Servicing

While rejecting the idea of a government bailout for delinquent subprime borrowers, a top government housing official said Wednesday that the Federal Housing Administration can come to the aid of "tens of thousands" of consumers through the refinancing process.Roy Bernardi, deputy secretary for the Department of Housing and Urban Development, said, "If a refi is doable, FHA would look at it and work with servicers." Mr. Bernardi noted that the agency could do more to help subprime borrowers if FHA reforms are passed by Congress, including a proposal that would allow the agency to charge risk-based premiums. "We must reach out to help the borrower," he said, speaking before a policy meeting sponsored by the Mortgage Bankers Association. "But we can't simply throw money at the problem."

Banks and thrifts can earn Community Reinvestment Act credit by placing their troubled subprime borrowers into newly refinanced loans, but not for ordinary workouts and loan modifications, according to regulators.When it comes to their own loans, "I don't think there is any question whether banks will do workouts and accommodate those individuals appropriately," said Robert Mooney, acting deputy director of the Federal Deposit Insurance Corp., at a CRA conference sponsored by the Consumer Bankers Association. The main thrust of the April 17 interagency statement is to encourage banks to work with nonprofit groups in helping subprime borrowers with adjustable-rate 2/28 and 3/27 mortgages that have been securitized. Mr. Mooney noted that a lot of the borrowers are trapped and facing foreclosure. And it isn't easy to "shake" those loans out of the securitizations so responsible banks can do the workouts, he said. Meanwhile, the regulators want to ensure that "you get the credit you deserve" in the CRA lending or service tests "for taking that extra step and going the extra mile," Mr. Mooney said. The CBA can be found on the Web at http://www.cbanet.org.

Fifteen classes from six deals issued by SACO I Trust have been placed on review for possible downgrade by Moody's Investors Service.The affected classes are as follows: series 2006-2, classes I-B-4 and II-B-4; series 2006-3, class B-4; series 2006-4, class B-4; series 2006-5, classes I-B-4, II-B-1, II-B-2, II-B-3, and II-B-4; series 2006-6, classes B-2, B-3, and B-4; and series 2006-7, classes B-2, B-3, and B-4. These actions are based on an analysis of the credit enhancement provided by subordination, overcollateralization, and excess spread relative to expected losses, Moody's said. The transactions are backed by closed-end second-lien loans.

Class B of Mesa Trust 2001-2 has been downgraded from B3 to Caa3 by Moody's Investors Service.The action was based on an analysis of the credit enhancement provided by subordination, overcollateralization, and excess spread relative to the expected loss, Moody's said. The transaction is backed by first- and second-lien fixed- and adjustable-rate subprime mortgage loans.

Two classes of Finance America Mortgage Loan Trust series 2004-2 have been downgraded by Fitch Ratings, and two classes from series 2004-1 have been placed on Rating Watch Negative.Class M-8 of series 2004-2 was downgraded from BBB to BBB-minus, and class M-9 was downgraded from BBB-minus to BB-minus. Classes M-7 and M-8 of series 2004-1 were placed on Rating Watch Negative. In addition, Fitch upgraded one class and affirmed the ratings on 13 other classes in the two deals. Fitch attributed the downgrades to deterioration in the relationship between credit enhancement and expected losses.

Two classes of Terwin Mortgage Trust mortgage-backed securities have been downgraded by Moody's Investors Service, and five classes have been placed under review for possible downgrade.Class B-6 of Terwin Mortgage Trust series 2006-2HGS was downgraded from B1 to Caa3, and class B-7 was downgraded from Caa3 to C. Classes B-3, B-4, and B-5 of the same transaction were placed under review for possible downgrade, as were classes B-4 and B-5 of Terwin Mortgage Trust series 2006-4SL. The negative rating actions were attributed to losses that have eroded subordination and caused credit enhancement to fall too low to support the existing ratings. Moody's can be found online at http://www.moodys.com.

Three classes of Structured Asset Securities Corp. residential mortgage-backed certificates have been downgraded by Fitch Ratings.The downgrades were as follows: series 1999-SP1 pools 1, 2, and 3, class B, from BBB to BB-plus; series 2002-BC1, class M3, from CCC/DR2 to CC/DR2; and series 2002-HF2, class B2, from B to CC/DR2. In addition, the Distressed Recovery rating of series 2003-BC2 class B2 was changed from DR6 to DR2. Fitch also upgraded two SASCO classes and affirmed the ratings on 49 classes from 15 SASCO deals. Fitch attributed the downgrades to deterioration in the relationship between credit enhancement and expected losses.

Twenty-five classes from nine Structured Asset Securities Corp. Amortizing Residential Collateral Trust transactions have been downgraded by Fitch Ratings.Fitch also affirmed the ratings on 29 classes from 11 SASCO ARC deals. The downgrades were attributed to a deterioration in the relationship between credit enhancement and loss expectations.

Twenty-nine classes from 10 Credit Suisse First Boston home equity securitizations have been downgraded by Fitch Ratings.In addition, the ratings on 97 classes from 18 CSFB deals 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.

Fifty-eight classes from 15 Structured Asset Investment Loan Trust mortgage pass-through certificates have been downgraded by Fitch Ratings.In addition, Fitch affirmed the ratings on more than 100 classes from 23 SAIL transactions. The rating agency attributed the downgrades to a deterioration in the relationship between credit enhancement and expected losses. The collateral in the deals consists primarily of conventional fixed- and adjustable-rate, fully amortizing and balloon, first- and second-lien residential mortgage loans. Fitch can be found on the Web at http://www.fitchratings.com.