Servicing

Six certificates from three GSAMP Trust deals issued in 2006 have been downgraded by Moody's Investors Service.The downgrades were as follows: series 2006-S1, class B-2, from Ba2 to Caa2; series 2006-S2, class B-2, from Ba2 to Caa2; series 2006-S5, class M-6, from Baa2 to Ba3, class M-7, from Baa3 to B2, class B-1, from Ba1 to Ca, and class B-2, from Ba2 to C. In addition, the following five classes were placed on review for possible downgrade: series 2006-S1, class B-1; series 2006-S2, classes M-7 and B-1; and series 2006-S5, classes M-4 and M-5. The negative ratings actions were taken because credit enhancement levels are low given the projected losses on the underlying pools, Moody's said. "The pools of mortgages have seen a spike in losses in recent months, with high loss severity," the rating agency said. The transactions consist of subprime, second-lien, fixed-rate loans. The primary originators for the three transactions were Fremont Investment & Loans, Long Beach Mortgage Co., and New Century Mortgage Co. Moody's can be found online at http://www.moodys.com.

Twenty-seven classes from 15 Morgan Stanley subprime mortgage-backed securities have been downgraded by Fitch Ratings.Fitch also upgraded two classes and affirmed the ratings on 622 classes from 88 Morgan Stanley transactions. The negative rating actions were attributed to deterioration in the relationship between credit enhancement and expected losses. All the affected securities have serious delinquencies (ranging from loans delinquent more than 60 days to real estate owned) ranging from 20% to nearly 50%, the rating agency said.

Subprime-related mortgage exposure for U.S. asset-backed commercial paper programs fell sharply in the fourth quarter, though it remained high by historical standards, according to Fitch Ratings.The rating agency said ABCP programs had experienced a "significant spike" in subprime exposure a year earlier. Fitch attributed the recent decrease in subprime exposure to slowing originations, the resulting paydown out of warehouse facilities, and the closing of several subprime single-seller facilities in 2006. "While subprime exposure remains high on an historical basis, Fitch believes the levels are manageable, and investors remain well insulated from the pressures facing other market participants," Fitch said. The rating agency can be found on the Web at http://www.fitchratings.com.

Citibank NA has purchased from Fannie Mae a portfolio of investments representing approximately $676 million in federal Low Income Housing Tax Credits, according to the two companies.The details of the sale were not disclosed, except that the purchase price was paid in cash plus the assumption of Fannie Mae's capital obligations relating to the investments. The portfolio consisted of Fannie's investments in 12 funds owning 382 LIHTC properties. "Citibank values the opportunity to invest in low-income rental housing and is committed to keeping much-needed capital flowing to these properties," said Andy Ditton, managing director of Citibank Community Development. The companies can be found online at http://www.citigroup.com and http://www.fanniemae.com.

A study by First American CoreLogic predicts that 1.1 million of the 8.37 million adjustable-rate mortgage loans originated between 2004 and 2006 will end up in foreclosure over a six- to seven-year period.That would be a cumulative 13% foreclosure rate on the $2.2 trillion portfolio. First American CoreLogic predicts that the defaulted loans will account for $326 billion of debt, and that even after the foreclosure and sale of the property, lenders and investors will lose $112 billion. Christopher Cagan, director of research and analytics at First American CoreLogic, said the impact of reset-based foreclosures will be greatest among subprime home loans and loans with low initial "teaser rates."

Wall Street wants to get its arms around rising subprime loan defaults as fast as possible so it can move forward with the least disruption to the markets, according to a loss mitigation firm hired to get a fix on polls of nonperforming mortgages.Jeffrey Taylor said clients that have hired his Orlando, Fla.-based firm, Digital Risk, "realize that they are a big part of the problem because they created the products" that have gotten many borrowers into financial difficulty. "They also realize that if they force lenders out of business [by requiring them to re-purchase delinquent loans], they have nothing," he added. "The message they want to convey to the investors who bought the bonds that are now being downgraded is that 'we know we erred, so here's the methodology we're going to use to project how new loans are going to perform during the next cycle'." Mr. Taylor would not reveal the name of Digital Risk's clients. But he said his firm has been hired to assess what went wrong with $30 billion worth of mortgage-backed securities. "Everything has happened so fast [our clients] don't have the infrastructure to wrap their hands around the problem," he said. "We're in a triage mode right now -- everybody is in a great panic."

Servicers should not start foreclosure proceedings until a borrower has missed three monthly payments of principal and interest, according to a Federal Trade Commission attorney.That is a "key provision" in the Fairbanks settlement agreement, FTC attorney Allison Brown told a National Community Reinvestment Coalition conference. The 2003 settlement spelled out best practices that the FTC expects all servicers to follow. And the consumer protection agency said it does not want to find servicers charging delinquent borrowers a lot of fees and using those unpaid fees as justification for initiating a foreclosure. The FTC is also concerned that some forbearance agreements are unworkable, because the borrowers are expected to make double payments when they resume making their monthly payments. "That is an area we are looking at," Ms. Brown said, as well as "how we can encourage better forbearance practices."

Credit-Based Asset Servicing and Securitization LLC will pay 28% less for Fieldstone Investment Corp., Columbia, Md., under an amended purchase agreement disclosed March 16.According to a statement released by the two firms, C-BASS will pay $4 a share for the struggling nonprime lender, compared with an original purchase price of $5.53. The price is being reduced to reflect "the cost to provide Fieldstone with needed additional liquidity," the two firms said. "This additional liquidity will be provided through the sale to C-BASS, at Fieldstone's option, of securities and mortgage loans owned by Fieldstone." Announced last month, the original cost of the deal was $260 million. C-BASS is a specialty servicer controlled by mortgage insurance giants MGIC and Radian. Fieldstone is a mortgage banking real estate investment trust. It lost $37.2 million through the first nine months of last year.

Delta Financial Corp., Woodbury, N.Y., has announced the securitization of $950 million of mortgage loans through its subsidiary Renaissance Mortgage Acceptance Corp.The co-lead managers of Renaissance Home Equity Loan Trust 2007-1 were Citigroup and Banc of America Securities LLC, Delta said. The company can be found on the Web at http://www.deltafinancial.com.

Touting record new-business volume of $3 billion in 2006, the Federal Agricultural Mortgage Corp., Washington, has reported net income of $29.8 million ($2.68 per share) for the year, down from $47.0 million ($4.09 per share) in 2005.For the fourth quarter, Farmer Mac's net income totaled $7.6 million ($0.70 per share), compared with a net loss of $11.9 million ($1.04 per share) in the fourth quarter of 2005. "Farmer Mac's record business volume for 2006 was attributable principally to its marketing strategies focused on large, high-asset-quality program transactions, backed by increasing numbers of mortgage loans on farmers, ranchers, and rural homeowners," said Henry D. Edelman, Farmer Mac's president and chief executive officer. "These transactions achieve greater protection for Farmer Mac against adverse credit performance, with commensurately lower compensation for the assumption of credit risk and administrative costs, resulting in projected risk-adjusted marginal returns on equity approximately equal to those of other Farmer Mac transactions." The government-sponsored enterprise can be found online at http://www.farmermac.com.