Servicing

Moody's Investors Service has downgraded the ratings of 62 tranches of mortgage-backed securities from six deals issued by Deutsche Bank in 2007, and 16 tranches have been placed under review for possible downgrade. One downgraded tranche remains on review for possible further downgrade. The negative rating actions were based on higher-than-expected rates of delinquency, foreclosure, and real estate owned in the underlying collateral relative to credit enhancement levels, the rating agency said. The collateral consists primarily of first-lien alternative-A mortgage loans.

Zacks Equity Research, Chicago, announced Jan. 9 that Highwoods Properties Inc., a real estate investment trust based in Raleigh, N.C., has been designated its "Bear of the Day," a stock expected to underperform the markets over the next three to six months. Zacks said the commercial REIT "continues to dispose of underperforming assets and focus on development," but that its shares are still rated a Sell. "Many of the company's Southeastern and Midwest markets still have high vacancies, which will make continued rent growth difficult," Zacks said. "In addition, the latest employment report was not encouraging, and we think this will get worse in the coming months." Zacks can be found online at http://www.zacks.com, and Highwoods can be found at http://www.highwoods.com.

Interactive Mortgage Advisors, Denver, is selling a $621 million package of Fannie Mae/Freddie Mac bulk servicing rights for an undisclosed client. The receivables (5,022 loans in total) have a 1.45% delinquency rate. Roughly 79% of the portfolio is collateralized by homes in Texas. The bid deadline is Jan. 17.

MBIA Inc., Armonk, N.Y., has sought to stave off negative rating pressure related to its mortgage-related asset-backed securities insurance exposure with a $1 billion surplus note offering and by cutting its dividend. Combined news reports also indicate that MBIA is facing inquiries by federal securities and state insurance regulators related to the company's reports to investors about its mortgage-related risks. The company reaffirmed previous estimates for the fourth quarter indicating that it will take a $737 million loss for the period that is "principally related" to "insured securitizations of prime home equity lines of credit and prime closed-end second-lien mortgages."

E*Trade Financial -- which is undergoing a wrenching restructuring -- said Wednesday that it has sold an additional $3 billion worth of bonds, including mortgage-backed securities and municipals. The bank/online brokerage firm said it took a $5 million loss on the sales which occurred in separate transactions over the past several weeks. (In November it sold $3 billion in asset-backed securities.) The New York-based E*Trade also said its home equity portfolio is continuing to "run off as anticipated" and totaled just under $12 billion in loans at year's end. Early in the fall, E*Trade closed its wholesale residential unit and booked a $245 million charge against earnings because of bad home equity loans and what it called a "deterioration in the mortgage market."

Fast-tracking loan modifications and freezing the interest rate on adjustable-rate subprime mortgages will not jeopardize the accounting and tax status of the mortgage-backed securities, according to an opinion by the Securities and Exchange Commission chief accountant. SEC chief accountant's opinion gives the green light for servicers to implement the fast-track loan modification framework endorsed by the Treasury Department, the Hope Now Alliance, and the American Securitization Forum. ASF deputy executive director Tom Deutsch welcomed the SEC's guidance. "It is imperative for subprime mortgage servicers to have confidence that implementing the fast-track loan modification segment of the ASF framework will not alter the accounting treatment of securitization trusts." SEC chief accountant Conrad Hewitt said in a letter that the vast majority of subprime loan modifications are expected to begin in early 2008. "The Office of Chief Accountant believes this is an appropriate interim step at this time to address this issue given the complexity and lack of specific guidance on the accounting and disclosure for these types of modifications." Mr. Hewitt noted, however, that the letter is not an opinion on the legality of modifying subprime mortgages.

Countrywide Financial Corp. Tuesday afternoon denied rumors that the company is planning to file for bankruptcy protection. In a statement, it added: "We are not aware of any basis for the rumor that any of the major rating agencies are contemplating negative action relative to the company." The bankruptcy rumor began to circulate late Tuesday morning after the firm's share price fell more than 16% to a new 52-week low, $5.76. There was no major news on the company except for a New York Times report that cited allegations that a Countrywide employee may have recreated documents tied to a consumer's bankruptcy filing in Pennsylvania. A company spokesman said Countrywide, as a policy, does not fabricate documents.

Countrywide Financial Corp. -- the nation's largest residential servicer, with $1.5 trillion in receivables -- saw its foreclosure rate spike to 1.44% at the end of December, a stunning 105% increase from the rate recorded a year earlier. Based on unpaid principal balances, that means $21 billion of loans that it owns the servicing rights to are pending foreclosure. (Based on number of loans serviced, the rate is 1.04%, or almost 94,000 loans.) Meanwhile, delinquencies in its gargantuan servicing portfolio increased to 7.20% at year's end, a 56% rise from the level at Dec. 31, 2006. The figures were disclosed in its monthly operational statement released Jan 9. It funded $24 billion worth of new loans in December, up slightly from the volume in November, but down 46% from that of the same month in 2006. Countrywide can be found on the Web at http://www.countrywide.com.

Three classes of mortgage pass-through securities issued by Nomura Asset Acceptance Corp. have been downgraded by Fitch Ratings. The downgrades were as follows: series 2001-R1, class B-2, from A to CCC/DR2, and class B-3, from B to C/DR5; and series 2003-A1, class B4, from BB to B (and removed from Rating Watch Negative). Fitch also affirmed the ratings on seven other classes in the two transactions. The downgrades reflect deterioration in the relationship between loss expectations and credit support levels, Fitch said.

Twelve classes of mortgage-backed securities issued by Credit Suisse First Boston Home Equity Asset Trust 2007-3 were downgraded by Fitch Ratings on Jan. 7 as a result of changes to its subprime loss forecasting assumptions. Fitch also affirmed the ratings on classes with outstanding balances of more than $170 million. The downgrades were attributed to changes in 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."