Servicing

Four classes of Ace Securities Corp. mortgage-backed securities have been downgraded by Fitch Ratings, and three classes have been placed on Rating Watch Negative.The downgrades were as follows: series 2002-HE3, class M-2, from A to BBB (and removed from Rating Watch Negative), and class M-3, from BB to B; and series 2004-HE1, class M-5, from BB to B-plus, and class M-6, from BB-minus to B. The securities placed on rating watch were class B-2 of series 2005-HE2, class B-2 of series 2005-HE3, and class B-1 of series 2005-RM2. In addition, the rating agency affirmed the ratings on 55 other classes from six transactions. Fitch said the negative rating actions were taken because monthly losses have generally exceeded the available excess spread in recent months, causing a deterioration in the amount of overcollateralization. The rating agency can be found on the Web at http://www.fitchratings.com.

Freddie Mac has announced that it will pass through full prepayments of principal that represent repurchases of 451 "hybrid" adjustable-rate mortgage loans from 31 single-family ARM participation certificate pools.Freddie Mac said it will reflect the prepayment activity in its February pool factors and will pass through the principal prepayments on the March distribution date for these adjustable-rate PCs. The ARMs and related PCs are all still in their fixed-rate periods. Freddie Mac said one of its sellers recently notified the company that during the second half of 2006 it inadvertently delivered certain ARM loans with a London interbank offered rate index into Freddie Mac PC pools that bear a prefix for Treasury indices. These errors triggered the repurchases, the government-sponsored enterprise said. Freddie can be found online at http://www.freddiemac.com.

Slowing home price appreciation and decreased affordability have boosted the risk of home price declines in the nation's 50 largest housing markets, according to PMI Mortgage Insurance Co., Walnut Creek, Calif.The average score in the PMI U.S. Market Risk Index rose from 328 to 342 in the fourth quarter, the company reported. This means the company's estimate of the probability of experiencing a home price decline in the next two years has risen from 32.8% to 34.2% in the 50 largest metropolitan statistical areas. According to the index, there are now 19 markets with a greater than 50% chance of price declines over two years, up from 18 in the third quarter. "Years of rapid appreciation have made homes less affordable in many areas, and that's not sustainable over the long term, so that what we are seeing is not unexpected," said Mark F. Milner, chief risk officer of PMI Mortgage Insurance. "Over time, moderating appreciation will bring prices back in line with economic fundamentals, particularly incomes, bringing the market back to a healthy balance." PMI can be found online at http://www.pmigroup.com.

RealtyTrac, an online foreclosure marketplace based in Irvine, Calif., has reported that more than 1.2 million foreclosure filings were reported nationwide in 2006, a 42% increase.The company's 2006 U.S. Foreclosure Market Report is based on the company's database of pre-foreclosure and foreclosure properties, which it says includes more than 800,000 properties in nearly 2,500 counties across the country. "While foreclosures are not at historically high levels, a 42% year-over-year increase is certainly noteworthy," said James J. Saccacio, RealtyTrac's chief executive officer. "The increase in the number of properties in foreclosure was driven partly by the general slowing of overall housing sales, and partly by the impact of monthly mortgage payments increasing dramatically for homeowners who held some of the riskier types of adjustable-rate and subprime mortgages." The company said Colorado had the nation's highest foreclosure rate, at 3%, and Texas recorded the highest number of foreclosures, 156,876, or nearly 13% of the national total. RealtyTrac can be found online at http://www.realtytrac.com.

Dow Jones Indexes, Wilshire Associates, and Wells Real Estate Funds have announced the launch of Wells' newest mutual fund, the first licensed to track the Dow Jones Wilshire Global Real Estate Securities Index.The Wells Dow Jones Wilshire Global RESI Index Fund marks the first time the full global RE securities index -- including publicly traded securities of about 240 real estate operating companies and real estate investment trusts in 24 countries -- has been licensed for an investment product, the companies said. The new mutual fund will seek to provide corresponding investment results by investing in the stocks included in the index. "We're seeing an explosion of interest in REITs and other investment vehicles around the world," said Leo Wells, president of Wells Real Estate Funds. " .... [T]wo dozen countries have created, or are considering, REIT-like structures for investors. We think the time is right to bring this global opportunity to Wells investors." The companies can be found online at http://www.djindexes.com, http://www.wilshire.com, and http://www.wellsref.com.

