Servicing

Impac Mortgage Holdings Inc., Irvine, Calif., has announced that it will not declare a second-quarter dividend on its common shares because its strategy of accelerating the liquidation of real estate owned via a new auction process has resulted in higher-than-expected losses.Impac, a real estate investment trust, said it believes the new strategy will eventually reduce losses and preserve capital. "Although we are seeing chargeoffs at levels higher than we anticipated, we are pleased to have reduced our exposure to future losses by auctioning REOs, especially as real estate values may deteriorate in the near future," said Joseph R. Tomkinson, Impac's chairman and chief executive officer. "In light of increased delinquencies, REO, and loan losses, we believe it is prudent to aggressively liquidate REOs in this market." Impac can be found online at http://www.impaccompanies.com.

There are "strong" and "growing" indications of deteriorating performance in alternative-A loans issued in 2006, according to Standard & Poor's.The percentage of such loans that are 90 or more days delinquent is 2.5 times higher than the previous year's figure and more than 4.0 times that of 2004 deals with the same amount of seasoning, S&P reported, citing data obtained from LoanPerformance. For example, after 14 months of seasoning, 90-plus-day delinquencies (including loans in foreclosure, real estate owned, and loans in bankruptcy) stand at 4.21% for the 2006 alt-A vintage, excluding payment-option adjustable-rate mortgage loans, S&P said. Comparable figures for 2005 and 2004 vintages are 1.59% and 0.91%, respectively. "The most disconcerting trend is how quickly the performance of these delinquent borrowers has deteriorated," S&P said. "We continue to see migration from 60-plus-day to 90-plus-day delinquencies within the 2006 vintage, suggesting that homeowners who experience early delinquencies are finding it increasingly difficult to refinance or work out problems, as opposed to being able to 'cure' falling behind on payments." S&P can be found online at http://www.standardandpoors.com.

Freddie Mac has announced changes in its interest-only fixed-rate mortgage product to make more IO financing available, as well as changes aimed at providing greater flexibility in its Treasury Plus Yield Maintenance Option."Freddie Mac has expanded the credit terms of its interest-only product in response to feedback from its customers and the unique challenges presented by the marketplace," said Mitchell W. Kiffe, Freddie Mac's vice president of multifamily production and sales. "The changes are twofold: Freddie Mac is providing the potential of a longer interest-only term for all loans, and it is also offering lower debt coverage ratios for certain acquisition loans with above-average fundamentals." Regarding its Treasury Plus product, the government-sponsored enterprise is offering to modify the assumed reinvestment rate in the yield maintenance formula up to the Treasury yield rate plus 100 basis points or the net spread, whichever is lower. The GSE can be found on the Web at http://www.freddiemac.com.

Bear Stearns & Co. said Wednesday that it has reduced by half a $3.2 billion line of credit to one of its two subprime-related hedge funds, citing asset sales from the High-Grade Structured Credit Fund.In a statement, Bear said it is continuing efforts to de-leverage both the High-Grade Fund and a related hedge fund called High-Grade Structured Credit Enhanced Leverage Fund. Bear's line of credit to the High-Grade Fund now stands at $1.6 billion. Both funds, according to sources, have been hit with margin calls from lenders, including Merrill Lynch, Goldman Sachs, and Bank of America. Bear has moved to prop up the High-Grade Fund with loans. Market sources say it may liquidate, in an orderly fashion, the Enhanced Fund. A Bear Stearns spokeswoman did not return a telephone call placed by MortgageWire. Meanwhile, according to combined news reports, the Securities and Exchange Commission has opened an informal inquiry into these two Bear Stearns managed funds, which have billions of dollars in subprime-related investments. An SEC spokeswoman said the agency neither confirms nor denies investigations.

Class B-5 of Washington Mutual's Alt-A series 2006-3 residential mortgage pass-through certificates has been placed on Rating Watch Negative by Fitch Ratings.Fitch also affirmed the ratings on five other classes in the transaction. The negative rating action was based on trends in the relationship between serious delinquency and credit enhancement, the rating agency said. The collateral consists primarily of fixed-rate alternative-A mortgage loans. Fitch can be found on the Web at http://www.fitchratings.com.

Two classes of CWALT 2006-43CB mortgage-backed securities have been placed on Rating Watch Negative by Fitch Ratings.The affected securities are classes III-B-3 and III-B-4. Fitch also affirmed the ratings on 10 classes from the transaction. The negative rating actions were based on "the relationship of serious delinquency" to credit enhancement, the rating agency said.

The class D notes and the preference shares of Trainer Wortham First Republic CBO III Ltd., a collateralized debt obligation consisting partly of residential and commercial mortgage-backed securities, have been placed on Rating Watch Negative by Fitch Ratings.In addition to residential and commercial MBS, the CDO consists of asset-backed securities, corporate debt, and other CDOs. The move was attributed to the fact that approximately 8.8% of the underlying portfolio collateral has been downgraded since the rating agency's last review in April.

Classes 2B-4 and 2B-5 of IndyMac MBS Inc. Residential Asset Securitization Trust, series 2004-A2 group 2, have been placed on Rating Watch Negative by Fitch Ratings.In addition, Fitch affirmed the ratings on seven other classes in groups 1 and 2 of the transaction. The negative rating actions were attributed to a deterioration in the relationship between credit enhancement and loss expectations.

Two classes of Credit Suisse's CSMC series 2006-7 mortgage-backed deal have been downgraded by Fitch Ratings, and one has been placed on Rating Watch Negative.Class DB-8 of groups 6-12 was downgraded from BB to B-plus, and class DB-9 was downgraded from B to C/DR4. Class DB-7 was placed on Rating Watch Negative. In addition, the ratings on 14 other classes in the deal were affirmed. The negative rating actions were attributed to a deteriorating relationship between credit enhancement and expected losses. The collateral consists of first-lien, fixed-rate alternative-A mortgage loans.

Two classes of Structured Asset Securities Corp. mortgage pass-through certificates have been downgraded by Fitch Ratings.The downgrades were as follows: Structured Adjustable Rate Mortgage series 2004-11, class B4, from B to CC/DR3, and class B5, from C/DR5 to C/DR6. In addition, classes B4-II and B5-II of SARM series 2006-12 group 2 and class IB5 of SASCO Lehman Mortgage Trust series 2006-6 group 1 were placed on Rating Watch Negative. Fitch also affirmed the ratings on 34 classes in four transactions. Fitch attributed the negative rating actions to a deterioration in the relationship between loss expectations and credit enhancement.