Servicing

Two classes of Asset Backed Securities Corp. home equity securitizations have been downgraded by Fitch Ratings.Class B-1F of ABSC series 1999-LB1 group 1 was downgraded from BBB to BB-plus, and class B-1A of series 1999-LB1 group 2 was downgraded from BBB to BB. In addition, Fitch upgraded six classes in three ABSC deals and affirmed the ratings on 80 classes in 15 transactions. The rating agency attributed the downgrades to "increasing concern due to high levels of nonperforming assets, as well as diminishing credit enhancement." Fitch can be found online at http://www.fitchratings.com.

NovaStar Financial Inc., a real estate investment trust based in Kansas City, Mo., has priced a public offering of 1.5 million shares of newly issued common stock at $42.50 per share.The underwriters have been granted an option to buy up to 225,000 additional shares to cover any overallotments, NovaStar said. JMP Securities LLC is the lead manager of the offering, and Flagstone Securities LLC is the co-manager. NovaStar, a lender and investor in residential mortgages, can be found online at http://www.novastarmortgage.com.

Community Reinvestment Fund USA, a Minneapolis-based nonprofit organization, has announced the closing of the first note offering rated by Standard & Poor's Ratings Services to be backed by community development loans.CRF said the offering, the 17th in a series, is backed by $51.1 million of loans to small businesses in 19 states, including loans for small, affordable rental housing properties. Frank Altman, CRF's president and chief executive officer, said the offering "has enabled us to attract new investors that previously were unable or unwilling to invest in our prior, nonrated offerings." The rated notes were offered through Piper Jaffray & Co.

The Washtenaw Group Inc., Ann Arbor, Mich., has reported a loss of $2.26 million ($0.50 per share) for the third quarter, compared with record net income from continuing operations of $3.83 million ($0.86 per share) a year earlier.Washtenaw Group, the parent of Washtenaw Mortgage Co., was spun off from Pelican Financial Inc., also of Ann Arbor, on Dec. 31, 2003. For the first nine months of the year, Washtenaw has lost $5.25 million ($1.17 per share), compared with net income from continuing operations of $9.9 million ($2.22 per share) for the same period in 2003. The results for the third quarter of 2004 were lowered by a mortgage servicing rights impairment of $101,000. In the third quarter of 2003, the company had a valuation credit of $2.2 million. Losses on loan repurchases for the third quarter totaled $1.6 million. Meanwhile, mortgage origination volume was one-fifth of what it was one year ago, going from $1.0 billion in the third quarter 2003 to just $212.2 million for the most recent period.

Prepayment rates for 30-year Fannie Mae and Freddie Mac mortgage-backed securities rose "modestly" in October in the wake of a decline in mortgage rates of 17 basis points, according to Bear Stearns analyst Dale Westhoff."The results show the classic symptoms of burnout: new issues increased more than seasoned issues while lower cuspy coupons were more responsive than higher coupons," Mr. Westhoff said. He noted that the speeds of 2004 MBS rose by over 20%, while in earlier vintages "the response was much more muted." Freddie Mac speeds are still slower than Fannie Mae's nearly across the board for 30-year MBS, while Ginnie Mae speeds continue to exceed those of conventionals across the board, Mr. Westhoff said. "Without a catalyst to unleash a significant refinancing event, the higher coupons are clearly exhibiting more burnout than they have over the last two years," Mr. Westhoff said. "Nevertheless, we feel that if mortgage rates were to enter the 5.60% to 5.40% corridor, exposing the 5.5% coupon, the observed burnout in recent months would be greatly diminished." Bear Stearns can be found online at http://www.bearstearns.com.

Fannie Mae has announced that it will not issue Callable Benchmark Notes in November.The company had previously announced that it might not issue Callable Benchmark Notes in a minimum of eight months, as it had originally planned. Fannie Mae said it will notify the market of its issuance intentions on the scheduled monthly announcement date. The government-sponsored enterprise can be found on the Web at http://www.fanniemae.com.

Class M-2 of Delta Funding Corp.'s series 2000-4 mortgage-backed securities transaction has been downgraded from BB to B by Fitch Ratings.Fitch also affirmed the ratings on two other classes in the deal. The downgrade was attributed to higher-than-expected loss levels that have depleted the overcollateralization in the deal to zero.

Class M-3 of Salomon Brothers Mortgage Securities VII Inc. New Century asset-backed certificates, series 1998-NC3, has been downgraded from BBB to BB-plus by Fitch Ratings.In addition, nine classes in seven transactions were upgraded and the ratings on 39 classes in 15 deals were affirmed. Fitch attributed the downgrade to higher-than-expected losses and delinquencies.

Two classes of Diversified Asset Securitization Holdings II LP have been downgraded by Fitch Ratings.The downgrades were as follows: class A-2L, from A-minus to BBB-plus; and class B-1, from BB-minus to B. The two classes were also removed from Rating Watch Negative. Fitch said DASH II is a collateralized debt obligation that was originated and managed by Asset Allocation & Management LLC, but that Western Asset Management Co. became the substitute asset manager for AAMCO in October 2002. The portfolio backing the CDO consists of residential and commercial mortgage-backed securities and commercial and consumer asset-backed securities. Fitch said the original ratings assigned to the downgraded classes "no longer reflect the current risk to noteholders." Fitch can be found online at http://www.fitchratings.com.

HUD's awarding of new Single Family Management & Marketing Contracts for their foreclosed properties has created "a very good investment opportunity" for investors who pay close attention to the inventory, according to Foreclosure.com, Boca Raton, Fla.The company said the awarding of the M&M contracts, last done in 1999, is "a monumental task" for the Department of Housing and Urban Development, causing information on HUD foreclosures to become "intermittent" for up to three months. "This transition will definitely create a backlog of HUD foreclosures over the next two months as the properties are transferred between contractors and the new contractors become familiar with HUD's disposition program," said Greg Sullivan, vice president and co-founder of Foreclosure.com. "While HUD foreclosure inventories should be back to normal levels by the beginning of 2005, this backlog will create a higher-than-average inventory of HUD foreclosures during the first quarter of 2005." Information on HUD foreclosures is available at the company's website, at http://www.foreclosure.com.