Servicing

Three classes of Finance America Mortgage Loan Trust series 2003-1 have been downgraded by Fitch Ratings.The downgrades were as follows: M-4, from BBB-plus to BB; class M-5, from BBB to B; and class M-6, from BBB-minus to B-minus/DR1. Fitch also affirmed the ratings on three classes in the transaction. The downgrades were attributed to a deterioration in the relationship between credit enhancement and expected losses.

Class B-5 of GE-WMC mortgage pass-through certificates, series 2005-2, has been downgraded from BB-plus to BB by Fitch Ratings.Fitch also affirmed the ratings on 23 classes from two GE-WMC transactions. The subprime transactions were among those placed Under Analysis on July 12. Fitch reported that at the end of the day on Aug. 10, it had downgraded 672 classes (with an outstanding balance of $13 billion) from those subprime RMBS deals and affirmed the ratings on 1,219 classes with an outstanding balance of $105 billion. Fitch can be found on the Web at http://www.fitchratings.com.

Pennant Capital Management LLC, a Chatham, N.J.-based hedge fund with a stake in PHH Corp., has reiterated its opposition to PHH's agreement to sell out to GE Capital and The Blackstone Group.Citing information provided by PHH in an Aug. 6 preliminary proxy, Pennant again called on management to separate the company's two main businesses with a spinoff of its fleet management operations. "The new disclosures underscore the value-destroying nature of the proposed sale and strongly support our rationale for continued public ownership and a business separation through a tax-free spin-off," Pennant said in its letter, signed by managing member Alan Fournier. Mr. Fournier said the amended proxy "shows that the board likely agreed to sell the mortgage business for after-tax proceeds of less than 0.8x tangible book, implying that even a liquidation of the mortgage business would be preferable to the proposed sale and result in an immediate combined valuation of $35 per share." Pennant estimated that this would allow shareholders to realize a combined valuation of approximately $60 per share in two years. PHH is one of the largest independent mortgage banks in the country.

The Office of Federal Housing Enterprise Oversight said Friday that it will not increase the portfolio caps on Fannie Mae and Freddie Mae, referring to the two companies -- in a letter to a key senator -- as "significant supervisory concerns."As previously reported, Fannie Mae had asked OFHEO to increase its portfolio capacity by 10% (roughly $72 billion) as a way to add some liquidity to the nonprime secondary market. In a statement, OFHEO said it is "exploring with each enterprise ways for them to enhance their support for affordable housing, both multi-family and single." The regulator said there is nothing wrong with the conventional secondary market, noting that the two government-sponsored enterprises securitized $500 billion in the first half alone. The agency recently received an inquiry from Sen. Charles E. Schumer, D-N.Y., about the nonprime liquidity crisis and the GSEs' possible role in easing conditions. OFHEO Director James Lockhart told Sen. Schumer that the GSEs have been meeting the needs of their seller/servicers, but he said they remain supervisory concerns "after more than three years of remediation efforts."

The class M-1 and M-2 certificates issued by Structured Asset Securities Corp. 2003-12XS have been placed on review for possible downgrade by Moody's Investors Service.Moody's attributed the actions to an analysis of the credit enhancement provided by subordination, overcollateralization, and excess spread relative to the expected loss. The transaction is backed by first-lien, alternative-A fixed-rate mortgage loans.

Three classes of Option One Mortgage Loan Trust mortgage-backed securities, series 2003-5, have been downgraded by Fitch Ratings.The downgrades were as follows: class M-4, from A-minus to BBB (and removed from Rating Watch Negative); class M-5, from BB-plus to B; and class M-6, from BB to C/DR5. Fitch also affirmed the ratings on six classes in the deal. The downgrades were attributed to a deterioration in the relationship between credit enhancement and loss expectations.

Three classes from two subprime issues of Argent Securities mortgage pass-through certificates have been downgraded by Fitch Ratings, and three classes have been placed on Rating Watch Negative.The downgrades were as follows: series 2003-W3, class M-5, from BBB to BB; and series 2003-W10, class M-5, from BBB to BB, and class M-6, from BBB-minus to B. Class M-4 of series 2003-W3, class M-5 of series 2003-W8, and class M-6 of series 2003-W10 were placed on Rating Watch Negative. Fitch also affirmed the ratings on 12 classes from the three Argent deals. The negative rating actions were attributed to a deterioration in the relationship between credit enhancement and loss expectations.

Five classes from three subprime issues of Ameriquest Mortgage Securities Inc. mortgage pass-through certificates have been downgraded by Fitch Ratings.The downgrades were as follows: series 2002-AR1, class M-3, from BBB to B, and class M-4, from BBB-minus to B; series 2003-6, class M-5, from BBB to BBB-minus (and removed from Rating Watch Negative), and class M-6, from B to C/DR4 (and removed from Rating Watch Negative); and series 2004-R11, class M-10, from BB-plus to CCC/DR1. Fitch also affirmed the ratings on 16 classes from the three deals. The downgrades were attributed to a deterioration in the relationship between credit enhancement and loss expectations.

Five classes of Meritage Mortgage Corp. asset-backed certificates, series 2003-1, have been downgraded by Fitch Ratings.The downgrades were as follows: class M-3, from A to BB; class M-4, from A-minus to B; class M-5, from BBB-plus to CCC/DR1; class M-6, from BBB to CCC/DR2; and class M-7, from BBB-minus to C/DR5. Fitch also affirmed the ratings on two classes in the deal. The downgrades reflect continued deterioration in the relationship between credit enhancement and loss expectations, the rating agency said.

Six classes from two CDC Mortgage Capital Trust issues of subprime mortgage pass-through certificates have been downgraded by Fitch Ratings.The downgrades were as follows: series 2002-HE1, class M, from A to A-minus, and class B, from B-plus to CC/DR3; and series 2003-HE2, class M-3, from A-minus to BB-plus, class B1, from BBB to B, class B2, from BB to CC/DR3, and class B3, from B-plus to C/DR5. Fitch also affirmed the ratings on three other classes from the two deals. The downgrades were attributed to deterioration in the relationship between credit enhancement and loss expectations.