Servicing

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.

Class M-II-3 of Residential Asset Mortgage Products Inc. Trust series 2003-RS7 has been placed on review for possible downgrade by Moody's Investors Service.The negative rating action was attributed to credit enhancement levels that are deemed to be low given the projected losses on the underlying pools. "The pool of mortgages has seen losses in recent months, and future loss could cause a more significant erosion of the overcollateralization," Moody's said. The transaction consists of a fixed-rate pool and an adjustable-rate pool containing mortgages that are not eligible for inclusion in Residential Funding Co. loan program securitizations because they do not satisfy the program guidelines, the rating agency said.

Class M-10 of Mortgage Asset Securitization Transactions Asset Back Securities Trust mortgage pass-through certificates, series 2005-FRE1, has been downgraded from BB-plus to B by Fitch Ratings.Fitch also placed classes M-8 and M-9 of the deal on Rating Watch Negative and affirmed the ratings on 45 classes in four MABS securitizations. The rating agency attributed the negative rating actions to a deterioration in the relationship between credit enhancement and expected losses. The collateral consists chiefly of conforming and nonconforming, fixed- and adjustable-rate subprime mortgage loans.

Class B5 of Merrill Lynch Mortgage Investors Trust series 2005-HE1 has been downgraded from BB to B-plus and removed from Rating Watch Negative by Fitch Ratings.In addition, class B4 was removed from Rating Watch Negative, and the ratings on 16 classes from two MLMI transactions were affirmed. The downgrade was based on a deterioration in the relationship between credit enhancement and loss expectations, Fitch said. The rating agency said the transactions are backed by fixed- and adjustable-rate, first- and second-lien subprime residential mortgages.

Two classes of Merrill Lynch Mortgage Investors Trust series 2006-SL2 have been downgraded by Fitch Ratings.Class B1 was downgraded from BB-plus to B-plus and placed on Rating Watch Negative, and class B2 was downgraded from BB to B and placed on Rating Watch Negative. In addition, Fitch placed class M9 on Rating Watch Negative. The negative rating actions were based on a deterioration in the relationship between credit enhancement and loss expectations, Fitch said. The rating agency said the transactions are backed by fixed-rate, closed-end second-lien residential mortgages.

Five certificates from two mortgage securitizations issued by Structured Asset Securities Corp. have been downgraded by Moody's Investors Service.The downgrades were as follows: series 2002-HF1, class B, from B1 to Caa2; and series 2005-AR1, class M8, from Baa2 to Baa3, class M9, from Baa3 to Ba1, class B1, from Ba1 to Ba3, and class B2, from B1 to B3. The five mezzanine and subordinate certificates have been downgraded because credit enhancement levels are low given the projected losses on the underlying pools, Moody's said. The transactions consist of subprime first-lien adjustable- and fixed-rate loans. Moody's can be found online at http://www.moodys.com.

Fannie Mae purchased about $79 billion in interest-only mortgages from lenders in 2006 and Freddie Mac purchased about $56 billion, according to a report by the Office of Federal Housing Enterprise Oversight.Both secondary-market agencies increased their purchases of IOs last year. OFHEO said 15% of Fannie's single-family loan purchases were IOs, compared with 10% in 2005. Freddie Mac sharply increased its IO purchases to 16% of single-family loan purchases, up from 6% in 2005. The OFHEO report says about one-eighth of Freddie's purchases were fixed-rate IOs and the rest were IO hybrid adjustable-rate mortgages.