Servicing

Five classes of mortgage pass-through certificates from Lehman Mortgage Trust 2006-5 have been downgraded by Fitch Ratings.The downgrades were as follows: class B1, from AA to AA-minus; class B2, from A to A-minus; class B3, from BBB to BB-plus (and placed on Rating Watch Negative); class B4, from BB to B (and placed on Rating Watch Negative); and class B5, from B to C/DR5. Fitch also affirmed the ratings on two other classes in the deal. The downgrades were attributed to deterioration in the relationship between credit enhancement and loss expectations. The collateral generally consists of fixed-rate, first-lien conventional mortgages.

Sixteen classes of Structured Adjustable Rate Mortgage Loan Trust mortgage pass-through certificates have been downgraded by Fitch Ratings.Fitch also affirmed the ratings on 20 other classes in four SARM transactions. The downgrades were attributed to larger-than-expected losses stemming from "a rapidly increasing delinquency pipeline." The transactions consist of conventional first-lien mortgage loans.

Thirty-eight classes from 11 issues of First Horizon Alternative mortgage pass-through certificates have been downgraded by Fitch Ratings.Fitch also affirmed the ratings on 30 other classes in the First Horizon transactions. The downgrades were attributed to trends in the relationship between serious delinquency and credit enhancement. The collateral generally consists of adjustable-rate, first-lien alternative-A mortgages. Fitch can be found on the Web at http://www.fitchratings.com.

DiamondRock Hospitality Co., a constituent of the Standard & Poor's REIT Composite Index, will replace Energen in the S&P SmallCap 600 Index after the close of trading Nov. 7, S&P has announced.The reason for the change is that Energen, an oil and gas company, will be moving from the SmallCap 600 to the S&P MidCap 400. DiamondRock, based in Bethesda, Md., is a real estate investment trust that owns and operates upscale hotels and resorts.

Increased exposure to the subprime mortgage market, specifically mortgage-backed securities, caused U.S. Central FCU to take losses of almost $17 million in the third quarter, according to the credit union.Losses and increasing troubles in its MBS portfolio prompted Standard & Poor's to downgrade U.S. Central's short-term outlook from stable to negative. "The outlook revision," the rating agency said, "reflects increased concerns about USC's exposure to subprime, home equity, and other MBS." USC has a federal credit union charter and is regulated by the National Credit Union Administration. It serves as a "central banker" for the nation's 40 regional corporate credit unions. Regionals, in turn, provide liquidity to the nation's 8,500 personal credit unions.

Democrats on the House Judiciary Committee plan to try Nov. 7 to mark up a bill that allows bankruptcy judges to restructure mortgages, and they are hoping to get some Republican support.Committee Chairman John Conyers, D-Mich., acknowledged at a Nov. 1 hearing that it will be "very tough" to get the bankruptcy bill through the House and the Senate without Republican support. But it appears that the Democrats will be lucky to get support for the bankruptcy bill (H.R. 3609) from Rep. Steve Chabot, R-Ohio, who has introduced his own bankruptcy restructuring bill. Mortgage industry lobbyists are fairly confident that opposition from Republicans and a group of conservative Democrats will make it difficult to bring H.R. 3609 to the House floor for a vote. Separately, the House Financial Services Committee is planning to start the mark-up of a predatory lending bill (H.R. 3915) on Nov. 6, which could take several days to complete.

Fannie Mae and Freddie Mac have the existing capability to buy or securitize over $125 billion in subprime rescue mortgages without congressional legislation temporarily increasing the caps on their investment portfolios, according to the director of the Office of Federal Housing Enterprise Oversight."In my view, the legislation is unnecessary, unsafe and unsound, and could have the unfortunate effect to set a target for subprime purchases that the enterprises may not be able to meet safely," OFHEO Director James Lockhart says in a letter to Rep. Paul Kanjorski, D-Pa. Sen. Charles E. Schumer, D-N.Y., and Rep. Barney Frank, D-Mass., have introduced a bill to lift the cap for six months -- provided that 85% of the GSEs' purchases involve subprime loans that have been refinanced. OFHEO recently provided the two government-sponsored enterprises with additional cap flexibility. However, Fannie and Freddie responded by reducing the size of their portfolios in September. Rep. Kanjorski said he agrees with the OFHEO director's "informed assessment."

Employment in the mortgage industry plummeted by 25,100 full-time positions in September, following a 26,800 drop in August, as the mortgage shops of major lenders and securities firms continue to reduce their payrolls.The U.S. Bureau of Labor Statistics reported that employment in the mortgage banker/broker sector fell from 428,700 in August to 403,600 in September. The latest numbers show that 100,000 jobs -- 20% of the mortgage industry work force -- have been lost since October 2006. At the same time, "construction employment has fallen by 124,000 since its peak in September 2006, driven by losses in residential construction," BLS acting Commissioner Philip Rones said. The BLS can be found online at http://stats.bls.gov.

Eight classes from three J.P. Morgan Alternative Loan Trust securitizations have been downgraded by Fitch Ratings.The downgrades were as follows: series 2006-A2 pools 2-5, class C-B-3, from BBB to BBB-minus, class C-B-4, from BB to B, and class C-B-5, from B to C/DR5; series 2006-A3 pools 2-3 (aggregate pool A), class C-B-4, from BB to B-plus, and class C-B-5, from B to C/DR5; and series 2006-S1 pools 1-2, class B-3, from BBB to BBB-minus, class B-4, from BB to B-plus, and class B-5, from B to CCC/DR2. Fitch also affirmed the ratings on 20 classes from five J.P. Morgan Alternative Loan Trust deals. The downgrades were attributed to a deterioration in the relationship between credit enhancement and loss expectations. The collateral for the deals consists primarily of first-lien alternative-A mortgage loans.

Eight classes from two issues of CitiMortgage Alternative Loan Trust mortgage pass-through certificates have been downgraded by Fitch Ratings.The downgrades were as follows: series 2006-A4, class B-2, from A to A-minus, class B-3, from BBB to BB-plus, class B-4, from BB to B, and class B-5, from B to C/DR5; and series 2006-A6, class B-2, from A to A-minus, class B-3, from BBB to BB-plus, class B-4, from BB to B-plus, and class B-5, from B to C/DR4. Fitch also affirmed the ratings on four classes in the two transactions. The downgrades were attributed to "current trends in the relationship between serious delinquency and credit enhancement." The collateral in the deals consists of fixed-rate alternative-A mortgage loans.