Servicing

Fitch Ratings has raised the primary and master servicer ratings for GMAC Commercial Mortgage to 'CPS1-minus' while affirming the special servicer rating at 'CSS1.'The new ratings reflect a one notch upgrade in the primary and master servicer ratings, while the special servicer rating is already at the highest level. Fitch said the change comes in the wake of GM's partial sale of General Motors Acceptance Corporation to an entity controlled by affiliates of Kohlberg, Kravis Roberts & Co; Five Mile Capital Partners and The Goldman Sachs Group. At the end of last year, GMACCM's primary servicing portfolio consisted of about $100 billion of commercial mortgage loans. GMACCM was also the master servicer on 164 commercial mortgage-backed securities transactions totaling $107.2 billion.

Mortgage servicers and their auditors are still grappling with the testing and reporting requirements of the Securities and Exchange Commission's new asset-backed securities (AB) regulation and the Mortgage Bankers Association is urging SEC to delay the initial reporting period.There is confusion about the role and responsibilities of ABS issuers, auditors, servicers and vendors in filing "Compliance with Applicable Servicing Criteria" reports (Item 1122) under the ABS regulation, according to the MBA, and more time is needed to resolve outstanding issues. "MBA believes that planning and performance of Item 1122 engagements under Regulation AB has been delayed for legitimate reasons that call for leniency in this initial reporting year," MBA says in a March 13 letter to SEC. While compliance testing should be conducted throughout 2006, MBA is recommending that non-compliance be reportable only if it is identified in the fourth quarter. SEC officials will be speaking at a Reg AB conference MBA is sponsoring April 10-11 in Washington.

Late payments on home equity loans fell in the fourth quarter of 2005, according to the American Bankers Association.However, banks reported a five basis point increase in delinquencies on home equity lines of credit, with the year-end overdue rate reaching 0.51%. Still, HELOCs had the lowest past due rate of any consumer credit category. On closed-end home equity loans, the overdue rate fell 26 basis points from the third quarter to 2.07% at the end of the fourth quarter. Mobile home loan delinquencies increased to 3.91% at the end of the fourth quarter, 60 basis points higher than in the third. The ABA also reported a marked decline in credit card delinquencies that helped push the overall consumer credit delinquency rate lower. "With job growth strong over the last year and gas prices easing by year-end, the delinquency picture has brightened considerably," ABA chief economist James Chessen said.

EMC Mortgage Corporation, a subsidiary of The Bear Stearns Companies, has hired John Vella as president and chief operating officer.Mr. Vella most recently served as president and COO for Aames Investment Corporation. Prior to that he was chief sales officer and chief administrative officer for Option One mortgage corporation. He has also held senior positions at Household International, GMAC/RFC, Freddie Mac, Fleet National Bank and the FDIC/FSLIC. EMC also added two new members to its executive management team. They are Robert N. Pruett and William Glasgow, both of whom have more than 30 years experience in the industry. EMC's mortgage servicing portfolio has grown from $4.2 billion in 2000 to $63.8 billion today. Also, Clayton Baker has joined Bear Stearns as senior managing director. He is leading several strategic initiatives designed to facilitate EMC's growth, the company said.

Flattening home price appreciation, slowing home sales and rising interest rates could lead home prices in the Western U.S. to slip, causing a rise in foreclosure activity, according to ForeclosureS.com.The distressed property investment advisory firm and publisher of foreclosure information said that home prices in Phoenix, Ariz., have declined 6.7% over the last six months after several years of rapid increases. The company also said prices have dropped for two consecutive months in the Las Vegas market. California markets, including the San Francisco Bay and San Diego areas, are seeing price appreciation cool down as well, according to Alexis McGee, president of ForeclosureS.com. She noted that in San Diego, 50% of mortgage loans issued between 2003 and 2005 were either interest only or pay-option adjustable-rate loans, which pose a major risk of increasing default rates.

Two classes of Solstice ABS CDO Ltd., a collateralized debt obligation that includes residential and commercial mortgage-backed securities, have been downgraded by Fitch Ratings.The class B notes were downgraded from BB-plus to B, and the class C notes were downgraded from CC to C. Fitch said the downgrades stemmed from reduced collateral coverage levels. Solstice consists of 42% residential mortgage-backed securities, 37.6% CDOs, 10.1% asset-backed securities, 5.2% corporate debt securities, 3.5% CMBS, and 1.6% real estate investment trust securities.

Three classes from three Amresco Residential Securities Corp. transactions have been downgraded by Fitch Ratings.The downgrades were as follows: series 1998-1 group 1, class M-2F, from A to BBB; series 1998-3 group 1, class B-1F, from BBB to BB; and series 1999-1, class B, from BBB-minus to BB. The downgrades were attributed to a deterioration in the relationship between credit enhancement and loss expectations. The certificates are backed by conventional fixed- and adjustable-rate mortgage loans.

Ryan J. Marshall has been named to oversee the investment analysis desk of KKR Financial LLC, the San Francisco-based manager of KKR Financial Corp., a real estate investment trust.Mr. Marshall was most recently managing director and global head of fixed-income research at Morgan Stanley, and he was previously global head of credit research and head of securitized products trading at Morgan Stanley. KKR can be found on the Web at http://www.kkrfinancial.com.

NovaStar Financial Inc., Kansas City, Mo., has announced an agreement to buy approximately $940 million of nonconforming mortgage loans that it plans to include in an asset-backed securitization structured as a financing.The seller of the loans was not disclosed. NovaStar, a real estate investment trust, said it intends to "maintain flexibility" in structuring securitizations as either sales or financings. "This flexibility allows us to continue providing shareholders with the tax benefits associated with NovaStar's REIT status, while complying with certain income and asset tests to maintain our tax-advantaged structure," said Greg Metz, NovaStar's chief financial officer. "In order to satisfy these tests in a variety of interest rate environments, it may be necessary to periodically add additional real estate assets to our GAAP and tax balance sheets through securitizations treated as financings." The residential mortgage lender and portfolio investor can be found online at http://www.novastarmortgage.com.

Clayton Holdings has announced the sale of $127.5 million of stock through an initial public offering.The 7.5 million shares sold at $17 per share, at the high end of a projected range of $15-$17 per share. Clayton, based in Shelton, Conn., provides services to the mortgage-backed securities market. Clayton said it will use the funds raised in the IPO to pay down debt and redeem preferred shares. TA Associates, a private equity fund, retains a 45.7% stake in Clayton after the IPO. The offering was made through an underwriting syndicate led by William Blair & Co. as sole book-running manager and Piper Jaffray & Co. as co-lead manager.