First Financial Bancorp, Hamilton, Ohio, has announced a strategic partnership with PHH Mortgage, a provider of private-label mortgage services and a subsidiary of PHH Corp., Mt. Laurel, N.J.Under the arrangement, PHH Mortgage will provide First Financial with mortgage loan processing, servicing, secondary-market functions, and other mortgage-related loan origination services for new loans, First Financial said. The company said the partnership will offer its clients a greater variety of mortgage products, faster approvals, reduced documentation requirements for most loans, and 24-hour access to the status of their loan applications. "Partnering with PHH gives us a new mortgage loan operating model with more channels for originating loans, freedom to use our name to create brand equity with our clients, and greater access to technology, products, competitive pricing, and world-class client service," said Claude E. Davis, president and chief executive officer of First Financial. The company can be found online at http://www.ffbc-oh.com.

Mortgage acquisitions by Freddie Mac fell 14% in 2006 to $502 billion, according to figures released by the company.Year-end production volumes for the entire industry have not yet been tabulated, but according to preliminary estimates from the Quarterly Data Report, residential originations fell 6.7% in 2006 to just over $3 trillion. (The QDR is published by National Mortgage News.) At year-end 2006, Freddie Mac's retained portfolio totaled $703.6 billion, compared with $710 billion at year-end 2005. The government-sponsored enterprise can be found on the Web at http://www.freddiemac.com.

Fitch Ratings has assigned its first construction loan servicer rating to JP Morgan Commercial Real Estate Loan Administration, Phoenix.CRELA is rated 'Acceptable' as a construction loan servicer for commercial real estate loans. (Fitch rates construction loan servicers 'Acceptable' or 'Unacceptable.') "The rating considers CRELA's extensive history of construction loan administration, project underwriting and servicing, experienced and tenured management and staff, and the strong operational risk and financial resources provided by its parent, JP Morgan Chase & Co.," Fitch said. The rating also considers CRELA's "extensive use" of technology. Fitch said it is the first rating agency to publish criteria for the rating of construction loan pools. It can be found online at http://www.fitchratings.com.

The bull market in residential mortgage-backed securities in recent years appears to have run its course, according to a new report published by Standard & Poor's Ratings Services.As evidence, S&P pointed to slowing home price appreciation, diminished profitability for mortgage lenders, widening credit spreads, and an acceleration of negative rating actions. Issuance will decline in 2007 by as much as 10%-15%, bringing the dollar amount to $900 billion-$950 billion, S&P said. However, the rating agency said RMBS issuance will still be significantly higher than in 2003 and 2004, when it totaled $586 billion and $864 billion, respectively. "We foresee further compression of the upgrade-to-downgrade ratio because fewer outstanding transactions are now collateralized by prime mortgage loans, and the recent trend in securitization is toward structures with fewer speculative-grade ratings," the rating agency said. S&P said it expects more downgrades and fewer upgrades this year. The report is titled, "For U.S. RMBS, 2007 Will Be a Year of Transition for Issuance and Performance Concerns." S&P can be found online at http://www.standardandpoors.com.

Citigroup has agreed to purchase ABN Amro Mortgage Group, Ann Arbor, Mich., for an undisclosed sum, a purchase that will make it the nation's fourth-largest residential servicer, with $728 billion in receivables.The sale effectively removes AAMG -- once the nation's largest wholesale funder -- as a major player in mortgages. The sale includes the broker platform, InterFirst, and Mortgage.com. AAMG's parent, LaSalle Bank Corp., will continue to fund mortgages and home equity loans through its branch network. According to a statement issued by ABN, Citi will purchase $9 billion in net assets, $3 billion of which represents the value of ABN's $228 billion servicing portfolio. In November, National Mortgage News broke the news that ABN Amro was for sale. The deal is expected to close by the end of the first quarter. The companies can be found online at http://www.citigroup.com and http://www.abnamro.com.