity reported a loss of $149 million for the quarter in its loans-held-for-sale portfolio due to problems in the secondary market, which resulted in additional fair-value writedowns on those loans. It has now stopped origination of all products other than agency-eligible products and shifted certain non-agency-eligible mortgage loans and home equity loans from its held-for-sale portfolio to its balance sheet portfolio. NatCity also took a charge of $181 million ($0.26 per share) for goodwill impairment related to the mortgage business. For the year, NatCity earned $314 million ($0.51 per share), down from income of $2.3 billion ($3.77 per share) in 2006.

Wachovia Corp. is taking a 25% loss on the sale of California homes financed by payment-option ARMs, and the banking company has seen the performance of those negatively amortizing loans deteriorate over the past few quarters. The Charlotte, N.C.-based bank reported a $1 billion increase in nonperforming option adjustable-rate mortgages as the percentage of loans 90 days or more past due in its $120 billion portfolio rose from 1.47% in the third quarter to 2.31% in the fourth quarter. Wachovia took a $93 million chargeoff against the portfolio. But company executives say they expect the option ARM business to remain profitable, despite rising chargeoffs and real-estate-owned sales. The banking company reported a 98% drop in earnings to $51 million in the fourth quarter compared with the level of a year earlier, mainly due to chargeoffs and provisioning relating to its residential and commercial mortgage portfolios. "Lower earnings largely reflect the effect of continued disruption in the capital markets, which resulted in net valuation losses of $1.7 billion as well as a provision for credit losses of $1.5 billion, which exceeded net chargeoffs by $1.0 billion," the bank said.

Ambac Financial Group Inc., New York, has taken a $5.21 billion writedown involving mortgage-related exposures and posted a $3.26 billion quarterly loss, but its executives said in a Jan. 22 conference call that they remain "confident." They said they were confident in part because the company has been offered several unspecified "alternatives" by "strong parties." The executives said the loss included a $1.1 billion reserve set aside to cover mortgage-related exposures. The company had backed away from a plan to raise equity capital on Jan. 18, citing challenging market conditions and rating actions. Fitch recently downgraded several of the company's ratings and put them on Rating Watch Negative.

Fannie Mae and Freddie Mac could write down the value of their subprime and alternative-A securities by as much as $16 billion, according to a new report issued by Credit Suisse. CS analyst Moshe Orenbuch estimates that Freddie's charge could be as high as $11 billion, Fannie's $5 billion. Mr. Orenbuch said the government-sponsored enterprises, through September, have recognized "minimal impairments" on their roughly $230 billion in subprime and alt-A holdings. Both GSEs declined to comment on the CS report. Fannie and Freddie are scheduled to release fourth-quarter earnings at the end of February, but have not yet specified an exact date.

Four of Countrywide Financial Corp.'s top executives -- except company chairman and chief executive Angelo Mozilo -- are entitled to millions of dollars in retention grants as part of the lender's sale to Bank of America. According to a new filing with the Securities and Exchange Commission, Ranjit Kripalani, Countrywide's managing director of capital markets, is entitled to the most ($2.5 million), followed by president/chief operating officer David Sambol ($1.9 million), chief financial officer Eric Sieracki ($1.5 million), and banking chief Carlos Garcia ($1.45 million). Mr. Mozilo is expected to leave the company once BoA takes over, or even sooner. Mr. Sambol, who currently serves as president, is considered Mr. Mozilo's successor. The board, chaired by Mr. Mozilo, approved the retention grants.

Bank of America chief executive Kenneth Lewis said Tuesday morning that he expects the company's purchase of the troubled Countrywide Financial Corp. to close some time in the second half of this year. There has been speculation that BoA might back out of the deal, which sent Countrywide's share price reeling on Jan. 18. Meanwhile, on Tuesday the treasurer of the Service Employees International Union sent a letter to Federal Reserve Chairman Ben S. Bernanke and elected officials that oversee the mortgage industry, asking them to carefully review the transaction. "While the short-term appeal of this acquisition may be tempting, the long-term implications of bank industry consolidation on this scale raise serious policy and regulatory questions that need to be answered now," wrote SEIU treasurer Anna Burger. The union has 1.9 million members.

Bank of America -- which a few weeks ago agreed to buy Countrywide Financial Corp. -- took a $5.28 billion charge on its collateralized debt obligation holdings in the fourth quarter. BoA saw its earnings plunge by 94% in the period to just $268 million. Over the past few days, investment bankers have speculated that BoA could back out of the Countrywide deal entirely, or at the very least ask for a reduction on the $4 billion purchase price. In trading early Tuesday morning, BoA's share price was down 6%, Countrywide's 13%. Bank of America can be found online at http://www.bankofamerica.com.