Servicing

Roughly 7% of U.S. homeowners have negative home equity, and the housing industry is currently in the throes of a "deep recession," according to the chief economist for Global Insight Inc., a forecasting firm.But Global Insight's Nariman Behravesh also said Thursday that the subprime mortgage crisis "is now off the front pages, but more firms could go belly up." Speaking at a forecast conference sponsored by the National Association of Home Builders, Mr. Behravesh added that "housing demand is beginning to recover." Even though 7% of mortgages are under water, 60% of homeowners have equity of 30% or more, he said. Outstanding subprime loans account for just 13% to 14% of the total market, according to Global Insight.

Three classes of Putnam Structured Products CDO 2001-1 Ltd., a collateralized debt obligation consisting partly of residential and commercial mortgage-backed securities, have been downgraded by Fitch Ratings.The rating agency also affirmed the ratings on four other classes in the transaction. "In Fitch's modeling, the portfolio is unable to generate sufficient interest proceeds to compensate [for] the costs of the floating-rate liabilities in both rising and flat interest rate scenarios," Fitch said. "This leads to deteriorating performance in the lower part of the capital structure while the senior notes benefit from structural protection features." Fitch said the portfolio backing the CDO consists of RMBS (32.3%), CMBS (13.6%), the debt of real estate investment trusts (23.5%), corporate bonds (16.1%), asset-backed securities (7.4%), and other CDOs (7.1%).

Three classes from two CitiFinancial Mortgage Securities Inc. securitizations have been downgraded by Fitch Ratings.The downgrades were as follows: series 2003-1, class MV-3, from A to BBB-minus, and class MV-4, from BBB-minus to BB-minus; and series 2003-3, class MV-3, from BBB to BB-minus. In addition, 16 tranches from four Citi transactions have been upgraded, and the ratings on 10 classes have been affirmed. The downgrades were attributed to deterioration in the relationship between credit enhancement and loss expectations. The collateral backing the affected classes consists primarily of first-lien subprime residential mortgage loans.

Two classes of mortgage pass-through certificates in Mortgage Asset Securitization Transactions Asset Back Securities Trust deals have been downgraded by Fitch Ratings.Class M-6 of series 2002-OPT1 was downgraded from BBB-minus to BB-minus, and class M-6 of series 2003-WMC2 was downgraded from BBB-minus to BB-plus. Fitch also placed classes M-10 and M-11 of series 2005-NC2 on Rating Watch Negative and affirmed the ratings on 22 classes in three MASTR ABS securitizations. The rating agency attributed the downgrades to deterioration in the relationship between credit enhancement and loss expectations. Fitch said the collateral backing the transactions consists primarily of first- and second-lien fixed- and adjustable-rate subprime mortgage loans.

Four classes of mortgage pass-through certificates in Mortgage Asset Securitization Transactions Second Lien Trust 2005-1 have been downgraded by Fitch Ratings.The downgrades were as follows: class M-6, from BBB-minus to BB-plus; class M-7, from BB-plus to CC; class M-8, from B-minus/DR2 to C/DR6; and class M-9, from CC/DR3 to C/DR6. Class M-7 was also assigned a Distressed Recovery rating of DR4. In addition, the ratings on six other classes in the MASTR transaction were affirmed. The downgrades were attributed to the failure of overcollateralization to reach the target level and to writedowns stemming from rising interest rates and prepayments that have been much faster than expected.

Seventeen classes from six Structured Asset Securities Corp. residential mortgage-backed securitizations have been downgraded by Fitch Ratings.In addition, the Distressed Recovery ratings on two SASCO classes were lowered. Fitch also affirmed the ratings on 59 classes from six SASCO deals. The downgrades were attributed to a deterioration in the relationship between credit enhancement and loss expectations. The pools consist of conventional, fixed-rate, fully amortizing and balloon, second-lien residential mortgage loans, Fitch said.

Twenty-nine classes from 10 Credit Suisse First Boston Home Equity Asset Trust transactions have been downgraded by Fitch Ratings.In addition, the ratings on 97 classes from 18 CSFB HEAT transactions have been affirmed. The downgrades were attributed to a deterioration in the relationship between credit enhancement and loss expectations. The rating agency said the collateral backing the transactions consists of first- and second-lien fixed- and adjustable-rate subprime mortgage loans. The rating agency can be found online at http://www.fitchratings.com.

Foreclosures are continuing to "escalate at a record-setting pace" in Massachusetts, according to ForeclosuresMass, a provider of foreclosure data based in Framingham, Mass.The company said 6,624 foreclosures were recorded in the first quarter, up 76% from the level of a year earlier. "It is clear that tens of thousands of Massachusetts residents are trapped in properties they can no longer afford," said Jeremy Shapiro, president and co-founder of ForeclosuresMass. "They can't keep up with mortgage payments that are too high, and the downward pressure on statewide housing prices means that they can't sell the home to pay off their debts. With no substantial market turnaround in sight, we expect Massachusetts foreclosure rates to continue at record or near-record levels for months to come." The company can be found online at http://www.foreclosuresmass.com.

More than 430,000 foreclosure filings were reported nationwide in the first quarter, up 27% from those of the previous quarter and 35% from a year earlier, according to RealtyTrac, an online foreclosure marketplace based in Irvine, Calif.The nation's quarterly foreclosure rate of one foreclosure filing for every 264 households was the highest since RealtyTrac began issuing its report 27 months ago, the company said in its 2007 U.S. Foreclosure Market Report. (Foreclosure filings include default notices, auction sale notices, and bank repossessions.) "The rise in foreclosure activity was quite dramatic and widespread in the first quarter, with 37 out of the 50 states reporting year-over-year increases," said James J. Saccacio, chief executive officer of RealtyTrac. "Certainly the surge in subprime defaults has contributed to the overall rise in foreclosures -- we estimate that more than 50% of the foreclosure activity we charted in the first quarter was from subprime loans. However, it's not just low-end homes that are going into foreclosure. We're seeing a rising percentage of foreclosures with an estimated market value of more than $750,000." The company can be found online at http://www.realtytrac.com.

A study by Freddie Mac has found that illness and excessive debt are gaining ground on job or income loss as the leading cause of mortgage delinquencies.Freddie Mac said unemployment and income losses caused 36% of delinquencies among Freddie Mac loans in 2006, down from 43% between 2001 and 2005. But delinquencies caused by excessive financial obligations rose to 13.6% last year, up from 11.1% in prior years. Late payments linked to a borrower or family illness rose from 19.2% to 21.1%. Noting that only 0.53% of Freddie Mac loans were 90 or more days overdue at the end of 2006, chief economist Frank Nothaft said the drop in job- or income-based severe delinquencies reflects increases in payroll jobs outside the manufacturing sector. "But the increase in late payments due to excessive debt is potentially troubling because it is independent of economic trends and suggests some borrowers are having a harder time handling their financial obligations than in past years." Freddie Mac can be found online at http://www.freddiemac.com.