Servicing

Two classes of notes issued by Pacific Coast CDO Ltd. have been downgraded by Fitch Ratings and removed from Rating Watch Negative.The class A notes were downgraded from AA to A, and the class B notes were downgraded from B/DR4 to CCC/DR4. Pacific Coast is a collateralized debt obligation that consists of 46% residential mortgage-backed securities, 20% commercial MBS, 19% asset-backed securities, 13% other CDOs, and 3% corporate bonds. The rating agency cited a continued decline in overcolllateralization, a drop in interest coverage, and the use of principal proceeds to pay interest as factors in the downgrades.

Three classes of notes issued by Glacier Funding CDO III, a collateralized debt obligation that includes mortgage-backed securities, have been downgraded by Fitch Ratings.The downgrades were as follows: class B notes, from AA to A; class C notes, from BBB to BB; and class D notes, from BB-plus to B (and removed from Rating Watch Negative). Fitch also affirmed the ratings on two other classes in the CDO. "Fitch's rating actions reflect the significant collateral deterioration within the portfolio, specifically subprime residential mortgage-backed securities, since the last rating action on March 13, 2007," the rating agency said. "Further, Glacier III's portfolio contains a sizable exposure (39%) to subprime [residential MBS] of 2005, 2006, and 2007 vintages, which are experiencing higher levels of delinquencies and defaults."

Three classes of notes issued by Glacier Funding CDO II, a collateralized debt obligation that includes mortgage-backed securities, have been downgraded by Fitch Ratings.The downgrades were as follows: class B notes, from AA to A; class C notes, from BBB to BB (and removed from Rating Watch Negative); and class D notes, from BB to B (and removed from Rating Watch Negative). Fitch also affirmed the ratings on two other classes in the CDO. "Fitch's rating actions reflect the significant collateral deterioration within the portfolio, specifically subprime residential mortgage-backed securities, since the last rating action on March 13, 2007," the rating agency said.

The residential servicer ratings of GMAC Mortgage LLC have been downgraded by Fitch Ratings and placed on Rating Watch Negative.The company's residential primary servicer ratings for prime and alternative-A products were downgraded from RPS1 to RPS1-minus, and its residential primary servicer ratings for subprime, high loan-to-value, and home equity/home equity lines of credit products were downgraded from RPS1 to RPS2-plus. In addition, its primary sub-servicer rating was downgraded from RPS1 to RPS1-minus, and its residential special servicer rating was downgraded from RSS1 to RSS1-minus. The rating actions "reflect the underlying corporate ratings of the company's parent, Residential Capital LLC," whose senior debt was recently downgraded from BBB to BB-plus and placed on Rating Watch Negative, Fitch said. They also reflect "the continued pressure on ResCap's liquidity position and financial flexibility in the increasingly challenged residential mortgage market and its potential impact on GMAC Mortgage's loan servicing operations."

The residential servicer ratings of Homecomings Financial Network LLC and GMAC-RFC have been downgraded and placed on Rating Watch Negative by Fitch Ratings.The Homecomings residential primary servicer rating for prime product was downgraded from RPS1 to RPS1-minus, and its residential primary servicer ratings for alternative-A, subprime, high loan-to-value, and home equity/home equity lines of credit products were downgraded from RPS1 to RPS2-plus. The company's residential special servicer rating was downgraded from RSS1 to RSS1-minus. GMAC-RFC's residential master servicer rating was downgraded from RMS1 to RMS2-plus. The rating actions "reflect the underlying corporate ratings of Homecomings' and GMAC-RFC's parent, Residential Capital LLC," whose senior debt was recently downgraded from BBB to BB-plus and placed on Rating Watch Negative, Fitch reported. They also reflect "the continued pressure on ResCap's liquidity position and financial flexibility in the increasingly challenged residential mortgage market and its potential impact on Homecomings' and GMAC-RFC's loan servicing operations." Fitch can be found online at http://www.fitchratings.com.

Shore Mortgage, Birmingham, Mich., has announced that it is recruiting 150 new employees, including underwriters, account executives, and loan officers, for its five locations in the Detroit metropolitan area.Noting that its announcement runs counter to the industry trend of downsizing and layoffs, the company touted its "consistent growth pattern" and said full-time positions are available in Birmingham, Canton, Roseville, and Taylor. Shore said mortgage professionals with experience in closing, processing, underwriting, servicing, post-closing, accounting, secondary marketing, quality control, information technology, or customer service are encouraged to apply for the positions. The company can be found online at http://www.shoremortgage.com.

The default rate on subprime mortgage loans hit a record 13.44% in June after rising 100 basis points from that of May, and the foreclosure rate jumped to 5.44%, which also topped the previous record set back in August 1997, according to a Friedman Billings Ramsey report.The default rate on alternative-A loans moved up from 2.69% in May to 3.0%. "The default rates on alt-A and subprime loans deteriorated sharply in June from May, after six months of gradual erosion," FBR managing director Michael Youngblood said. During 2006, underwriting standards on subprime loans became progressively worse with each successive month, Mr. Youngblood said. He noted that debt-to-income ratios rose from 46% in May to 47% in June. The FBR researcher said he expects default rates to drift higher through May of next year. (The default rate includes loans 90 days or more past due, those in foreclosure, and real estate owned.) FBR can be found on the Web at http://www.fbr.com.

