Servicing

Nine classes of certificates from five deals issued by NovaStar Mortgage Funding Trust in 2003 and 2004 have been downgraded by Moody's Investors Service.The actions were based on an analysis of the credit enhancement provided by subordination, overcollateralization, excess spread, and mortgage insurance relative to the expected loss, Moody's said. Four of the deals have already stepped down, and losses have begun to erode the overcollateralization while reducing credit enhancement provided by subordination, leaving the rated bonds less protected, the rating agency said. The deals are backed by fixed- and adjustable-rate subprime mortgage loans.

Fourteen tranches of mortgage-backed securities issued by CSFB Adjustable Rate Mortgage Trust in 2004 and 2005 have been downgraded by Moody's Investors Service, and seven tranches have been placed on review for possible downgrade.Moody's also downgraded six tranches of CSFB Home Equity Pass-Through Certificates, series 2005-1, which is backed by first-lien subprime mortgage loans. The actions were based on an analysis of the credit enhancement levels provided by excess spread, overcollateralization, and subordinate classes relative to expected losses, Moody's said. The collateral for the tranches issued by CSFB Adjustable Rate Mortgage Trust consists of first-lien alternative-A mortgage loans.

Twenty-two classes of certificates from six deals issued by Aegis Asset-Backed Securities Trust have been downgraded by Moody's Investors Service.The downgrades were attributed to an analysis of the credit enhancement provided by subordination, overcollateralization, and excess spread relative to expected losses. Most of the deals have already stepped down, losing credit enhancement provided by subordination due to stepdown, the rating agency said. For all the deals, losses have begun to erode the overcollateralization, leaving the rated bonds less protected, Moody's said. The transactions are backed by fixed and adjustable-rate subprime mortgage loans.

Forty-one tranches from eight transactions issued by Securitized Asset Backed Receivables LLC Trust in 2007 have been downgraded by Moody's Investors Service, and 15 tranches have been placed under review for possible downgrade.In addition, one downgraded tranche remains on review for possible further downgrade. The collateral is experiencing higher-than-expected rates of delinquency, foreclosure, and real estate owned relative to credit enhancement levels, Moody's said. The collateral consists primarily of first-lien subprime mortgage loans.

Forty-three tranches from eight transactions issued by Merrill Lynch in 2007 have been downgraded by Moody's Investors Service, and 12 tranches have been placed under review for possible downgrade.In addition, two downgraded tranches remain on review for possible further downgrade. The collateral is experiencing higher-than-expected rates of delinquency, foreclosure, and real estate owned relative to credit enhancement levels, Moody's said. The collateral consists primarily of first lien subprime mortgage loans.

In a flurry of rating announcements on Dec. 3, Moody's Investors Service downgraded 167 classes of second-lien mortgage-backed securities from nine issuers.In addition, Moody's placed 23 classes of certificates on review for possible downgrade. Among the downgraded securities were 41 classes from six deals issued by Bear Stearns Mortgage Funding Trust; 35 classes from five deals issued by Nomura Asset Acceptance Corp., Alternative Loan Trust; 34 classes from five deals issued by Ace Securities Corp. Home Equity Loan Trust; 17 classes from three deals issued by Morgan Stanley Mortgage Loan Trust; and 16 classes from two deals issued by CWABS Asset-Backed Certificates Trust. "Substantial pool losses over the last few months have continued to erode credit enhancement available to the mezzanine and senior certificates," the rating agency said. "Despite the large amount of writeoffs due to losses, delinquency pipelines have remained high as borrowers continue to default." Moody's said it expects the "significant delinquency pipelines" will continue to erode the credit support for the senior and mezzanine certificates. The rating agency can be found online at http://www.moodys.com.

New York Mortgage Trust Inc., a New York-based real estate investment trust, has announced that it will issue $20 million of convertible preferred stock to JMP Group Inc. and certain of its affiliates.James J. Fowler, a managing director of JMP Asset Management LLC, a wholly owned subsidiary of JMP Group, will become nonexecutive chairman of NYMT upon the closing of the investment, the REIT reported. NYMT also said it has agreed to retain JMP Asset Management to manage investments held by NYMT subsidiaries Hypotheca Capital LLC and New York Mortgage Funding LLC. "Over the years, we have learned that periods of market dislocation are the best times to deploy fresh capital, and in NYMT we have found the right platform and team to immediately take advantage of today's compelling investment opportunities in the mortgage-backed securities markets," Mr. Fowler said. NYMT can be found on the Web at http://www.nymtrust.com.

Clayton Holdings, a provider of information and analytics to lenders, mortgage servicers, and the capital markets, says it expects to take a pretax impairment charge of $75 million to $100 million in the fourth quarter.Clayton said the noncash charge will reflect the reduced carrying charge of goodwill, intangible assets, and other long-lived assets of its transaction management business. Frank Filipps, chairman and chief executive officer of Clayton, said the steep decline in new nonconforming mortgage securities issuance has "significantly reduced our transaction management revenues." He noted that industry projections suggest that the issuance of private-label mortgage-backed securities will remain depressed "throughout much of 2008 and possibly into 2009." Clayton's services include due-diligence analytics, conduit support services, professional staffing, compliance products and services, credit risk management and surveillance, and specialized loan servicing. Clayton Holdings can be found online at http://www.clayton.com.

Top Bush administration officials are urging Congress to pass Federal Housing Administration reform legislation before the end of the year, and they appear ready to compromise on a risk-based premium structure for FHA mortgages."We are working with the leadership in Congress to resolve differences on this issue," a Department of Housing and Urban Development spokesman said. A few weeks ago, it appeared that HUD was ready to move ahead administratively with a risk-based premium structure despite congressional opposition. But now HUD does not want to antagonize Congress while there is still a chance the Senate could act on FHA reforms in the next few weeks, which would increase refinancing options for troubled subprime borrowers. "It has been sitting in the Senate for too long," HUD Secretary Alphonso Jackson told an Office of Thrift Supervision housing forum. "Each day of delay unnecessarily places thousands of families at risk of foreclosure."

The Treasury Department's "teaser freezer" plan to help subprime borrowers facing resets will have a "limited" impact on the total number of loan modifications and the coming wave of foreclosures, according to some Wall Street analysts.Reports by UBS and Friedman Billings Ramsey & Co. point out that the group of homeowners targeted for modifications -- where the servicer freezes the interest rate at the starter (or "teaser") rate -- would likely get their loans modified without a government-sponsored plan. "That is why we suspect this effort will have only marginal impact on total modifications and little impact on the coming wave of foreclosures," said Thomas Zimmerman, a managing director at UBS Investment Bank. FBR analyst Paul Miller contends that the teaser freezer plan simply represents what is already being done in the market. "In our opinion, the plan will affect a limited number of borrowers, many of whom might receive a loan modification even without a government-sponsored plan," Mr. Miller says. "The plan will not enable borrowers who are unable to pay their mortgages to keep their homes or support home prices."