Servicing

Twenty-one certificates from nine Residential Asset Securities Corp. Trust transactions issued in 2004 have been placed on review for possible downgrade by Moody's Investors Service.The negative rating actions were attributed to levels of credit enhancement that "may be inadequate" in view of current and projected pipeline losses, Moody's said.

Three tranches from two closed-end, second-lien residential mortgage securitizations issued by Structured Asset Securities Corp. in 2004 have been downgraded by Moody's Investors Services.The downgrades were as follows: SASCO Trust 2004-S2, class M7, from Baa3 to B3 (and placed on review for possible further downgrade); and SASCO Trust 2004-S4, class B1, from Ba1 to Caa3, and class B2, from Ba2 to Ca. In addition, Moody's placed classes M5 and M6 of series 2004-S2, classes M6 and M7 of series 2004-S3, and class M7 of series 2004-S4 under review for possible downgrade. "The downgrades are driven by back-ended losses that have eroded credit support to a point where the subordinate tranches no longer have sufficient enhancement levels to maintain their current ratings in light of the anticipated losses," Moody's said.

Eleven classes of certificates from four deals issued by GSAMP Trust in 2002 and 2004 have been downgraded by Moody's Investors Service.The affected transactions are GSAMP Trust series 2002-HE, 2004-HE1, 2004-HE2, and 2004-SEA2. The downgrades were attributed to an analysis of the credit enhancement provided by subordination, overcollateralization, and excess spread relative to expected losses. GSAMP Trust 2002-HE, 2004-HE1, and 2004-HE2 are backed by subprime fixed- and adjustable-rate mortgage loans, while GSAMP Trust 2004-SEA2 is backed by seasoned subprime fixed-rate mortgage loans.

Sixteen tranches from four issues of Ameriquest Mortgage Securities Inc. Quest Trust scratch-and-dent transactions have been downgraded by Moody's Investors Service.The downgrades resulted from "a significant slowdown of prepayment speeds and the rapid pace of losses resulting from a higher-than-anticipated delinquency pipeline build-up and higher severities of losses upon liquidation of small-balance mortgage collateral," Moody's said. The collateral consists primarily of first-lien scratch-and-dent mortgage loans. The rating agency can be found online at http://www.moodys.com.

When it comes to hanging onto his palatial estate, the pixie dust appears to be running dangerously low for the King of Pop, singer Michael Jackson.According to a foreclosure detail report filed by Alliance Default Services, Mr. Jackson has defaulted on the mortgage payments for his Neverland Ranch in Los Olivos, Calif. The notice said the report was filed on Oct. 22 in Santa Barbara County. However, Mr. Jackson's loan with Fortress Music Trust (doing business as DBGC LLC, a Delaware corporation) expired on Oct. 12. The singer is delinquent $23.2 million on a $23 million loan and is at risk of losing his ranch if he fails to pay the full amount plus the accrued interest of $231,354 within 90 days. A representative at Alliance Default Services refused to comment on the matter. Mr. Jackson's record label referred the matter to his spokesman, who had not returned telephone calls at deadline time.

The Federal Agricultural Mortgage Corp., Washington, has reported a net loss to common stockholders of $8.6 million ($0.82 per share) for the third quarter, compared with a loss of $6.3 million ($0.58 per share) for the third quarter of 2006.Farmer Mac attributed the losses in both periods to market value changes on financial derivatives used to hedge interest rate risk on Farmer Mac's assets and liabilities. The government-sponsored enterprise also reported "core earnings," a performance measure based on net income available to common stockholders less the after-tax effects of unrealized gains and losses on financial derivatives. Core earnings totaled $7.6 million in the third quarter, versus $6.5 million a year earlier. "Focusing on core earnings, in light of the volatility of the capital markets during the last quarter, we are extremely pleased with Farmer Mac's strong financial results in third-quarter 2007 -- up 18% in comparison to the third quarter of 2006," said Henry D. Edelman, Farmer Mac's president and chief executive officer. The company can be found online at http://www.farmermac.com.

PHH Corp., Mt. Laurel, N.J., lost $38 million in the third quarter as trouble in the mortgage sector hurt the company's business.The company's "segment loss" from mortgage production in the third quarter totaled $113 million, more than double the loss posted in the third quarter of 2006. A $79 million loss on the sale of loans was primarily responsible for the weak performance, the company said. PHH also suffered a $2 million segment loss related to loan servicing in the third quarter. The company serviced $166.9 billion of loans, including subservicing, in the third quarter. The portfolio had a 2.6% delinquency rate. During the third quarter, PHH sold servicing rights on $9.6 billion of loans. The company can be found online at http://www.phh.com.

Federal Reserve Chairman Ben S. Bernanke said Thursday that Fannie Mae and Freddie Mac should be allowed to securitize loans of up to $1 million as a way to alleviate the mortgage credit crunch.Currently, Fannie and Freddie cannot purchase or securitize loans larger than $417,000 -- their loan limit "cap." The Fed chairman said the government could act as a guarantor to aid Fannie and Freddie in securitizing jumbos. "Suppose that the GSEs were to pay their usual mortgage insurance credit fee to the government, which then acted as guarantor so it would be taking away the credit risk from the GSEs," he told the Joint Economic Committee of Congress. "They could process these jumbo loans and sell them in the secondary market." Approval for the government-sponsored enterprises to securitize jumbos would need congressional approval.

Wachovia Corp. said in a federal filing Friday morning that it will take an additional hit of $1.1 billion on the value of subprime-related collateralized debt obligations it owns.The banking giant said its CDOs declined by that much in October alone. When it reported third-quarter earnings, Wachovia revealed a $1.3 billion pretax charge on CDOs, including $347 million in subprime-related valuation losses. The new charge is in addition to the third-quarter hit. Wachovia, the nation's seventh-largest originator of home mortgages, said its remaining asset-backed security CDO exposure is $676 million. The company blamed the writedowns on rising defaults and delinquencies in the subprime market. Wachovia can be found online at http://www.wachovia.com.

Fannie Mae lost $1.4 billion in the third quarter as the company returned to timely financial reporting by posting its official results for the first nine months of the year.The third-quarter loss per share was $1.56. A $2.2 billion decline in the fair value of derivatives was a big drag on Fannie Mae's third-quarter results. On a year-to-date basis, credit expenses rose sharply by $1.6 billion to $2.0 billion, Fannie said. Included in that credit-related expense is a charge of $805 million on delinquent loans purchased from mortgage-backed security trusts, reflecting the difference between par value and the market value of the loans purchased. Credit losses were driven by home price declines and economic weakness in the Midwest, Fannie Mae said. "This is a tough year for our industry, and Fannie Mae is not immune to the challenges facing the mortgage markets," chief executive officer Daniel Mudd said. On the positive side, he said Fannie Mae's guaranty revenue is rising, and its market share has increased to 41% of mortgages produced in the third quarter. Fannie said net income totaled $1.5 billion in the first nine months of the year, down from $3.5 billion in the first nine months of 2006. Fannie Mae's share price fell by 3% in morning trading Nov. 9 after the results were released. Fannie can be found online at http://www.fanniemae.com.