Servicing

The residential primary servicer rating for subprime product of Accredited Home Lenders Inc. has been placed on Rating Watch Negative by Fitch Ratings.The company's primary servicer rating is RPS3-minus. (Fitch rates residential servicers on a scale of 1 to 5, with 1 being the highest rating.) Fitch said the actions reflect "the continued pressure on [Accredited Home Lenders Holding Co.'s] liquidity position in the increasingly challenged subprime mortgage market." The rating agency noted that Accredited Home Lenders Holding Co., the parent company of Accredited Home Lenders Inc., has announced a merger agreement with Lone Star Fund V (U.S.) LP.

Class B of notes issued by Bristol CDO I Ltd. have been downgraded from B/DR2 to CCC/DR2 by Fitch Ratings and removed from Rating Watch Negative.In addition, the ratings on classes A-1 and A-2 in the deal were affirmed. The collateralized debt obligation is secured by a static pool of asset-backed securities, of which 18.4% are manufactured housing residential mortgage-backed securities and 17.1% are subprime RMBS issued in 2002 and 2001, Fitch said. The rating agency attributed the downgrade to a deterioration in collateral, reporting that the overcollateralization ratio of class C remains below its minimum threshold of 104.5%, despite an improvement in the deal's collateral quality tests. "The class B notes will not receive any principal proceeds until the class A-1 and A-2 notes have been paid in full," Fitch said.

Standard & Poor's Ratings Services has placed its BBB ratings on the series 2004-A and 2005-A subordinated notes issued by Broadhollow Funding LLC on CreditWatch with negative implications.Broadhollow is a single-seller warehouse asset-backed commercial paper conduit that issues extendible notes to finance mortgage loans originated by American Home Mortgage Corp. The rating actions followed a bankruptcy filing by American Home Mortgage Investment Corp., which is a "termination event" under the Broadhollow transaction documents, S&P said. Broadhollow is no longer permitted to buy additional mortgage loans, and all collections and sales proceeds will be held to pay off Broadhollow's secured liquidity notes as they mature. S&P said the rating actions reflect its uncertainty about the bankruptcy filing and the extent to which AHM's recent announcements and reduced operating structure will affect its servicing operations. "Further aging of delinquent loans, in combination with the current market environment for pricing those nonperforming loans, has increased the risk of unprecedented market value declines," the rating agency said.

Fitch Ratings has announced criteria revisions to ResiLogic, its mortgage default and loss model for U.S. residential mortgage-backed securities.The updated criteria incorporate new assumptions for falling home prices, the poor performance of loans with certain characteristics, and changes in mortgage originations, the rating agency said. The revisions place greater emphasis on regional economic risk, increase default expectations for short-term and hybrid adjustable-rate mortgages, and introduce a new risk category (Low) for borrower income and asset documentation (in addition to the existing categories of Full, Reduced, and None), Fitch reported. Regarding regional economic risk, the rating agency said it will give greater weight to the University Financial Associates default multiplier component of the ResiLogic model because "Fitch believes that the greatest risk to new U.S. RMBS is the continued deterioration of home prices."

More than 100 classes of subprime residential mortgage-backed securities with outstanding balances totaling over $2.1 billion were downgraded by Fitch Ratings on Aug. 6.Fitch also affirmed the ratings on classes with outstanding balances of more than $15 billion. Among the downgrades were the following mortgage pass-through certificates: 65 classes from nine issues of Ameriquest Mortgage Securities Inc.; 24 classes from four issues of Fremont Home Loan Trust; and 13 classes from two issues of CDC/IXIS Corp. The rating actions were based on changes to Fitch's subprime loss forecasting assumptions, which "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. Fitch reported that as of the end of the day on Aug. 6, it had downgraded 491 such classes (from subprime RMBS deals placed Under Analysis on July 12) with an outstanding balance of $9 billion, and affirmed the ratings on 850 classes with an outstanding balance of $74 billion. Fitch can be found online at http://www.fitchratings.com.

