Servicing

Three classes of Asset Backed Securities Corp. mortgage pass-through certificates have been downgraded by Fitch Ratings, and two classes have been placed on Rating Watch Negative.The downgrades were as follows: series 2002-HE1, class B, from BBB-minus to B (and placed on Rating Watch Negative); series 2003-HE1, class M-3, from BB-minus to B; and series 2005-HE5, class M12, from BB to B. Fitch also placed class M-2 of series 2002-HE1 on Rating Watch Negative. In addition, Fitch affirmed the ratings on 14 classes in the three ABSC deals. The rating agency attributed the downgrades to a deterioration in the relationship between loss expectations and credit enhancement. The transactions consist primarily of fixed- and adjustable-rate subprime mortgage loans on one- to four-family properties.

Two classes from Credit Based Asset Servicing and Securitization LLC series 2002-CB6 have been downgraded by Fitch Ratings, and two classes from two C-BASS transactions have been placed on Rating Watch Negative.Class B-2 of series 2002-CB6 has been downgraded from BB-minus to B, and class B-3 has been downgraded from B-plus to C/DR5. Class B-1 was placed on Rating Watch Negative, along with class B-5 of series 2005-CB2. Fitch also affirmed the ratings on 34 classes from four C-BASS deals. The negative rating actions reflect a deterioration in the relationship between credit enhancement and loss expectations, the rating agency said.

Six certificates from two First Franklin Mortgage Loan Trust deals issued in 2002 and 2004 have been placed under review for possible downgrade by Moody's Investors Service.The affected classes were as follows: classes M2 and M3 of series 2002-FF3, and classes M-6, M-7, M-8, and M-9 of series 2004-FFH1. The negative rating actions stemmed from credit enhancement levels that were deemed to be low given the projected losses on the underlying pools, Moody's said. The transaction consists of adjustable- and fixed-rate subprime first-lien mortgage loans originated by First Franklin Financial Corp. Moody's can be found online at http://www.moodys.com.

Thirty-eight classes from 12 First Franklin Financial Corp. residential mortgage-backed security transactions have been downgraded by Fitch Ratings.In addition, 12 classes from four deals were placed on Rating Watch Negative, and the ratings on 188 classes from 21 First Franklin deals were affirmed. The downgrades were attributed to a deteriorating relationship between credit enhancement and expected losses. The collateral for the transactions consists of subprime mortgage loans secured by first liens on residential properties. Fitch can be found online at http://www.fitchratings.com.

The default rate on subprime mortgages jumped 55 basis points in April to 12% -- the highest level since 1997, according to a report by Friedman Billings Ramsey, Arlington, Va."The default rate has climbed to the highest level since August 1997 (13.42%), which was the peak of the prior decade," says the monthly report by FBR Investment Management Inc. The default rate on securitized subprime loans rose to 11.99% in April from 11.44% in March. FBR researchers noted that there are metropolitan areas of California, Arizona, Florida, Nevada, and the District of Columbia that have seen default rates increase by more than 200% since April 2006. The default rate on alternative-A loans rose 22 bps in April, to nearly 2.48%. (The default rate includes loans 90 days or more past due, in foreclosure, and real estate owned.) FBR can be found online at http://www.fbr.com.

Three classes of Saxon Asset Securities Trust residential mortgage-backed securities have been placed on Rating Watch Negative by Fitch Ratings.The affected securities were as follows: class BV-2 of series 2000-2 group 2; class MF-3 of series 2003-3 group 1; and class M-2 of series 2001-3. In addition, three Saxon classes were upgraded and the ratings on 29 classes in 12 Saxon deals were affirmed. Fitch attributed the negative rating actions to "current trends in the relationship between serious delinquency and credit enhancement." The pool collateral consists of fixed- and adjustable-rate subprime residential mortgages, the rating agency said.

Two classes from Credit Based Asset Servicing and Securitization LLC series 2006-SL1 have been downgraded by Fitch Ratings and placed on Rating Watch Negative, and three other classes have also been placed on Rating Watch Negative.Class B-4 was downgraded from BBB-minus to BB-minus, and class B-5 was downgraded from BB-plus to B. They were placed on Rating Watch Negative, along with classes B-1, B-2, and B-3. Fitch also affirmed the ratings on nine classes from the C-BASS deal. The negative rating actions reflect a deterioration in the relationship between credit enhancement and loss expectations, the rating agency said. The collateral consists mainly of second-lien residential mortgage loans extended to subprime borrowers, Fitch said.

Five classes of Countrywide Asset-Backed Securitizations series 2006-SPS1 have been downgraded by Fitch Ratings, and six classes have been placed on Rating Watch Negative.The downgrades were as follows: class M-6, from A to BBB-minus (and remains on Rating Watch Negative); class M-7, from A-minus to BB-plus (and remains on Rating Watch Negative); class M-8, from BB-plus to C/DR6; class M-9, from BB to C/DR6; and class B, from BB-minus to C/DR6. Classes A, M-1, M-2, M-3, M-4, and M-5 were placed on Rating Watch Negative. Fitch attributed the negative rating actions to deterioration in the relationship between credit enhancement levels and loss expectations. The collateral consists of second liens extended to subprime borrowers on one- to four-family residential properties and certain other property and assets.

Fifteen classes of mortgage-backed securities issued by Morgan Stanley in 2002 and 2003 have been downgraded by Fitch Ratings.In addition, class B-3 of series 2004-HE4 was placed on Rating Watch Negative and the ratings on 46 classes in 11 Morgan Stanley transactions were affirmed. The negative rating actions were based on a deterioration in the relationship between credit enhancement and expected losses, Fitch said. The collateral in the mortgage pools consists of fixed- and adjustable-rate, 15- and 30-year subprime residential loans.

American Home Mortgage has warned that it expects to post a loss for the second quarter as a result of delinquent loan repurchases.The company also reduced its earnings guidance for 2007, though it said it plans to maintain its $0.70-per-share dividend. The company is adding to loan loss reserves, saying it expects to take "substantial charges for credit-related expenses" in the second quarter. The company said the higher repurchases relate to a three-month "timely payment" warranty on stated-income loans with high loan-to-value ratios that are sold to investors. American Home said it has stopped making this type of loan and expects the high credit-related losses to diminish as the warranty expires on loans already sold. Chief executive officer Michael Strauss said the company's goal in establishing reserves for this problem is "to put the impact from the discontinued products behind us." American Home's repurchase burden peaked in April before declining in May and June, the company said. American Home issued the update after the close of trading on June 28, and the company's stock price declined more than 20% in after-hours and morning trading on June 29.