Servicing

Delinquency rates rose while prepayment speeds slowed in August for home equity and jumbo mortgage loans that have been pooled into securities, according to a pair of reports from Moody's Investors Service.The composite delinquency rate on home equity securitizations continued to weaken, with the percentage of loans at least 60 days overdue rising to 15.2%, up from 14.2% in July. The foreclosure and chargeoff rates also rose. For jumbo mortgages in securities, the percentage of loans more than 60 days past due rose to 0.53%, up from 0.50% in July. Moody's said the cumulative prepayment rate declined in August for both home equity and jumbo mortgage securitizations. Moody's can be found online at http://www.moodys.com.

Zacks Equity Research, Chicago, announced Oct. 29 that Liberty Property Trust, Malvern, Pa., had been designated its "Bear of the Day," a stock expected to underperform the markets over the next three to six months.Zacks said the commercial real estate investment trust "paid a steep price" to get into the Washington, D.C. office market with its acquisition of Republic Property Trust for over $900 million. The acquisition will be dilutive to earnings over the next several quarters, the research firm said. "We expect rental rates to remain flat through 2008, as the company has assets in office markets that still have high vacancies," Zacks said. "The company has a large development pipeline that is only 41% pre-leased, which poses a real risk if the economy softens in 2008." Zacks can be found online at http://www.zacks.com, and Liberty Property Trust can be found at http://www.libertyproperty.com.

Stanley O'Neal, executive chairman and chief executive of Merrill Lynch & Co. -- once a huge financier of subprime firms -- is expected to resign from the Wall Street firm as early as Monday.According to combined news reports, Laurence Fink of Black Rock Financial, which is 49% owned by Merrill, is being interviewed about replacing Mr. O'Neal. Back in the 1980s, while at First Boston, Mr. Fink was an important player in the mortgage-backed securities market. Merrill has long been a financier of mortgage companies but became an aggressive player in banking subprime firms when Mr. O'Neal took over the reins of the company six years ago. Merrill recently took a stunning $7.9 billion writedown on subprime and collateralized debt obligation assets in the third quarter, 75% more than it had forecast just a few weeks earlier. Merrill posted a net loss of $2.3 billion and hinted that more writedowns are to come.

Three classes from two EquiFirst Mortgage Loan Trust securitizations have been downgraded by Fitch Ratings.The downgrades were as follows: EquiFirst 2003-1, class M-3, from BBB to B; and EquiFirst 2003-2, class M6, from BBB-minus to BB-plus, and class B1, from BB-plus to BB-minus. In addition, Fitch affirmed the ratings on nine classes from the two deals. The downgrades were attributed to deterioration in the relationship between credit enhancement and loss expectations. The mortgage pools consist of first-lien, fixed- and adjustable-rate residential mortgage loans.

Three classes of mortgage pass-through certificates issued by Banc of America Alternative Loan Trust series ALT 2006-6 have been downgraded by Fitch Ratings.The downgrades were as follows: class B3, from BBB to BB; class B4, from BB to B; and class B5, from B to C/DR5. Fitch also affirmed the ratings on 34 classes from the transaction. The downgrades were based on a deterioration in the relationship between credit enhancement and loss expectations, Fitch said.

Six classes from Ownit Mortgage Loan Trust series 2005-2 have been downgraded by Fitch Ratings as a result of changes in the rating agency's subprime loss forecasting assumptions.The downgrades were as follows: class M-6, from A-plus to BBB; class B-1, from A to BB-plus; class B-2, from A-minus to BB-minus; class B-3, from BBB-plus to B; class B-4, from BBB-plus to CC/DR2; and class B-5, from BBB to CC/DR3. Fitch also affirmed the ratings on six other classes in the deal. The revised assumptions in Fitch's subprime loss model "better capture the deteriorating performance of pools from 2006 and late 2005 with regard to continued poor loan performance and home price weakness," the rating agency said.

Meanwhile, three classes from Bear Stearns Asset Backed Securities 2005-AQ1 mortgage pass-through certificates were downgraded by Fitch Ratings as a result of changes in the rating agency's subprime loss forecasting assumptions.The downgrades were as follows: class M-6, from BBB-minus to BB-plus; class M-7, from BB-plus to BB-minus; and class M-8, from BB to B-plus. Fitch also affirmed the ratings on six other classes in the deal. The revised assumptions in Fitch's subprime loss model "better capture the deteriorating performance of pools from 2006 and late 2005 with regard to continued poor loan performance and home price weakness," the rating agency said.

Eight classes from two issues of Bear Stearns Asset Backed Securities Inc. mortgage-backed securities have been downgraded by Fitch Ratings.The downgrades were as follows: series 2004-2, class M-2, from A to BBB-plus, class M-3, from BBB to BB, and class B, from BBB-minus to B; and series 2005-2, class M-3, from A-minus to BBB-plus, class M-4, from BBB-plus to BBB-minus, class M-5, from BBB to BBB-minus, class M-6, from BBB-minus to BB, and class M-7, from BB to C/DR4. Fitch also affirmed the ratings on five other classes in the two deals. The downgrades were attributed to deterioration in the relationship between credit enhancement and loss expectations. The securitizations are backed by fixed- and adjustable-rate, first- and second-lien mortgage loans. The rating agency can be found online at http://www.fitchratings.com.

Fannie Mae has announced the availability of mortgage relief for victims of recent California wildfires and the donation of $150,000 in grants to American Red Cross chapters in Southern California.The mortgage relief is available under Fannie's single-family servicing guidelines on disaster relief, which advise lenders to make judgments on a case-by-case basis about suspending or reducing mortgage payments for up to four months or offering loan repayment plans that may extend up to 18 months. The Red Cross grants were made to chapters in Los Angeles, San Diego, and San Bernardino counties.

Fannie Mae issued $58.4 billion in mortgage-backed securities in September, the company has reported, marking the sixth consecutive month its MBS issuance has exceeded $50 billion.MBS issuance by Fannie and Freddie has been increasing this year while private-label MBS issuance has declined dramatically. But like all mortgage companies, Fannie is experiencing rising delinquencies. The serious delinquency rate on Fannie single-family loans with private mortgage insurance or other credit enhancements hit 2% in September, up 26 basis points from that of a year earlier. Overall, Fannie's single-family mortgage portfolio has a 0.71% serious delinquency rate (90 days or more past due). Fannie's monthly report also shows that its investment portfolio shank by $7.2 billion to $267.4 billion in September and its purchases totaled only $202 million, compared with $2.8 billion in August. Fannie Mae can be found online at http://www.fanniemae.com.