Servicing

Four tranches of two deals issued by Citigroup Mortgage Loan Trust in 2003 have been downgraded by Moody's Investors Service.The downgrades were as follows: series 2003-HE3, class M-4, from Ba1 to B2; and series 2003-HE4, class M-5, from Ba1 to B1, class M-6, from Ba3 to Caa2, and class M-7, from B2 to C. The downgrades were attributed to higher-than-expected delinquencies and losses. "Moreover, the 2003-HE4 transaction has experienced erosion of overcollateralization due to the recent pace of losses," the rating agency said. The collateral backing the deals consists primarily of first-lien subprime residential mortgage loans.

Two certificates from Ameriquest Mortgage Securities Inc. series 2003-2 have been downgraded by Moody's Investors Service, and a third has been placed on review for possible downgrade.Class M-3 was downgraded from B3 to Ca, and class M-4 was downgraded from Ca to C. Class M-2 was placed on review for possible downgrade. The negative rating actions were based on an analysis of credit enhancement levels provided by excess spread, overcollateralization, and subordinate classes relative to the expected loss, Moody's said. The transaction is backed by adjustable- and fixed-rate subprime mortgage loans. Moody's can be found online at http://www.moodys.com.

Three classes from two issues of Banc of America Alternative Loan Trust mortgage pass-through certificates have been downgraded by Fitch Ratings.The downgrades were as follows: series ALT 2004-9 pool 4, class 15-B5, from B to C/DR5 (and removed from Rating Watch Negative); and series ALT 2004-10 pool 3, class 15-B3, from BBB to BB-minus (and removed from Rating Watch Negative), and class 15-B4, from B to C/DR4. Fitch also placed class 15-B4 of series ALT 2004-9 pool 4 and class 15-B2 of series ALT 2004-10 pool 3 on Rating Watch Negative and affirmed the ratings on 14 other classes in the two deals. The negative rating actions were attributed to a deterioration of credit enhancement relative to loss expectations. The collateral in the transactions consists of fixed-rate, first-lien mortgage loans.

Thirteen classes from seven subprime mortgage-backed securities deals issued by Morgan Stanley have been downgraded by Fitch Ratings.Fitch also placed one of the downgraded classes on Rating Watch Negative and affirmed the ratings on 17 other classes from the transactions. The negative rating actions were attributed to deterioration in the relationship between credit enhancement and expected losses. Fitch can be found online at http://www.fitchratings.com.

Standard & Poor's has downgraded 1,713 classes of U.S. RMBS backed by first-lien subprime, first-lien alternative-A, and closed-end second-lien mortgage loans issued in the first half of 2007.The downgraded securities had an original par value of $23.35 billion, which represents 6.28% of the U.S. residential mortgage-backed securities backed by such collateral that were rated by S&P during that period, the rating agency reported. S&P said it also affirmed the ratings on securities representing $245.1 billion of U.S. RMBS backed by such collateral, and placed the ratings of 646 other classes on CreditWatch negative. "Transactions issued in 2007 have not experienced an adequate payment history to reliably apply our traditional surveillance assumptions," S&P said, "however, the same risks that are apparent in transactions issued in 2006 are present in transactions issued in 2007." The rating agency can be found online at http://www.standardandpoors.com.

Although foreclosure sales declined in California in September, they actually rose by 5% on an average daily basis, according to ForeclosureRadar, Discovery Bay, Calif.The company reported that 8,818 California foreclosures (with a total loan value of $3.60 billion) were sold at auction in September, compared with 9,477 (with a total value of $3.86 billion) in August. "Although it appears that foreclosure activity has slowed this month, digging deeper into the numbers tells another story," said Sean O'Toole, founder and chief executive officer of ForeclosureRadar. "In the month of August there were 23 recording and auction days. In contrast, September had 19 recording days and only 18 auction days, so we actually saw across-the-board increases in average daily foreclosure activity." ForeclosureRadar, a foreclosure listings and software company, can be found on the Web at http://www.foreclosureradar.com.

A Better Business Bureau-type organization called the Better Mortgage Bureau has been formed in Baltimore to provide the tools and education consumers need to make informed homebuying decisions, according to the BMB.The bureau said its mission is to "elevate consumer awareness through shared experiences and industry experts" and to establish the best-practices benchmark for the mortgage industry. Calling itself the "Good Housekeeping Seal of Approval" for the mortgage industry, the organization said consumers can search the repository of all BMB members to find the mortgage professional that meets their needs. "For the first time, consumers can be assured that their mortgage professional is licensed, trained, and will adhere to the BMB code of ethics," the bureau said. The BMB can be found online at http://www.bettermorgagebureau.com.

The PMI Group Inc., Walnut Creek, Calif., has issued a preliminary estimate that it will take a third-quarter loss of approximately $1.05 per share.The company cited incurred losses in its U.S. mortgage insurance operations and a mark-to-market adjustment at its unconsolidated subsidiary, FGIC, as the cause. Defaults significantly worsened in September. As a result, PMI said it expects approximately $350 million in paid claims, loss adjustment expenses, and additions to the reserve for losses for its U.S. mortgage insurance operations in the third quarter. It is withdrawing its full-year total incurred loss guidance and other financial guidance. Regarding FGIC, in which it holds a 42% stake, mark-to-market adjustments on the insured credit derivative will result in an unrealized loss of approximately $206 million. FGIC anticipates that as a result of this adjustment it will report a net loss of approximately $65 million for the third quarter. PMI's share of that loss is $0.32 per share.

State attorneys general are not going to take a back seat to the Treasury Department's Hope Now initiative when it comes to working with and monitoring the top 10 subprime servicers and their loan modification activities, despite the suggestions of one mortgage industry group."We think the Hope Now initiative and our initiative are very complementary," Iowa AG Tom Miller said. It is important to have people at the local as well as the federal level involved in the monitoring, he added. In a letter to the Iowa AG, the Consumer Mortgage Coalition said the Treasury is putting together a coordinated effort to prevent foreclosures and that requiring servicers to work with two initiatives will make them less effective. "We believe that by concentrating our efforts in the Hope Now Alliance, we will be able to maximize the benefit for the citizens of your state," CMC executive director Anne Canfield says in the letter. Mr. Miller told MortgageWire that the top 10 servicers have agreed to work closely with a group of state AGs and banking regulators. "None of them have indicated they are not going to honor their commitment," he said.

Forced to sell high-quality jumbo loans at a discount, Thornburg Mortgage, Santa Fe, N.M., posted a $1.1 billion loss in the third quarter.Company president and chief operating officer Larry Goldstone argued that the liquidity crisis in the nonconforming market -- at least as it pertains to Thornburg -- reflects "investor perception, not investment reality." At the end of September, the publicly traded real estate investment trust had assets (mostly adjustable-rate mortgages) of $36.3 billion, compared with $52.7 billion at the end of December. At the end of the third quarter it boasted a delinquency rate of just 0.27%. However, because of the liquidity crisis, the company has been forced to sell high-quality assets as a way to keep its lenders happy.