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Two classes of Diversified Asset Securitization Holdings III LP, a collateralized debt obligation based in part by residential and commercial mortgage-backed securities, have been downgraded by Fitch Ratings.Class A-3L was downgraded from BB to B/DR1, and class B-1L was downgraded from CC/DR3 to C/DR6. Fitch said there have been further writedowns on some previously defaulted bonds since its last rating action on the deal, in March 2006. Fitch said DASH III is a CDO that was originated and managed by Asset Allocation & Management LLC, but that TCW Asset Management Co. became the substitute asset manager for AAMCO in October 2002. The portfolio backing the CDO consists of RMBS, CMBS, asset-backed securities, and real estate investment trusts.

Four classes of Countrywide asset-backed securitizations have been downgraded by Fitch Ratings, and eight classes have been placed on Rating Watch Negative.The downgrades were as follows: series 2006-SPS1, class M-8, from BBB-plus to BB-plus, class M-9, from BBB to BB, and class B, from BBB-minus to BB-minus; and series 2006-SPS2, class B, from BBB-minus to BB-minus. The four downgraded classes were placed on Rating Watch Negative, as were classes M-6 and M-7 of series 2006-SPS1 and classes M-8 and M-9 of series 2006-SPS2. In addition, Fitch affirmed the ratings on 14 other classes in the two deals. Fitch attributed the negative rating actions to deterioration in the relationship between credit enhancement levels and loss expectations.

Three certificates from Long Beach Mortgage Loan Trust series 2006-A have been downgraded and maintained on review for possible further downgrade by Moody's Investors Service, and nine other certificates from the deal have been placed on review for possible downgrade.The downgrades were as follows: class M-7, from Baa3 to B1; class B-1, from Ba1 to B3; and class B-2, from Ba2 to Ca. The classes placed on review for possible downgrade are as follows: A-1, A-2, A-3, M-1, M-2, M-3, M-4, M-5, and M-6. "The projected pipeline loss has increased over the past a few months and may affect the credit support for the three [downgraded] certificates," Moody's said. The placing of the other nine certificates on review for possible downgrade was also based on the fact that the bonds' credit enhancement levels may be too low, in view of projected losses, for the current rating levels. The transaction is backed by subprime second-lien loans.

Twenty-three classes from 10 Long Beach Mortgage Loan Trust transactions have been downgraded by Fitch Ratings.Fitch also affirmed the ratings on 91 classes from 21 Long Beach transactions. The negative rating actions were attributed to a continued deterioration in the relationship between credit enhancement levels and loss expectations. All the mortgages in the various transactions -- consisting of fixed- and adjustable-rate subprime loans -- were either originated or acquired by Long Beach Mortgage Co.

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.