Following its monthly surveillance review, Fitch Ratings has identified 67 of its U.S. CMBS deals as 'Under Analysis', indicating that Fitch will be issuing a rating action within 30 days. Approximately 400 U.S. CMBS deals were designated with a SMARTView date of Aug. 23, 2007, indicating that no immediate action is necessary.SMARTView, a recent addition to Fitch's Structured Finance Surveillance, Metrics, Analytics, Research, and Tools (SMART) products, monitors collateral performance in structured finance bonds providing investors greater insight to Fitch's internal analytic screening process and furthers transparency by publicly identifying the deals that Fitch has identified as requiring an immediate review. As Fitch receives monthly information on structured finance transactions from trustees and servicers, Fitch analysts run the data through various internal algorithms that identify classes of a transaction as possible candidates for upgrade or downgrade. Fitch's analysts scrutinize the output to decide which deals need a formal review, which are noted as 'under analysis', and those deals which can be given a SMARTView date.

Fitch has affirmed one class of notes, downgraded five classes, and placed three classes of notes issued by GSC ABS CDO 2006-4u Ltd. (GSC 2006-4u) on Rating Watch Negative.The following rating actions are effective immediately: $0 class A-S1VF notes affirmed at 'AAA'; $85,000,000 class A1 notes downgraded to 'AA' from 'AAA', placed on Rating Watch Negative; $45,000,000 class A2 notes downgraded to 'A' from 'AA', placed on Rating Watch Negative; $45,000,000 class A3 notes downgraded to 'BB' from 'A', placed on Rating Watch Negative; $33,000,000 class B notes downgraded to 'CCC' from 'BBB', remains on Rating Watch Negative; $10,000,000 class C notes downgraded to 'CC' from 'BB+', remains on Rating Watch Negative. GSC 2006-4u is a hybrid cash and synthetic arbitrage collateralized debt obligation (CDO), which closed on Oct. 6, 2006. The portfolio is managed by GSC Group who maintains a CDO asset manager rating of 'CAM2' for structured finance CDOs. GSC 2006-4u is composed of 94.28% residential mortgage-backed securities, 0.84% commercial mortgage-backed securities, and 4.88% CDOs. On July 12, 2007, class B and class C notes were placed on Rating Watch Negative because of negative migration of subprime RMBS assets in the portfolio. In addition, Fitch has also removed three classes of notes from Rating Watch Negative. The following rating actions are effective immediately: $0 class A-1A notes affirmed at 'AAA'; $125,000,000 class A-1B notes affirmed at 'AAA'; $13,500,000 class A-2 notes affirmed at 'AAA'; $56,500,000 class B notes affirmed at 'AA'; $14,500,000 class C notes affirmed at 'AA-'; $22,500,000 class D notes downgraded to 'A-' from 'A'; $21,000,000 class E notes downgraded to 'BB' from 'BBB', removed from RWN; $4,718,616 class F notes downgraded to 'B' from 'BB+', removed from RWN; $4,718,616 class G notes downgraded to 'B-' from 'BB', removed from RWN. GSC 2006-2m is an arbitrage cash flow collateralized debt obligation, with hybrid features, which closed on May 31, 2006. The portfolio is managed by GSC Group who maintains a CDO asset manager rating of 'CAM2' for structured finance CDOs. GSC 2006-2m is composed of 82.97% RMBS, 6.62% CMBS, and 9.47% CDOs. The class A-1A is structured as delayed draw notes. On July 12, 2007, classes E, F and G notes were placed on Rating Watch Negative because of negative migration of subprime RMBS assets in the portfolio.

Given the Bank of America investment, Fitch Ratings has revised the Rating Watch on Countrywide Financial Corp. and related subsidiaries to Evolving from Negative, signifying that Fitch may upgrade, downgrade or affirm CFC's ratings once additional information has been gathered.The Rating Watch Evolving reflects the $2 billion strategic equity investment from Bank of America in non-voting convertible preferred stock of CFC. The preferred securities, which yield 7.25%, can be converted into common stock at $18 per share, subject to restrictions on trading for 18 months. BoA will receive no Board representation as a result of its investment. Fitch's downgrade of CFC and subsidiary ratings on Aug. 16, 2007 was prompted by the company's announcement that it had drawn down its $11.5 billion unsecured bank facility, a clear sign that liquidity pressure was mounting. While the decision in and of itself raises concerns, Fitch believes the added liquidity provides relief in the short term. Fitch also believes that CFC's current liquidity issues were not caused by a fundamental breakdown of the company's financing plan or strategy, but more so with investor's extreme risk aversion that has triggered unprecedented disruption in the capital markets. Even if the environment normalizes in relative short order, Fitch believes that residual effects caused by the company's temporary liquidity stress will have a significant impact on origination volume and operating performance.