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Freddie Mac could take an impairment charge ranging from $1 billion to $5 billion on its subprime mortgage investments, according to a Credit Suisse report released Monday morning.The government-sponsored enterprise is slated to report third-quarter earnings on Tuesday and was not commenting on the projections made by Credit Suisse analyst Moshe Orenbuch. Freddie owns roughly $120 billion in subprime-related asset-backed securities, which are triple-A rated. A spokeswoman noted that the investments have senior/subordinated enhancements and that for the government-sponsored enterprise to take a loss, all the subordinated pieces would have to be wiped out first. In his report, Mr. Orenbuch says Freddie's subprime investments "likely have substantial subordination." He refers to the anticipated writedowns as an "other-than-temporary" impairment charge. Credit Suisse also reduced its 12-month price target on the stock from $68 to $45. Credit Suisse can be found on the Web at http://www.credit-suisse.com.

The Federal Home Loan Bank of Chicago reported net income of $24 million in the third quarter, down from $27 million in the second quarter (not down from $50 million, as a previous Wire item incorrectly reported). A spokeswoman for the FHLBank pointed out that a restatement has increased the FHLBank's first-half earnings upward by $2 million to $52 million.

Class B-5 of Sequoia Mortgage Funding Corp. mortgage pass-through certificates, series 2005-2, has been placed on Rating Watch Negative by Fitch Ratings.Fitch also affirmed the ratings on 17 classes from three Sequoia transactions issued in 2005. The negative rating action was attributed to a high balance of loans with serious delinquencies. The collateral consists of prime adjustable-rate mortgage loans indexed to the one-month and six-month London interbank offered rates.

Classes B-5 and B-6 of Structured Asset Mortgage Investments II Trust mortgage pass-through certificates, series 2004-AR1, have been placed on review for possible downgrade by Moody's Investors Service.The actions are based on an analysis of the credit enhancement provided by subordination, overcollateralization, excess spread, and mortgage insurance relative to expected losses, Moody's said. The transaction is backed by adjustable-rate alternative-A mortgage loans.

Two tranches from Structured Asset Mortgage Investments II Trust series 2006-AR3 have been downgraded by Moody's Investors Service.Class II-B-2 was downgraded from A2 to Baa1, and class II-B-3 was downgraded from Baa2 to B1. The downgrades were attributed to higher-than-expected rates of delinquency, foreclosure, and real estate owned in the underlying collateral relative to credit enhancement levels. The collateral classes consists primarily of first-lien, adjustable-rate alternative-A mortgage loans.

Five classes of notes (and their series 2 counterparts) issued by Duke Funding High Grade II-S/EGAM I Ltd., a collateralized debt obligation used to acquire mortgage-backed securities, have been downgraded by Fitch Ratings.The downgraded notes were as follows: class A2 and series 2 class A2, from AAA to BBB-minus; class B1 and series 2 class B1, from AA-plus to BB; class B2 and series 2 class B2, from AA-minus to BB-minus; class C and series 2 class C, from BB to B; and class D and series 2 class D, from B to CCC. All the classes remain on Rating Watch Negative. The downgrades were attributed to continued concerns about the availability of repo funding with terms similar to those now in place. Fitch said the proceeds of the notes are used to buy a diversified portfolio of triple-A rated, primarily private-label residential MBS. The rating agency can be found online at http://www.fitchratings.com.

Twelve tranches from three mortgage securitizations issued by Banc of America Funding Corp. in 2006 have been downgraded by Moody's Investors Service, and six tranches have been placed under review for possible downgrade.The negative rating actions were attributed to higher-than-expected rates of delinquency, foreclosure, and real estate owned in the underlying collateral relative to credit enhancement levels. The collateral consists primarily of first-lien, fixed- and adjustable-rate alternative-A mortgage loans.

The ratings of 62 tranches from 12 mortgage securities deals issued by Deutsche Bank in 2006 and late 2005 have been downgraded by Moody's Investors Service, and 18 tranches have been placed under review for possible 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 collateral consists chiefly of first-lien, fixed- and adjustable-rate alternative-A mortgage loans. Moody's can be found on the Web at http://www.moodys.com.

California foreclosure sales surged by 40% in October (and by 568% from the level recorded a year earlier) and they are unlikely to peak until late next year, according to ForeclosureRadar, Discovery Bay, Calif.The company reported that 12,336 California foreclosures (with a total loan value of $5.0 billion) were sold at auction in October, compared with 8,118 (with a total value of $3.6 billion) in September. "We see no sign of a foreclosure peak at this point, and we don't expect to see one until the third or fourth quarter of 2008 at the earliest," said Sean O'Toole, founder and chief executive officer of ForeclosureRadar. "The sales we are seeing now are from missed payments in March. So current auction sales really have not yet been impacted by either August's liquidity crunch or the [adjustable-rate mortgage] reset peaks this month and again in March '08." ForeclosureRadar, a foreclosure listings and software company, can be found on the Web at http://www.foreclosureradar.com.

The Laborers' International Union of North America has announced shareholder proposals that it terms "the most aggressive effort yet by any institutional investor" to protect workers' pension funds and restore accountability to the mortgage industry.The proposals focus on: helping investors understand mortgage securities risk by requiring disclosure of the types of mortgages bought and sold and their underlying value; limiting conflict of interest between rating agencies and mortgage buyers and sellers by requiring a cooling-off period before hiring key staff from financial services and mortgage holding companies; and enacting succession plans and executive compensation policies to deal with the likelihood that many chief executives will be replaced due to the mortgage crisis. "As many as 1 million residential construction workers will lose their jobs, up to 3 million homeowners face foreclosure, and hundreds of billions of dollars in shareholder value have been destroyed because of a system riddled with conflicts of interest, lack of disclosure, and lack of oversight," said Terence M. O’Sullivan, LIUNA general president. A "real solution" must also include legislative action and self-regulation by homebuilders, lenders, and rating agencies, he said.