Servicing

Twenty classes from nine Morgan Stanley issues of subprime mortgage-backed securities have been downgraded by Fitch Ratings.The rating agency also placed four classes on Rating Watch Negative and affirmed the ratings on 35 issues from 10 Morgan Stanley MBS issues. The negative rating actions were attributed to a deterioration in the relationship between credit enhancement and loss expectations.

Seventy-six tranches from 19 U.S. cash-flow and hybrid collateralized debt obligations have been placed on CreditWatch with negative implications by Standard & Poor's Ratings Services.The issuance amount of the affected tranches totals approximately $2.16 billion, S&P reported. Ten of the affected deals are collateralized by trust-preferred securities issued by real estate investment trusts, and the other nine are backed by mezzanine structured finance securities, including residential mortgage-backed securities collateralized by first-lien subprime mortgages. Including the latest CreditWatch placements, 193 tranches (representing issuance amounts totaling approximately $6.60 billion) from 57 cash-flow and hybrid CDOs are on CreditWatch with negative implications due to exposure to RMBS that have experienced "negative credit migration," the rating agency said.

Over 100 classes of subprime residential mortgage-backed securities with outstanding balances totaling more than $2 billion were downgraded by Fitch Ratings on Aug. 9.Fitch also affirmed the ratings on classes with outstanding balances of more than $18 billion. Among the downgrades were the following mortgage pass-through certificates: 48 classes from 11 SAIL issues; 42 classes from six Structured Asset Securities Corp. issues; and 11 classes from two BNC issues. Fitch reported that as of the end of the day on Aug. 9, it had downgraded 671 classes (with an outstanding balance of $12 billion) from subprime RMBS deals placed Under Analysis on July 12 and affirmed the ratings on 1,189 classes with an outstanding balance of $104 billion. Fitch can be found on the Web at http://www.fitchratings.com.

The Federal Agricultural Mortgage Corp., Washington, has reported net income available to common stockholders of $18.4 million ($1.74 per share) for the second quarter, compared with $13.4 million ($1.18 per share) for the second quarter of 2006.Farmer Mac said its outstanding program volume stood at a record high of $8.4 billion as of June 30. "The growth of the portfolio, and our confidence in its performance, derive from the success of business strategies we implemented in the fall of 2005 that emphasize large program transactions with high asset quality, providing greater protection for Farmer Mac against adverse credit performance with commensurately lower compensation for its assumption of credit risk and administrative costs," said Henry D. Edelman, Farmer Mac's president and chief executive officer. The government-sponsored enterprise can be found online at http://www.farmermac.com.

Delta Financial Corp., Woodbury, N.Y., has filed a form 12b-25, Notification of Late Filing, with the Securities and Exchange Commission for its second-quarter 10-Q.The company said it has begun to negotiate to add new sources of capital, and that the results would materially affect its financial condition. However, it said it expects to file the 10-Q within five days. In its filing, Delta said it expected to report second-quarter 2007 net income of $777,000 ($0.03 per share), compared with $7.2 million ($0.31 per share) a year earlier. Part of the reason for the decline was a $3.9 million noncash decrease in net interest income as a result of changes in prepayment assumptions. Prepayments are occurring slower than previously anticipated. The $3.9 million is now recognized as deferred revenue. Delta's provision for loan losses increased by $6.3 million during the second quarter. The increase, except for a specific provision for impaired loans, corresponds to the performance and seasoning of loans held for investment, Delta said.

Opteum Inc., Vero Beach, Fla., has filed a form 12b-25 with the Securities and Exchange Commission, notifying the regulator that it will not file its 10-Q until Aug. 14.Opteum revealed that it expects to report a loss of $162.5 million ($6.53 per share) for the quarter, with $82.0 million coming from continuing operations and $80.5 million from discontinued operations (its mortgage originations business). During the second quarter, Opteum shut its wholesale and correspondent channels and sold its retail business. It also sold $5.67 billion of its mortgage servicing portfolio. The company reached an agreement to sell the remainder of the portfolio, $2.97 billion, on July 26. "The magnitude of our second-quarter estimated losses is far greater than we could have imagined when the second quarter began, and such losses were precipitated by the now well-known developments in the secondary market for mortgage loans," said Jeffrey J. Zimmer, chairman, president, and chief executive officer. "We were unable to immunize ourselves from these developments, and our second-quarter results were significantly impacted as a result. However, unlike some other mortgage market participants, we have survived the recent market turmoil and we believe that we are well positioned for the future."

Fannie Mae has announced that it plans to file its 2006 annual 10-K financial report on Aug. 16.The government-sponsored enterprise said it will host a conference call for the investment community at 1 p.m. EDT on that date. Several Fannie executives, including Daniel H. Mudd, president and chief executive officer of the company, and chief financial officer Robert T. Blakely, are scheduled to discuss the filing with analysts and investors during the call. Fannie Mae also announced the filing of a Form 12b-25 with the Securities and Exchange Commission to report that it will not timely file its Form 10-Q report for the second quarter. The mortgage giant has not filed a timely quarterly financial report since the second quarter of 2004, before an accounting scandal came to light later that year. Fannie Mae can be found online at http://www.fanniemae.com.

Subprime lender NovaStar Financial, Kansas City, Mo., has reported that it lost $54.5 million in the second quarter, noting that the nonprime securitization market "continues to be illiquid."During the quarter, NovaStar set aside $73 million for credit losses and took a $22.5 million impairment charge on mortgage securities. In the same quarter last year, the nondepository earned $33 million. Despite the loss, its shares were up slightly in trading Friday morning.

The Securities and Exchange Commission is said to be looking into the accuracy of Wall Street firms' subprime mortgage-related valuations, according to the Wall Street Journal, but the commission itself -- while acknowledging that it "generally looks at things like that on a regular basis" -- is neither confirming nor denying the report.The commission, for example, recently settled entered into a settlement with First Bancorp, Puerto Rico, involving charges that the bank holding company had "concealed the true nature" of "transactions involving 'nonconforming' mortgages," a category which it said "can constitute 'subprime mortgages'." The SEC can be found on the Web at http://www.sec.gov.

The Federal Reserve has begun providing liquidity to a market hard-hit by the subprime mortgage-sparked credit crunch and said it will continue to "provide reserves as necessary."The Fed said Friday that it is providing the support "to facilitate the orderly functioning of financial markets," noting that "in current circumstances, depository institutions may experience unusual funding needs because of dislocations in money and credit markets." The Federal Reserve can be found online at http://www.federalreserve.gov.