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Over 260 classes of mortgage-backed securities from 22 issuers were downgraded by Fitch Ratings on Dec. 21 as a result of changes to its subprime loss forecasting assumptions.Fitch also affirmed the ratings on classes with outstanding balances of approximately $27 billion. Among the securities affected by the latest downgrades were: 42 classes of Structured Asset Investment Loans mortgage pass-through certificates; 35 classes of Ameriquest, Argent, and Park Place mortgage pass-throughs; 31 classes of Soundview Home Equity Loan Trust asset-backed certificates; 15 classes from three Bear Stearns Asset-Backed Securities issues; 13 classes of Fremont Home Loan Trust mortgage pass-throughs; 13 classes of NovaStar mortgage pass-throughs; 12 classes of WaMu asset-backed certificates; 12 classes of Citigroup Mortgage Loan Trust mortgage pass-throughs; 11 classes of Option One mortgage pass-throughs; and 11 classes of People's Choice Home Loan mortgage pass-throughs. The rating actions 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."

Loan purchases by Fannie Mae and Freddie Mac rose in November but their retained portfolios continued to shed assets.Fannie Mae purchased $63.7 billion in mortgages during the month, a 28% rise from the level recorded a year earlier. Freddie's purchases rose a more modest 8%, to $41.4 billion. At the end of November Fannie held $722 billion in mortgages, a 1.4% decline from the level on Oct. 31. Freddie's holdings fell 0.3%, to $701.3 billion. In a research note, Credit Suisse said, "Freddie disclosed that wider spreads on mortgage products adversely affected the fair value of its common equity during November." Credit Suisse has an "underperform" rating on Freddie and a price target of $22, which is $8 below its current trading value. Fannie can be found online at http://www.fanniemae.com, and Freddie can be found at http://www.freddiemac.com.

Class M-2 of GS Mortgage Securities Corp. mortgage pass-through certificates series GSRPM 2002-1 has been downgraded from BB to B-minus/DR1 by Fitch Ratings.Fitch also affirmed the ratings on two other classes in the transaction. The downgrade was attributed to deterioration in the relationship between credit enhancement and expected losses. The collateral for the deal consists of seasoned residential mortgage loans.

Two classes of mortgage pass-through certificates from Structured Asset Securities Corp. series 1998-8 have been downgraded by Fitch Ratings.Class M-1 was downgraded from AA to A-minus, and class M-2 was downgraded from A to BBB-minus. Fitch also affirmed the triple-A rating of class A. The downgrades were attributed to deterioration in the relationship between credit enhancement and expected losses. Fitch explained that the securities are made up of four component classes that support four groups, and each component is backed by a separate mortgage pool. "Although each mortgage group performs differently, since the component bonds are not severable, each component bond reflects the performance of the weakest of all the components," the rating agency said.

Four classes of mortgage pass-through certificates from Structured Asset Investment Loan series 2003-BC 2 have been downgraded by Fitch Ratings.The downgrades were as follows: class M-1, from A to BBB-minus (and placed on Rating Watch Negative); class M-2, from BBB-plus to B-minus/DR1; class M-3, from BBB-plus to B-minus/DR1; and class B, from BBB-minus to B-minus/DR2. Fitch also affirmed the triple-A rating of class A. The negative rating actions were based on deterioration in the relationship between credit enhancement and expected losses, the rating agency said.

Twenty-five classes of mortgage-backed securities from three issuers have been downgraded by Fitch Ratings as a result of changes to its subprime loss forecasting assumptions.Fitch also placed nine classes on Rating Watch Negative and affirmed the ratings on classes with outstanding balances of nearly $1 billion. Securities affected by the latest downgrades were as follows: 11 classes from two issues of GSAMP mortgage pass-through certificates; seven classes from two issues of Structured Asset Securities Corp. mortgage pass-throughs; and seven classes of Asset Backed Funding Corp. mortgage pass-throughs. The rating actions 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."

Standard & Poor's Ratings Services has downgraded 793 classes from 116 U.S. residential mortgage-backed securities deals backed by closed-end second-lien mortgage collateral issued from 2004 through 2006.S&P removed 746 of the downgraded classes from CreditWatch negative. (The remaining 47 classes were not on CreditWatch.) The downgraded classes had an original total principal balance of approximately $22.9 billion, which represents 31.8% of the approximately $72.1 billion in closed-end second-lien RMBS rated by S&P from 2004 through 2006. S&P said the actions stemmed from its belief that losses on such RMBS will "significantly exceed historical precedent" and from recent performance data indicating that performance is "likely to be even worse than previously anticipated." This expectation was attributed to: looser underwriting standards; pressure on home prices; speculative borrowing behavior; risk layering; very high combined loan-to-value ratios; pressure on borrowers resulting from payment increases on first-lien mortgages; and questionable data quality. The rating agency can be found online at http://www.standardandpoors.com.

The ratings of MBIA Inc. and its financial guaranty subsidiaries have been placed on Rating Watch Negative by Fitch Ratings as a result of MBIA Insurance Corp.'s exposure to subprime mortgage collateral.MBIA Inc.'s long-term and debt ratings stand at AA, and the insurer financial strength ratings of MBIA Insurance and MBIA's other financial guaranty subsidiaries stand at AAA. The rating agency said the action followed the completion of an updated assessment of MBIA Insurance's exposure to structured finance collateralized debt obligations backed by subprime mortgage collateral, as well as MBIA's exposure to residential mortgage-backed securities. Fitch said slower growth through 2008 "should help improve the company's capital position," but added that MBIA recently "began to get more competitive in the sectors suffering material credit deterioration, and it is many of these transactions that are causing the problems for the company today." Fitch can be found online at http://www.fitchratings.com.

Cleveland-based KeyCorp has announced that it expects a record number of charges for the fourth quarter, including some related to its homebuilder loan portfolio and its past exit from the subprime mortgage business.However, Key also reported that its board has increased the company's dividend for first-quarter 2008 by 2.7% to $0.375 per common share. "Key has been well positioned to weather this unprecedented volatility in the credit markets as we exited the subprime home mortgage business more than a year ago," said Henry L. Meyer III, KeyCorp's chairman and chief executive officer. "Further, we have no meaningful [collateralized loan obligation, collateralized debt obligation, asset-backed commercial paper, or specialized investment vehicle] exposure, and we moved two years ago to sharply curtail our Florida condominium exposure." However, Key's homebuilder loan portfolio has been hurt by the downturn in the U.S. housing market, and its participation in the capital markets has hurt market values and, therefore, financial results, he said. The company can be found online at https://www.key.com.

Former alternative-A giant Impac Mortgage Holdings posted a $1.2 billion loss in the third quarter, $790 million of it tied to markdowns on various types of collateral, including derivatives.The company -- whose shares now trade for about 60 cents each -- is expected to file for bankruptcy protection within the next two months, according to executives close to the lender. Impac is no longer funding nonconforming loans, but originated $261 million in agency product during the quarter. Its balance sheet includes $19.4 million in assets, which threw off interest income of $313 million in the third quarter. Impac, echoing statements made by several other players in the business, blamed its problems on "deteriorating market conditions, higher delinquencies, and higher severities." The company also said its executive vice president and chief financial officer, Gretchen Verdugo, resigned effective Nov. 30 but was given a $200,000, six-month consulting contract. Impac can be found online at http://www.impaccompanies.com.