Servicing

Class B1-A of Cityscape Home Equity Loan Trust home equity loan pass-through certificates, series 1997-C group 2, has been downgraded from BBB to BB by Fitch Ratings.Fitch also affirmed the ratings on 12 classes in two Cityscape subprime securitizations. The downgrade was attributed to a deterioration in the relationship between credit enhancement and loss expectations due to higher-than-expected delinquencies, the rating agency said. The rating agency can be found online at http://www.fitchratings.com.

Freddie Mac has announced the settlement of a $4.0 billion, 30-year, 6% Gold MACS Strip security.The weighted average coupon of the issue (CUSIPs: IO 31282YSS9, PO 3128HWC62) is 6.57%, and the weighted average loan age is two months, the government-sponsored enterprise reported. The lead underwriters of the transaction were Banc of America Securities and RBS Greenwich Capital. Freddie Mac can be found online at http://www.freddiemac.com.

Those counting on business from adjustable-rate mortgage loans refinancing in 2007 need to pay heed to the latest statistics cited by Mortgage Bankers Association chief economist Doug Duncan.The MBA is predicting $2.12 trillion in production in 2007, down from a projected $2.46 trillion for all of this year. Refinancings will fall from $1.07 trillion in 2006 to $807 billion next year. Mr. Duncan told attendees at the MBA annual convention in Chicago the best estimates indicate that between $1.1 trillion and $1.5 trillion of ARMs will reset in 2007. There are three possibilities for those loans: refinancing, going into default, or resetting. Mr. Duncan said he thinks just $600 billion to $700 billion will refinance (which is already accounted for in the MBA's projection, he added). As for defaults, Mr. Duncan said many of those ARMs have already reset at least once, and the biggest threat of default is on the first reset. The remaining $500 billion to $800 billion of ARMs will just reset, he said. The MBA can be found online at http://www.mortgagebankers.org.

Class B4 of CSFB Mortgage Securities Corp. mortgage pass-through certificates, series 1997-2, has been downgraded from CCC/DR2 to CC/DR2 by Fitch Ratings.Fitch also affirmed the ratings on seven classes from series 1997-2 and another CSFB issue. The downgrade was attributed to the deterioration in the relationship of credit enhancement to loss expectations.

The residential primary servicer ratings of American Home Mortgage Servicing Inc. for prime, alternative-A, and home equity/home equity lines of credit products have been upgraded from RPS3 to RPS3-plus by Fitch Ratings.Fitch attributed the upgrades to operational and technological improvements to the company's servicing platform. As of June 30, AHMS serviced nearly 208,000 loans with an unpaid principal balance of over $43.5 billion, the rating agency said. AHMS is a subsidiary of American Home Mortgage Investment Corp., a real estate investment trust based in Melville, N.Y. Fitch can be found online at http://www.fitchratings.com.

Doral Financial Corp., the troubled mortgage lender based in San Juan, Puerto Rico, has reported a net loss of $33.8 million ($0.47 per share) for the first six months of 2006.Noting that it has filed its Form 10-Q for the period with the Securities and Exchange Commission, Doral said the loss reflects "significant" restatement- and re-engineering-related expenses; an $8.2 million charge related to the restructuring of certain prior transfers of mortgage loans to local financial institutions; and a $12.3 million charge related to the transfer of some mortgage loans held for sale to its loan receivables portfolio. In September, Doral announced an agreement with the SEC under which the mortgage lender will pay a $25 million civil penalty in connection with the SEC's probe of Doral's restatement of financial results for 2000-2004. Doral said it had agreed, without admitting or denying any wrongdoing, to be enjoined from future violations of certain provisions of the securities laws. Doral's restatement slashed $694.4 million from its retained earnings through the end of 2004 to correct the accounting for certain mortgage loan sales and the valuation of its interest-only strips. In March, the company signed consent orders with banking regulators that restrict its payment of dividends and require it to review its mortgage portfolio and submit plans on maintaining capital adequacy and liquidity. Doral can be found online at http://www.doralfinancial.com.

Countrywide Financial Corp., Calabasas, Calif., has reported net income of $648 million in the third quarter, up from $634 million a year earlier.Countrywide's diluted earnings per share were flat at $1.03, the same as in the third quarter of 2005. But the company pointed out that EPS through the first nine months of 2006 reached a record of $3.29, up 7% from the same period last year. Countrywide chief executive Angelo Mozilo said that a "transitional market" put pressure on the company's mortgage earnings, which declined 40% from the level recorded a year earlier. Falling interest rates depressed loan servicing performance, and loan production earnings also declined. Moreover, Mr. Mozilo said the home loan industry continues to face challenges, saying Countrywide expects that "margins will remain under pressure and that pricing will remain competitive" in the fourth quarter. Countrywide can be found online at http://www.countrywide.com.

Fannie Mae and Freddie Mac intend to win back some of the market share they have ceded to private-label conduits while laboring through their respective accounting scandals.A large part of how well the two government-sponsored enterprises will be able to duke it out with totally private entities remains to be seen, as lawmakers continue to argue whether the agencies need a new regulator and under what kind of rules they will have to operate. But whatever happens on Capitol Hill, Freddie Mac chairman Richard Syron told the Mortgage Bankers Association's annual convention in Chicago that his company is "determined to be as competitive as it can be." Mr. Syron said that for the last several years, both Fannie Mae and Freddie Mac have "been in the penalty box" and have been playing mostly defense. Private-label issuers now control an estimated 55%-60% of the mortgage-backed securities market. Fannie Mae chairman Daniel Mudd conceded that his company hasn't been innovative enough, especially while it has been dealing with its accounting irregularities. The company has also been too slow and bureaucratic, he said. But while Fannie has "been working to get our house in order," the company has also been "rethinking a lot of things, including how we do business," Mr. Mudd said. Both executives maintained that their respective companies were designed for the turbulent and changing market that lies ahead.

Freddie Mac has priced about 4.7 billion euros (approximately $5.9 billion) of tendered Reference Notes securities.The five CUSIP/ISIN offers were priced for settlement on Oct. 26 by reference to applicable fixed spreads over applicable reference swap rates, plus amounts equal to any accrued and unpaid interest to (but excluding) the date of payment of the purchase price. The specifics of the offering can be found on Freddie Mac's website, which can be found online at http://www.freddiemac.com.

Effective next month, Freddie Mac will stretch the period lenders have to originate, document, and sell construction-to-permanent mortgages to the secondary-market company from six to 18 months.The longer time frame will remove separate time lines for origination, construction, and sales of loans financing either new construction or renovations, allowing for a more streamlined process. The change is intended to give lenders and their clients more time and flexibility to accommodate unexpected changes in construction scheduling, and should be particularly helpful in giving move-up buyers more time to sell their homes in the slowing real estate market. It should also help thousands of Gulf Coast borrowers waiting for grants or insurance proceeds to commence repairing their storm-damaged homes or experiencing construction delays. The pending changes make it clear that Freddie Mac is financing only the permanent "takeout" mortgage and not loans for land acquisition, development, or construction.