Servicing

Officials from Citigroup have been inspecting the offices of Ameriquest Mortgage in California, and may be preparing to make a bid on the subprime giant, industry sources have told MortgageWire.One source said Citigroup sent a group of executives to Ameriquest's corporate offices in Orange, Calif., and to another location in Rancho Cucamonga. The source -- and another official -- said Citigroup may be eyeing Ameriquest's servicing unit, which has about $60 billion in receivables. Meanwhile, a hedge fund called Ellington Management out of Old Greenwich, Conn., has also expressed interested in Ameriquest, sources said, though it is unclear how serious it is about the company. A Citigroup spokesman said the bank does not comment on market rumors, and an Ameriquest spokesman said the same. Ellington could not be reached for comment. (For more details, see the Feb. 5 issue of National Mortgage News.)

Mortgage lenders dropped 6,500 full-time employees from their payrolls in December, and the correction in the subprime sector is starting to show up in the government's job figures.The U.S. Bureau of Labor Statistics reported that employment in the mortgage banking/broker sector declined from 501,200 in November to 494,700 in December. The BLS also revised downward the November and October job numbers, and the statistics now indicate that the industry cut 10,000 employees during the last two months of 2006. Industry economists have been expecting a retrenchment for some time, even though mortgage originations declined by only 7% in 2006 from the level of the previous year. A preliminary estimate by NMN's Quarterly Data Report shows that one- to four-family originations totaled $3.1 trillion last year, down from $3.3 trillion in 2005. However, home sales were down 10% last year, and the purchase mortgage business is more labor-intensive than refinancings. Housing economists are forecasting another 5% to 7% drop in originations in 2007. The Bureau of Labor Statistics can be found online at http://stats.bls.gov.

Two classes of certificates from Meritage Mortgage Loan Trust 2004-1 have been placed on review for possible downgrade by Moody's Investors Service.The class M-8 and B-1 notes are backed by average subprime collateral, consisting primarily of adjustable-rate mortgages, the rating agency said. Moody's said it will assess "whether rate resets and resulting prepayments may have contributed to the deterioration in credit quality of the pool in the past year, resulting in higher-than-expected projected tail-end losses."

Class M-2 of Terwin Mortgage Trust 2004-EQR1 has been downgraded from A2 to Ba1 by Moody's Investors Service.The downgrade was attributed to low credit enhancement levels vis-a-vis current loss projections. "This transaction is not performing as anticipated due to the rising loss severities, delinquency rates, and realized losses," Moody's said. The underlying collateral consists of nonperforming, fixed- and adjustable-rate, first-lien residential mortgage loans.

Two classes from Morgan Stanley ABS Capital I Inc., series 2002-HE3, have been downgraded by Moody's Investors Service.Class B-1 was downgraded from Baa2 to B1, and class B-2 was downgraded from Baa3 to B3. The downgrades were based on credit enhancement levels that are low in view of loss projections, Moody's said. "The overcollateralization amount is declining far below its required level due to the rising loss severities and realized losses," the rating agency said. The collateral consists of fixed- and adjustable-rate first-lien residential mortgage loans.

Five classes of GSAMP Trust series 2006-S3 mortgage-backed securities have been placed under review for possible downgrade by Moody's Investors Service.The affected certificates are classes M-5, M-6, M-7, B-1, and B-2. Moody's said the actions were taken because credit enhancement is low given the projected losses on the underlying pool. "The pool of mortgages has seen a spike in losses in recent months with high loss severity," the rating agency said. The transaction consists of subprime second-lien fixed-rate loans.

Class M-5 of Homestar Mortgage Acceptance Corp. asset-backed pass-through certificates, series 2004-3, has been downgraded from Baa2 to Ba3 by Moody's Investors Service.The downgrade was based on deteriorating credit enhancement, the rating agency said. "While the collateral is performing better than expected, the overcollateralization has consistently been falling below its target as a result of lower-than-expected excess spread levels," Moody's reported. The deal is backed by Homestar-originated collateral consisting primarily of alternative-A loans, with a small percentage of subprime loans.

Class DB3 of CSFB Mortgage Securities Corp. mortgage pass-through certificates, series 2002-22 (groups 3 and 4), has been downgraded from B to C/DR6 by Fitch Ratings.Fitch also affirmed the ratings on 59 classes from 16 CSFB issues. The downgrade was attributed to the deterioration of credit enhancement relative to monthly losses.

Two classes of Residential Accredit Loan Inc. mortgage pass-through certificates have been downgraded by Fitch Ratings.Class B-2 of series 2004-QS6 was downgraded from B to C/DR4, and class B-2 of series 2004-QS9 was downgraded from B to C/DR4. In addition, Fitch upgraded nine classes in three RALI transactions and affirmed the ratings on 160 classes in 36 RALI deals. Fitch attributed the downgrades to high delinquencies and losses. The loans in the securitizations consist of 15- and 30-year fixed-rate mortgages extended to prime and alternative-A borrowers, primarily on one- to four-family residential properties. Fitch can be found online at http://www.fitchratings.com.

Two certificates from Reperforming Loan REMIC Trust Certificates series 2003-R4 have been downgraded by Moody's Investors Service.Class B-3 was downgraded from Ba2 to B2, and class B-4 was downgraded from B2 to Ca. Moody's also confirmed the rating on class B-2 of the transaction. The downgrades were attributed to credit enhancement levels that are low in view of projected losses on the underlying pools. The transaction consists of securitizations of reperforming loans insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs, virtually all of which were repurchased from Ginnie Mae pools. "Frequencies of loans into default appear to be significant for FHA/VA collateral, causing erosion in credit support," Moody's said. The rating agency can be found online at http://www.moodys.com.