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Three classes of First Horizon Home Loan Mortgage Trust mortgage-backed securities have been placed on Rating Watch Negative by Fitch Ratings.The affected securities are the B5 classes of series 2005-AA7, series 2005-AA8, and series 2006-FA1. The negative rating actions were attributed to "signs of increasing credit risk, posing a potential threat to subordinate bonds." The collateral for the transactions consists of conventional 15- and 30-year fixed-rate residential mortgages extended to prime borrowers.

Class E of Merrill Lynch Mortgage Investors Inc. mortgage pass-through certificates, series 1998-C1-CTL, has been downgraded from Ba3 to B1 by Moody's Investors Service.One other class was upgraded, and the ratings on six other classes in the deal were affirmed. The downgrade reflects "concerns about the credit of Rite Aid Corp.," Moody's said. The certificates are collateralized by 99 credit tenant lease loans backed by 16 corporate credits, the rating agency said. Moody's can be found online at http://www.moodys.com.

Bank of America Corp., Charlotte, N.C., has reported net income of $5.26 billion ($1.16 per share) for the first quarter, an increase of 5% from $4.99 billion ($1.07 per share) a year earlier that it attributed partly to a rise in mortgage banking income.BoA said the net income from its Consumer Real Estate segment, including its home equity and mortgage businesses, rose 33% to $227 million. Revenues for the segment totaled $840 million, a 21% increase derived "partly from increased home equity balances," the company said. BoA can be found online at http://www.bankofamerica.com.

RealtyTrac, an online foreclosure marketplace based in Irvine, Calif., has reported that new foreclosure filings rose 7% in March and were 47% higher than the level recorded a year earlier.The company's U.S. Foreclosure Market Report indicates that 149,150 new foreclosure properties were added to the rolls in March. "Foreclosure activity shifted into a higher gear in the first two months of 2007, and March's numbers continued that trend," said James J. Saccacio, RealtyTrac's chief executive officer. "While foreclosures are causing a major disruption in the subprime sector of the lending industry and saturating pockets of some local markets, it's important to note that U.S. foreclosure activity overall is not far above historical norms." The company said Nevada, Colorado, and California recorded the highest foreclosure rates in March. RealtyTrac can be found online at http://www.realtytrac.com.

A partisan dispute over an affordable housing trust fund could slow passage of a Federal Housing Administration reform bill that many in Congress view as a way to help subprime borrowers get into safer and more affordable home loans.Rep. Judy Biggert, R-Ill., warned Democrats that she has "grave concerns" about the solvency of the FHA single-family program if excess FHA revenues are earmarked for a yet-to-be-created AH trust fund. "Removing the housing trust fund provision will allow us to work together on a bipartisan bill that can move expeditiously to the House floor," Rep. Biggert said. But Rep. Maxine Waters, D-Calif., warned that the FHA reform bill will not get out of the House Financial Services Committee without the affordable housing fund provision. The FHA bill, co-sponsored by Rep. Waters and the committee chairman, Rep. Barney Frank, D-Mass., does not create an AH trust fund -- that requires separate legislation that Rep. Frank plans to introduce later this year. It simply allows the future affordable housing trust fund to tap the FHA as a funding source.

Freddie Mac has announced that it will purchase $20 billion in fixed-rate and hybrid adjustable-rate mortgage products that will provide more options for lenders to offer subprime borrowers.The products, which are under development and slated to be introduced by midsummer, will limit payment shock by offering reduced adjustable-rate margins, longer fixed-rate terms, and longer reset periods, the government-sponsored enterprise said. The $20 billion commitment was made by Freddie Mac chairman and chief executive Richard F. Syron at the Homeownership Preservation Summit convened by Sen. Christopher J. Dodd, D-Conn., and attended by Sen. Richard Shelby, R-Ala. Mr. Syron said the pledge is intended "to assist families caught up in the subprime crisis and to make the market more stable and transparent for all borrowers." The commitment followed a recent announcement that Freddie Mac will stop buying subprime mortgages that have "a high likelihood of excessive payment shock" and of risking foreclosure. The GSE can be found online at http://www.freddiemac.com.

Class B-1 of Diversified Asset Securitization Holdings II LP has been downgraded from B/DR4 to CCC/DR4 by Fitch Ratings.The ratings on three other classes in the deal were affirmed. Fitch said DASH II is a collateralized debt obligation that was originated and managed by Asset Allocation & Management LLC, but that Western Asset Management Co. became the substitute asset manager for AAMCO in October 2002. The portfolio backing the CDO consists of residential and commercial mortgage-backed securities, asset-backed securities, and other CDOs.

The class A notes issued by Blue Heron Funding IX Ltd., a collateralized debt obligation consisting partly of residential and commercial mortgage-backed securities, has been downgraded from F1-plus to F1 by Derivative Fitch.In addition, the ratings on two other classes were affirmed. Fitch said the downgrade resulted from a previous downgrade of the short-term rating of Westdeutsche Landesbank Girozentrale, the manager of the CDO. In addition to RMBS and CMBS, the transaction includes asset-backed securities and other CDOs, the rating agency said.

The class A-1 and A-2 notes issued by Blue Heron Funding V Ltd., a collateralized debt obligation partly composed of residential and commercial mortgage-backed securities, have been downgraded from F1-plus to F1 by Derivative Fitch.In addition, the ratings on two other classes were affirmed. Fitch said the downgrade resulted from a previous downgrade of the short-term rating of Westdeutsche Landesbank Girozentrale, which is the manager of the CDO. In addition to RMBS and CMBS, the transaction includes asset-backed securities and other CDOs, the rating agency said. Fitch can be found on the Web at http://www.fitchratings.com.

Washington Mutual Inc.'s home loan segment incurred a net loss of $113 million in the first quarter as a result of weakness in the subprime mortgage market, the Seattle-based thrift has reported.The segment recorded net income of $52 million in the first quarter of 2006, WaMu said. The company said its first-quarter gain on sale included net losses of $164 million on sales of subprime mortgage loans and adjustments to reflect declines in market values of loans held for sale. WaMu decreased the value of its subprime mortgage residual portfolio by $88 million, ending the quarter with a balance of $105 million. Overall, WaMu reported net income of $784 million ($0.86 per share) for the first quarter, down from $985 million ($0.98 per share) a year earlier.