More than 200 classes of securities backed by alternative-A residential mortgages have been placed on CreditWatch with negative implications by Standard & Poor's Ratings Services.The rating agency reported that the 207 affected classes total approximately $913.9 million in residential mortgage-backed securities, representing 0.20% of the $455.4 billion in U.S. RMBS backed by first-lien alt-A collateral that were rated by S&P from October 2005 through December 2006. The negative rating actions were attributed to "a rising level of delinquencies among the alt-A collateral supporting these transactions, as well as our expectation that losses on the collateral will exceed historical precedent and may exceed our original expectations." The weak performance was attributed to various factors, including high combined loan-to-value ratios, home price declines, looser underwriting standards, and risk layering (the combination of several risk elements for a single borrower). The rating agency can be found online at http://www.standardandpoors.com.

Pre-foreclosure filings totaled just over 100,000 in July, an increase of 27% from the level recorded in June, according to ForeclosureS.com, a Fair Oaks, Calif.-based investment advisory firm.The 100,421 filings, up from 79,018 in June, the company said. "The numbers are dismal, but we had better get used to it because the bloodletting likely will continue for another 12 to 18 months," said Alexis McGee, president of the firm. She added, however, that the foreclosure outlook should not be a cause for panic. "In spite of the housing industry's troubles, the nation's economy, as measured by the 3.4% second-quarter growth in the U.S. Gross Domestic Product, is going strong, and so is current consumer confidence in it," she said. The company can be found online at http://www.foreclosures.com.

The Core Mortgage Risk Index increased 4.4% in the second quarter, reflecting the pressures of rising delinquency and foreclosure rates and slow price appreciation, according to First American CoreLogic, a Sacramento, Calif.-based provider of mortgage risk assessment and fraud prevention systems.The index is "increasingly driven by the fallout caused by high delinquency rates in the subprime and alt-A markets," the company said. CoreLogic listed the five U.S. markets currently most at risk as Detroit-Livonia-Dearborn, Mich.; Warren-Troy-Farmington Hills, Mich.; Memphis; Youngstown-Warren-Boardman, Ohio-Pa.; and Dayton, Ohio. CoreLogic can be found on the Web at http://www.corelogic.com.

Freddie has issued a $105.6 million subprime mortgage-backed security as part of its $20 billion commitment to Congress to provide liquidity to the subprime market and safer underwriting standards.The subprime and alternative-A loans originated by Wells Fargo Home Mortgage include fixed-rate products along with adjustable-rate 2/28 mortgages. The maximum margin on the ARMs is 450 basis points. One group of loans in the Freddie Mac structured pass-through security (Series T-074) has FICO credit scores ranging from 550 to 752 with a weighted average score of 613. Freddie spokesman Brad German said loans have a wide range of credit scores, loan-to-value ratios, debt-to-income ratios, and other characteristics. He said Freddie does not have a cookie-cutter model with every detail worked out. But the secondary-market agency will work with lenders in putting loan pools together that meet a certain risk profile. "The prospectus will give the market a strong idea of what we are looking to buy," Mr. German said.

With loan servicers facing a possibly unprecedented increase in delinquencies and defaults, Credit Suisse has announced that it is developing a seller/servicer guide to help servicers better understand what they can and cannot do to manage defaults and limit loss exposure.Speaking at the Western States Loan Servicing Conference in Las Vegas, Matthew Kobin of Credit Suisse Securities said many changes are under way in the area of servicer surveillance. He said the seller/servicer guide, similar to those used by Fannie Mae and Freddie Mac, will help bring transparency to participants in the company's private-label mortgage-backed securities program by setting forth acceptable loan sale and servicing parameters. One goal is to help servicers understand when they can approach borrowers about a possible loan workout and what workout options are acceptable. He said the guide should "demystify acceptable servicing" at a time when servicers are facing many questions related to the handling of subprime, alternative-A, and adjustable-rate loans that face payment resets.