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Nineteen classes from four GSAMP Trust securitizations have been downgraded by Moody's Investors Service, and 21 classes (including eight of those downgraded) have been placed on review for possible downgrade.The negative rating actions stemmed from the fact that credit enhancement levels are low given the projected losses on the underlying pool, Moody's said. The transactions consist of subprime second-lien fixed-rate loans. The primary originators were Fremont Investment & Loans, IndyMac Bank FSB, Long Beach Mortgage Co., and New Century Mortgage Co.

Twenty-eight classes from seven Terwin Mortgage Trust securitizations have been downgraded by Moody's Investors Service, and all but one have been placed on review for possible further downgrade.In addition, nine other classes from three of the deals have been placed on review for possible downgrade. The negative rating actions were based on the fact that credit enhancement levels (including excess spread) may be too low in view of projected losses, Moody's said. The transactions are backed by second lien loans.

Moody's Investors Service said June 15 that a host of negative rating actions it announced that day reflect the fact that second-lien subprime mortgage loans securitized in 2006 are defaulting at a "materially higher" rate than originally expected."Those loans were originated in an environment of aggressive underwriting and lack protection from home owner equity," the rating agency said. "The combination of this risk layering with slowing home price appreciation has caused significant loan performance deterioration and is the primary factor in these rating actions." The actions resulted in the downgrading of 131 securities (of which 111 remain on review for possible further downgrade), and 136 other classes were placed on review for possible downgrade, Moody's reported. The rating agency can be found online at http://www.moodys.com.

Democratic Sens. Christopher J. Dodd (Conn.) and Mary L. Landrieu (La.) are co-sponsoring a comprehensive bill to speed up the recovery in the Gulf Coast that would allow Federal Housing Administration lenders to convey hurricane-damaged properties to HUD.Currently, the Department of Housing and Urban Development requires lenders to convey properties in habitable condition before they can be reimbursed for losses on an FHA single-family loan. But his policy has left damaged and empty residential properties scattered throughout the Gulf Coast, hindering redevelopment. Once HUD takes over ownership, the department can sell or transfer the properties to local governments or the private sector. The House has passed a similar FHA conveyance provision in its Gulf Coast housing recovery bill (H.R. 1227). The Senate bill also provides that Louisiana would have to put up $1 billion for its Road Home program before the federal government would cover any additional shortfall. The Road Home program, which provides grants of up to $150,000 to repair and rebuild homes damaged by hurricanes Katrina and Rita, has run into a $4 billion to $5 billion shortfall. The shortfall stems from the fact that the program covers wind and flood damage, not just flood damage as originally intended by Congress. In addition, 143,000 homeowners have qualified for grants -- 20,000 more than originally estimated.

Subprime and alternative-A mortgage concerns appear largely responsible for a double-digit percentage decline in net income reported by the Bear Stearns Cos. in its latest fiscal quarter.The Wall Street firm saw approximately a 33% drop in net income to $362 million for the second quarter (ending May 31) vs. that of the same period a year earlier. An extraordinary noncash charge was partly responsible, but even with that item removed, Bear saw about a 10% slide in net income to $486 million from that of the second quarter of 2006. That decrease appears to be largely attributable to a 21% falloff in fixed-income revenue, to approximately $962 million, from that of a year earlier. The revenue from other major Bear business lines detailed in the company's earnings release generated lesser percentage declines or gains, the company said. An increase in expenses was also seen during the quarter. Wall Street firms were largely expected to be insulated from the subprime market's woes due to their diversification. Bear Stearns can be found online at http://www.bearstearns.com.

Seven states are driving the trends in mortgage foreclosure rates, according to the Mortgage Bankers Association's National Delinquency Survey.The percentage of loans on one- to four-unit residential properties in the foreclosure process stood at 1.28% at the end of the first quarter, up from 1.19% in the fourth quarter and 0.98% a year earlier, the survey found. The rate of loans entering foreclosure stood at 0.58% on a seasonally adjusted basis, up from 0.54% in the fourth quarter and 0.41% a year earlier. "The percentage of loans in foreclosure would be well below the average of the last 10 years were it not for Ohio, Michigan, and Indiana, and the rate of foreclosures started nationwide would have fallen were it not for big jumps in California, Florida, Nevada, and Arizona," said MBA chief economist Doug Duncan. "Those states have special circumstances that do not reflect what is happening in the rest of the country." The delinquency rate (which does not include loans in foreclosure) for residential mortgage loans fell from 4.95% in the fourth quarter to 4.84% in the first quarter, but the rate was up from 4.41% a year earlier. The MBA can be found online at http://www.mortgagebankers.org.

Two classes from two Citigroup Mortgage Loan Trust transactions have been placed on Rating Watch Negative by Fitch Ratings.The affected securities are class M-12 of series 2005-HE4 and class M-13 of series 2005-OPT4. Fitch also upgraded 12 classes from two Citi transactions and affirmed the ratings on 124 classes in 11 transactions. The negative rating actions reflect increased pressure on the credit enhancement available to offset losses, the rating agency said.

Three classes in two Conseco Finance home equity transactions have been downgraded by Fitch Ratings.The downgrades were as follows: Conseco Home Equity 2001-D, class B-2, from CC/DR3 to C/DR5; and Conseco Home Equity 2002-B, class B-1, from BBB-plus to BBB, and class B-2, from BB-plus to B-plus. Fitch also upgraded one class and affirmed the ratings on over 40 classes in various Conseco/Green Tree Finance home equity and home improvement deals. The rating agency said the downgrades stem from a deteriorating relationship between credit enhancement and expected losses.

Six classes from three Aegis Asset-Backed Securities Trust deals have been downgraded by Fitch Ratings.The downgrades were as follows: series 2003-1, class M2, from BBB-plus to BB (and placed on Rating Watch Negative), and class B1, from CC/DR3 to C/DR4; series 2003-3, class M3, from A-minus to BBB, and class B, from BBB-minus to B; and series 2004-3, class B2, from BBB to BB-plus (and removed from Rating Watch Negative), and class B3, from BBB-minus to BB-minus (and removed from Rating Watch Negative). Fitch also affirmed the ratings on nine other classes in the three transactions. The downgrades were attributed to deterioration in the relationship between credit enhancement and loss expectations. The collateral pools for both deals consist of subprime residential mortgage loans. Fitch can be found online at http://www.fitchratings.com.

Freddie Mac resumed quarterly reporting for the first time since 2002, citing a net loss of $211 million ($0.46 per share) that it attributed primarily to mark-to-market losses on its derivatives portfolio and credit spread widening.Freddie Mac also reported that it recorded net income of $2 billion ($2.80 per share) in the first quarter of 2006. Richard Syron, Freddie Mac's chairman and chief executive officer, noted that "[h]ousing prices declined, mortgage credit tightened, and credit spreads and OAS spreads widened" in the first quarter, which he termed a "very challenging period" for the housing and mortgage markets. "As you can see in our GAAP and fair-value results, we were affected by these changes," he said. "Despite these headwinds, Freddie Mac gained ground last quarter." Guaranteed portfolio volumes rose 16% on an annualized basis, resulting from a shift in mortgage originations back to long-term fixed-rate products, which Mr. Syron characterized as Freddie Mac's "sweet spot." The increase "has enabled us to regain some share from the private-label market and to grow at twice the rate of the market as a whole," he said. "Importantly, we have achieved this growth while maintaining a more cautious view than most towards credit risk. This has helped our aggregate credit statistics, such as delinquencies, to stay lower than the market as a whole."