Servicing

Four certificates from Ace Securities Corp. Home Equity Loan Trust series 2006-SL2 have been downgraded and maintained on review for possible further downgrade by Moody's Investors Service, and 10 other certificates from the deal have been placed on review for possible downgrade.The downgrades were as follows: class M-8, from Baa2 to B1; class M-9A, from Baa3 to B3; class M-9B, from Baa3 to B3; and class B-1, from Ba1 to Ca. The additional classes placed on review for possible downgrade are as follows: A, M-1, M-2A, M-2B, M-3, M-4, M-5, M-6A, M-6B, and M-7. Moody's attributed the negative rating actions to "the fact that the bonds' credit enhancement levels, including excess spread, may be too low compared to the current projected loss numbers at the current rating level." The transaction is backed by subprime second-lien loans.

Fifteen classes from three issues of GSAMP Trust mortgage-backed securities have been downgraded by Moody's Investors Service, and eight classes have been placed under review for possible downgrade.Moody's said the actions were taken because credit enhancement is low given the projected losses on the underlying pool. The three affected GSAMP deals are series 2006-S2, series 2006-S3, and series 2006-S5, the rating agency said. The transaction consists of subprime second-lien fixed-rate loans. Moody's can be found online at http://www.moodys.com.

Fitch Ratings has affirmed the long-term issuer default rating of IndyMac Bancorp, but it has revised the company's outlook from Positive to Stable.The long-term issuer default rating is BBB-minus. Fitch said the revision of IndyMac's Rating Outlook "reflects the likelihood that 2007 will be a transitional year for both [IndyMac] and the industry." The rating agency said IndyMac's mortgage banking revenue margin has "dropped recently and consistently narrowed over the last five years." Fitch can be found online at http://www.fitchratings.com.

Core Mortgage Risk Monitor's foreclosure index has "increased dramatically" in the second quarter, although the risk index overall is showing signs of stabilization, according to First American CoreLogic, a Sacramento, Calif.-based provider of mortgage risk assessment and fraud prevention systems.The foreclosure index posted a 10.5% quarterly increase that was attributed to rising delinquency rates in the subprime sector. "While house prices are stabilizing, we are transitioning the risks to a period of rising delinquencies and foreclosures that is going to have concentrated and contagious impact on local markets," said Mark Fleming, CoreLogic's chief economist. "Fraud and collateral risk has stabilized at a relatively high level not seen in recent years, and foreclosures are expected to continue to rise despite relatively unchanged employment conditions and stabilization of house prices." CoreLogic said the five U.S. markets currently most at risk are Detroit-Livonia-Dearborn, Mich.; Memphis; Warren-Troy-Farmington Hills, Mich.; Youngstown-Warren-Boardman, Ohio-Pa.; and Dayton, Ohio. CoreLogic can be found on the Web at http://www.corelogic.com.

Although subprime defaults are rising in Florida and the West Coast, a market correction is under way and Congress should leave it to regulators and the mortgage industry to help troubled subprime borrowers, according to a top housing regulator."Between the regulators, financial institutions, mortgage servicers, and the brokers, I think it can be worked out," James Lockhart, director of the Office of Federal Housing Enterprise Oversight, told reporters. "There is going to be some pain." And the correction will be "drawn out" as the resets on adjustable-rate subprime mortgages take effect over the next two years. But the best way to address this problem is "not to overreact, and not cause an unnecessary credit crunch that would end up just hurting the people you are trying to help," Mr. Lockhart said. Until recently, subprime defaults were concentrated in the Rust Belt states and the hurricane-affected states -- principally Louisiana and Mississippi. "We are beginning to see rapid growth in the West Coast and Florida," the OFHEO director told an Independent Community Bankers of America meeting in Washington.

Fannie Mae and Freddie Mac are some of the biggest investors in subprime securities, and their regulator -- the Office of Federal Housing Enterprise Oversight -- is looking for ways to ensure that their purchases of private-label securities comply with federal subprime underwriting standards."It would make a lot of sense if they can get a representation from the packagers of these securities that they are following reasonable underwriting standards," OFHEO Director James Lockhart told reporters. In a speech to the Independent Community Bankers of America, the OFHEO director said unregulated lenders and mortgage brokers largely contributed to the deterioration of subprime underwriting standards. "OFHEO is now working with the enterprises on guidance that would have the effect of applying -- through the GSEs' market activities -- the strictures of federal guidances on these unregulated firms," Mr. Lockhart said. Fannie chief executive Daniel Mudd told a congressional panel April 17 that his company will comply with the proposed subprime underwriting guidance issued by federal banking regulators in March. The comment period ends May 7.

Class B5 of Harborview Mortgage Loan Trust Inc. series 2006-6 has been placed on Rating Watch Negative by Fitch Ratings.In addition, Fitch affirmed the ratings on five other classes in the transaction. The rating agency attributed the watchlist placement to "increasing credit risk, posing a potential threat to subordinate bonds." The deal is backed by hybrid and adjustable-rate mortgage loans secured by residential first liens. Fitch can be found online at http://www.fitchratings.com.

Five classes from three deals issued by First Franklin Mortgage Loan Trust have been downgraded by Moody's Investors Service.The downgrades were as follows: First Franklin Mortgage Loan Trust 2003-FFB, class B-1, from Baa2 to B3, and class B-2, from Baa3 to B3; First Franklin Mortgage Loan Trust series 2003-FFC, class M-3, from Baa1 to Ba1, and class M-4, from Baa2 to Ba1; and FFML Net Interest Margin Trust 2003-FFB notes, from Baa2 to B3. The downgrades were based on credit enhancement levels that were low in view of current loss projections, Moody's said. "Realized losses have caused the overcollateralization amount to decline below the required level," the rating agency said. "In addition, losses are not all covered by the mortgage insurance, and the subordinate tranches have therefore less credit protection than expected."

The Federal Agricultural Mortgage Corp., Washington, D.C., has announced the guarantee of a $1 billion note transaction that boosted its total guarantee volume to a record level of over $8 billion.Farmer Mac said the transaction was part of the government-sponsored enterprise's AgVantage program, which guarantees timely payment of principal and interest on notes issued by a trust and secured by the corporate obligation of an agricultural mortgage lender, which is in turn secured by agricultural mortgages. Farmer Mac can be found online at http://www.farmermac.com.

The mortgage banking sub-segment of Capital One Financial Corp., McLean, Va., incurred a $12.6 million net loss in the first quarter, Capital One has reported.The company cited pressures in the secondary capital markets for loans associated with nonconforming prime mortgage loans (including alternative-A loans), which it said resulted in a $19 million addition to its reserve related to representations and warranties and a $21 million warehouse valuation adjustment. The sub-segment -- which falls under Capital One's National Lending segment and represents the legacy business of GreenPoint Mortgage -- originated $6.8 billion in loans during the first quarter, down $2.5 billion from originations in the fourth quarter and down $1.0 billion from those of a year earlier, Capital One reported. (Capital One acquired North Fork Bank, the parent company of GreenPoint, in December 2006.) Overall, the company reported net income of $675.1 million ($1.62 per share) for the first quarter, compared with $883.3 million ($2.86 per share) in the first quarter of 2006. Capital One can be found online at http://www.capitalone.com.