Servicing

Nearly 165,000 foreclosure filings were reported nationwide in June, down 7% from the level recorded in May but up 87% from that of a year earlier, according to RealtyTrac, an online foreclosure marketplace based in Irvine, Calif.The nation's foreclosure rate stood at one foreclosure filing for every 704 households, the company said in its June 2007 U.S. Foreclosure Market Report. (Foreclosure filings include default notices, auction sale notices, and bank repossessions.) "Foreclosure activity subsided somewhat in June after hitting a 30-month high in May," said James J. Saccacio, chief executive officer of RealtyTrac. "And the drop in activity was fairly broad, with 33 states reporting month-over-month decreases. Still, the foreclosure rates in most states remained substantially above last year's levels." RealtyTrac said Nevada, California, and Colorado recorded the highest foreclosure rates in June. The company can be found online at http://www.realtytrac.com.

American Residential Equities LLC, Miami, has announced a passive investment in Strategic Recovery Group LLC, Plano, Texas, that it says will enable SRG to expand its "high-touch" specialty servicing of nonperforming residential mortgages.The amount of the investment was not disclosed. The capital infusion will allow SRG to apply its technology and business process in earlier stages of management and servicing for delinquent residential mortgages held by ARE and others, ARE said. "We believe that there is a significant and growing demand today for premium servicing and specialized loan collections," said Jeffrey Kirsch, ARE's chief executive officer. The companies can be found online at http://www.arenow.com and http://wwwsrg-i.com.

Fifty-two securities originated in 2005 and backed by subprime closed-end second-lien mortgage loans have been downgraded by Moody's Investors Service.Of the downgraded securities, 27 remain on review for possible downgrade. Moody's placed 23 other classes on review for possible downgrade and upgraded 52 classes. The negative actions, affecting residential mortgage-backed securities with an original face value of nearly $600 million, were based on the fact that projected pipeline losses have increased in recent months and are likely to affect the credit support for the certificates, Moody's said. As with its negative rating actions on first-lien subprime RMBS classes (see item above), Moody's cited "aggressive underwriting" and "prolonged, slowing home price appreciation" as the causes of significant deterioration in loan performance.

Moody's Investors Service has downgraded 399 securities that were issued in 2006 and backed primarily by first-lien subprime mortgage loans.Moody's also placed 32 other classes under review for possible downgrade. The actions, which affect securities with an original face value of over $5.2 billion, were based on higher-than-expected rates of delinquency in the underlying collateral, the rating agency said. First-lien subprime loans securitized in 2006 "were originated in an environment of aggressive underwriting," Moody's said. "This aggressive underwriting combined with prolonged, slowing home price appreciation has caused significant loan performance deterioration and is the primary factor in these rating actions." Moody's said about 60% of the rating actions affected transactions backed by collateral originated by Fremont Investment & Loan, Long Beach Mortgage Co., New Century Mortgage Corp., and WMC Mortgage Corp., which it said have been performing below the average of the 2006 vintage. Moody's can be found online at http://www.moodys.com.

Two classes of First Horizon Home Loan Mortgage Trust mortgage-backed securities have been placed on Rating Watch Negative by Fitch Ratings.The affected securities are the B5 classes of series 2005-AA9 and 2006-AA5. The negative rating actions were attributed to "signs of increasing credit risk." The collateral for the transactions consists of conventional adjustable-rate residential mortgages.

Two classes of Structured Asset Investment Loan Trust residential mortgage-backed certificates have been downgraded by Fitch Ratings.Class B1 of series 2006-4 was downgraded from BB-plus to BB, and class B2 was downgraded from BB to B-plus. In addition, Fitch affirmed the ratings on nine classes from the SAIL transaction. The rating agency attributed the downgrades to a deterioration in the relationship between credit enhancement and expected losses. The pools consist primarily of fixed- and adjustable-rate, fully amortizing and balloon, first- and second-lien residential mortgage loans.

Fourteen classes from two issues of Structured Asset Securities Corp. residential mortgage-backed certificates have been downgraded by Fitch Ratings, and nine of the downgraded classes have been placed on Rating Watch Negative.The affected classes are part of SASCO series 2006-ARS1 and 2006-S1. In addition, Fitch placed two other classes on Rating Watch Negative, assigned Distressed Recovery ratings to five of the downgraded classes, and affirmed the ratings on eight other classes from the two SASCO deals. The negative rating actions were attributed to a deterioration in the relationship between credit enhancement and expected losses. The mortgage pools consist of fixed-rate second-lien residential mortgage loans.

More than 600 classes of securities backed by subprime residential mortgages have been placed on CreditWatch with negative implications by Standard & Poor's Ratings Services, and S&P said a majority are expected to be downgraded.The rating agency reported that the 612 affected classes total approximately $12.08 billion in residential mortgage-backed securities, representing 2.13% of the $565.3 billion in U.S. RMBS rated by S&P from the fourth quarter of 2005 through the fourth quarter of 2006. The negative rating actions were attributed to "poor collateral performance, our expectation of increasing losses on the underlying collateral pools, the consequent reduction of credit support, and changes that will be implemented with respect to the methodology for rating new transactions." Among the changes in rating methodology are an increase in the "severity of the surveillance assumptions" (from 33% to 40%) used to evaluate creditworthiness and a greater likelihood that senior classes will be downgraded in transactions containing subordinate classes that have been downgraded, S&P said. The rating agency can be found online at http://www.standardandpoors.com.

Huntington Bancshares Inc., Columbus, Ohio, has announced that it expects to report higher loan-loss provisions and market-related losses involving real estate credits and mortgage servicing rights for the second quarter.Huntington said it expects to report a $60 million loan-loss provision, including $25 million related to two East Michigan real estate credits and one Northeast Ohio commercial loan that were downgraded to nonperforming status. "The commercial developer and residential real estate homebuilder markets in East Michigan deteriorated during the quarter, reflecting a significant downturn in home sales activity and the inability of homebuilders to sustain sufficient sales activity," Huntington said. The bank holding company also reported a $3 million pretax charge of net market-related losses based on "a combination of hedging ineffectiveness for mortgage servicing rights and investment securities impairment." The company can be found online at http://www.huntington.com.

Three of every 1,000 homeowners in the United States lost their homes to foreclosure in the first half, a 41% increase from the level recorded in the first half of 2006, according to ForeclosureS.com, a Fair Oaks, Calif.-based investment advisory firm.That translated into 247,907 residential properties that wound up in the hands of banks or lenders, the company said. "Hundreds of thousands more homeowners won't be able to escape foreclosure for most of the rest of the year, either, unless stagnating housing prices and markets pick up and the nation's economy rebounds, too," said Alexis McGee, president of the firm. The company can be found online at http://www.foreclosures.com.