Servicing

Two classes of Meritage Mortgage Loan Trust series 2004-1 have been downgraded by Fitch Ratings, and two other classes have been placed on Rating Watch Negative.Class M-8 was downgraded from BBB-minus to BB-minus, and class B-1 was downgraded from BB-plus to B-plus. Classes M-6 and M-7 were placed on Rating Watch Negative. Fitch said the negative rating actions were due to a deteriorating relationship between losses and excess spread that is likely to prevent overcollateralization from maintaining its target amount.

Two classes of Asset-Backed Securities Corp. Long Beach Home Equity Trust mortgage pass-through certificates have been downgraded by Fitch Ratings.Class M2V of series 2000-LB1 group 2 was downgraded from BB-plus to BB, and class BV was downgraded from CC/DR4 to C/DR5. In addition, Fitch affirmed the ratings on five classes of group 1 in the transaction. The rating agency attributed the downgrades to continued deterioration in the relationship between credit enhancement and loss expectations. The subprime mortgage loans underlying the transaction were acquired by ABSC from Long Beach Mortgage. Fitch can be found online at http://www.fitchratings.com.

The net income of Washington Mutual Inc.'s home loan segment plummeted by more than $1 billion last year, although profits exceeded $3.5 billion for the company overall, the Seattle-based thrift has reported.WaMu reported a net loss of $48 million in its Home Loans Group for 2006, compared with net income of $1.03 billion in 2005. For the fourth quarter, the thrift reported a net loss of $122 million in the Home Loans Group, compared with a $24 million loss in the previous quarter and net income of $57 million in the fourth quarter of 2005. Originations of home loans declined 6% in the fourth quarter and 22% for the year. WaMu attributed the nosedive in the mortgage segment's profits to "the continued slowing of the housing market and a significant weakening of overall subprime market conditions." The company said higher delinquencies on subprime home loans and weaker market conditions shaved $160 million from its pretax earnings in the fourth quarter. Overall, WaMu reported net income of $3.56 billion ($3.64 per share) for the year, up from $3.43 billion ($3.73 per share) for 2005. WaMu can be found online at http://www.wamu.com.

Two classes of First Franklin Financial Corp. residential mortgage-backed certificates have been downgraded by Fitch Ratings, and three classes have been placed on Rating Watch Negative.Class M-8 of series 2004-FFH1 was downgraded from BBB to BB, and class M-9 was downgraded from BBB-minus to BB-minus. Class M-7 of the series and classes B-1 and B-2 of series 2004-FFH2 were placed on Rating Watch Negative. In addition, Fitch affirmed the ratings on 16 classes from the two transactions. The negative rating actions were attributed to a deteriorating relationship between credit enhancement and expected losses. The collateral for the transactions consists of first-lien subprime loans. Fitch can be found online at http://www.fitchratings.com.

RealtyTrac, an online foreclosure marketplace based in Irvine, Calif., has reported that the number of new properties in some stage of foreclosure fell nearly 9% in December, though it was up 35% from that of a year earlier.The company's Monthly U.S. Foreclosure Market Report indicates that 109,652 new foreclosure properties were added to the rolls in December. "New foreclosure filings surpassed the 100,000 level for the fifth straight month, something we've not seen since we began issuing our foreclosure market report in January 2005," said Jim Saccacio, RealtyTrac's chief executive officer. "While the number of new foreclosure filings dropped back from the high point of 2006 in November, the combination of slower home sales and rising interest rates on adjustable mortgages continues to drive foreclosures at significantly higher numbers than a year ago." The company said Colorado recorded the highest foreclosure rate of any state in December -- one new filing for every 376 households. RealtyTrac can be found online at http://www.realtytrac.com.

Hanover Capital Mortgage Holdings, Edison, New Jersey, has sold assets associated with its due diligence business to Terwin Acquisition, which does business as The Winter Group.The sale, which includes the assumption of certain liabilities, is expected to generate $4.7 million for Hanover after the collection of receivables retained by the company. Hanover, a real estate investment trust that invests in mortgage assets, said it plans to reinvest the proceeds in its portfolio. Tom Guba, president of The Winter Group, said his company plans to maintain Hanover's due diligence client relationships. "When combined with our existing due diligence operation in Denver and our IT capabilities, this transaction makes us a significant provider of outsourced solutions to the mortgage industry," he said. Winter maintains a capital markets residential sourcing, securitization, trading, and distribution platform. The company also has mortgage servicing and asset management capabilities. Hanover can be found online at http://www.hanovercapitalholdings.com.

Class B-5 of Banc of America Funding Corp. mortgage pass-through certificates, series 2002-1, has been downgraded from BBB to CCC by Fitch Ratings and assigned a Distressed Recovery rating of DR1.In addition, Fitch affirmed the ratings on five other classes in the transaction. The downgrade was attributed to a deterioration in the relationship between credit enhancement and loss expectations.

Andrew Davidson & Co., New York, has announced the introduction of the Loan Dynamics Model, which projects delinquency, default, and loss severity as well as prepayment on nonagency mortgage loans.AD&Co said the new model addresses "the mounting needs of firms that issue or invest in credit-sensitive mortgages and related securities" like alternative-A, high loan-to-value, and subprime loans. Andrew Davidson, president of the firm, said that while prepayment models have become "quite sophisticated" over the past 20 years, credit modeling has not advanced to the same level. "Our new Loan Dynamics Model provides a unified framework for analyzing and modeling the prepayment and default characteristics of a loan," he said. "The Loan Dynamics Model incorporates the best features of traditional roll-rate models and discrete choice models." AD&Co said it will unveil the new product Jan. 29 at the American Securitization Forum Conference in Las Vegas. The company can be found online at http://www.ad-co.com.

IndyMac Bancorp, Pasadena, Calif., has lowered its earnings guidance for the fourth quarter of 2006 by about 28%.IndyMac said it now expects to earn $0.97 per share for the fourth quarter, down from previous guidance of $1.30 to $1.40. In a letter to shareholders, IndyMac chairman and chief executive Michael Perry attributed the shortfall to higher-than-expected credit costs, a lower interest margin, and a lower return on servicing rights and interest-only securities. He said IndyMac still expects to report EPS for 2006 that is about 9% higher than that of the year before, however. In morning trading on Jan. 16 after the announcement, IndyMac's stock price declined by more than 7%. The company can be found online at http://www.indymacbank.com.

The mortgage originations of Wells Fargo Home Mortgage, Des Moines, Iowa, totaled $398 billion in 2006, up 9% from the level recorded in 2005, according to Wells Fargo & Co., San Francisco.In addition, the owned mortgage servicing portfolio stood at a record $1.37 trillion as of Dec. 31, 2006, up 38% from that of a year earlier, Wells Fargo reported. (Wells Fargo Home Mortgage is part of Wells Fargo's community banking segment.) "The past year has been a very challenging year for the mortgage industry with the flat to inverted yield curve and a slowdown in the housing sector," said Mark Oman, senior executive vice president in the Wells Home and Consumer Finance Group. "Despite this environment, we continued our long track record of growing our mortgage servicing businesses at double-digit rates, which provides opportunities to cross-sell and retain these customers." Wells Fargo & Co. reported record net income of $8.48 billion ($2.49 per share) for 2006, up 11% from that of a year earlier. The company can be found online at http://www.wellsfargo.com.