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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.

Three classes from two Residential Accredit Loans Inc. mortgage pass-through certificates have been downgraded by Fitch Ratings.The downgrades were as follows: series 2003-QS23, class B-1, from BB to B and placed on Rating Watch Negative, and class B-2, from B to CC/DR4; and series 2005-QS12, class B-2, from B to C/DR4. Fitch also placed class B-1 of series 2005-QS12, class B-2 of series 2006-QS11, and classes B-1 and B-2 of series 2006-QS15 on Rating Watch Negative. In addition, Fitch affirmed the ratings on 17 classes in the four deals. The negative rating actions were attributed to a deteriorating relationship between credit enhancement and expected losses. The underlying collateral consists primarily of alternative-A, first-lien residential mortgage loans. Fitch can be found online at http://www.fitchratings.com.

Forty-five classes backed by closed-end second-lien collateral in 14 securitizations from nine issuers have been downgraded by Standard & Poor's Ratings Services, as well as 11 subprime classes in nine deals from three issuers.Of the closed-end second-lien classes, 27 were placed on CreditWatch with negative implications, 12 were left on CreditWatch negative, and six were removed from CreditWatch negative, S&P reported. Of the subprime classes, five were placed on CreditWatch negative, four remain on CreditWatch, and two were removed from CreditWatch. In addition, the ratings on 46 other classes (from 11 issuers) backed by closed-end second-lien collateral were placed on CreditWatch negative, as were 31 other classes (from 15 issuers) backed by subprime collateral. S&P said the downgrades and CreditWatch placements "reflect early signs of poor performance of the collateral backing these transactions." For the closed-end second-lien transactions, the percentage of severely delinquent (90-plus days, foreclosure, and real estate owned) loans in the pools ranges from 3.30% to 18.20% of the current pool balances, S&P reported. For the subprime transactions, the comparable percentages range from 5.27% to 17.06%. The rating agency can be found online at http://www.standardandpoors.com.