Servicing

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.

Six classes of SACO I Trust second-lien mortgage-backed securities have been downgraded by Fitch Ratings, and four classes have been removed from Rating Watch Negative.The downgrades were as follows: class B-3 of series 2005-1, from BB to B and removed from Rating Watch Negative; class B-3 of series 2005-2, from BBB-minus to BB-minus and removed from Rating Watch Negative; class B-4 of series 2005-2, from B to CCC and assigned a Distressed Recovery rating of DR3; class B-3 of series 2005-3, from BB to B-plus and removed from Rating Watch Negative; class B-4 of series 2005-4, from BB to B and removed from Rating Watch Negative; and class B-5 of series 2005-WM1, from BB to B. The downgrades reflect a decline in overcollateralization stemming from losses associated with the mortgage pools as well as reduced excess spread resulting from "much faster-than-expected prepayments and rising interest rates," the rating agency said. Fitch can be found online at http://www.fitchratings.com.

Class B-4 of Structured Asset Securities Corp. residential mortgage-backed certificates, series 2003-7H, has been downgraded from BB to B by Fitch Ratings.In addition, Fitch affirmed the ratings on 38 classes from seven SASCO securitizations. The downgrade was attributed to cumulative pool losses and high delinquency levels. The rating agency can be found on the Web at http://www.fitchratings.com.

Countrywide Financial Corp., Calabasas, Calif., has reported slightly lower fourth-quarter earnings than in the fourth quarter of last year, but also revealed a huge jump in accumulated negative amortization on its payment-option ARM portfolio.According to the lender's earnings statement, it holds $32.7 billion in option adjustable-rate mortgages on the balance sheet of its bank, a 23% gain from last year. But its option ARMs have accumulated negative amortization of $653 million -- a stunning increase of 782% over 12 months. Countrywide earned $622 million in the fourth quarter (down 3%), but had record earnings of $2.67 billion for the year. It funded $124 billion in the fourth quarter (mostly residential), an 8% drop from that of the fourth quarter of 2005. Acquisitions by its capital markets conduit fell 69%, to $2.7 billion. Countrywide now services $1.298 trillion in loans, a 17% increase from a year ago. The company can be found online at http://www.countrywide.com.

Class M-11 of J.P. Morgan Mortgage Acquisition Corp. asset-backed pass-through certificates, series 2005-FRE1, has been placed on Rating Watch Negative by Fitch Ratings.Fitch also affirmed the ratings on 18 other classes in the transaction. The negative rating action was attributed to "early trends in the relationship between serious delinquency and credit enhancement." The collateral pool consists of fixed- and adjustable-rate subprime mortgage loans originated by Fremont Investment and Loan. Fitch can be found online at http://www.fitchratings.com.

Clayton Holdings, Shelton, Conn., has announced the introduction of fraud detection services designed to protect conduits, Wall Street issuers, and holders of mortgage-backed securities from losses due to origination fraud and breaches of representations and warranties.Clayton said the new services draw upon its "extensive" due diligence and credit risk surveillance experience. They include: high-risk loan identification; expanded fraud reviews; put-back reviews; and trend analysis. "We're drawing on the breadth and depth of our data, experience, and technology to spot issues prior to securitization, and we have the analytics and surveillance tools to identify exceptions that, when cured, enhance bond performance," said Keith Johnson, Clayton's president and chief operating officer. "Our new fraud services not only reduce fraud and early payment default exposure, but increase client efficiency and enhance understanding of this problem." The company can be found online at http://www.clayton.com.

A recent report by a consumer advocacy group predicting a wave of foreclosures on 2/28 adjustable-rate mortgages is "grossly inaccurate," according to the Coalition for Fair & Affordable Lending, a subprime lending group."Traditional hybrid ARMs are neither a significant problem nor a disaster waiting to happen as some have claimed," CFAL executive director Wright Andrews says in a letter to federal and state banking regulators. The CFAL argues that foreclosure rates on subprime ARMs will be dramatically less than the 20% predicted in the Center for Responsible Lending study. But the CRL is not projecting a 20% foreclosure rate, according to CRL senior vice president Eric Stein. The study shows that 20% of the subprime ARMs originated in 2006 will end up in foreclosure over the life of the loans. "That is a totally different question that the CFAL letter does not address," Mr. Stein said.