Origination

Class L of CS First Boston Mortgage Securities Corp. pass-through certificates series 2007-TFL2 has been downgraded from BBB-minus to BB-minus by Fitch Ratings. Fitch also affirmed the ratings of 26 classes in the transaction. The rating agency attributed the downgrade to the failure of the Resorts Atlantic City loan to perform as well as expected. Nearly half of the deal (49.1%) consists of loans collateralized by hotel properties. the remainder consists of loans on office properties (24.0%), health care properties (16.0%), and land (10.9%).

Two classes of Lehman Brothers-UBS commercial mortgage pass-through certificates series 2006-C1 have been downgraded by Fitch Ratings. Class M was downgraded from BB to BB-minus, and class N was downgraded from BB-minus to B-plus. Fitch also affirmed the ratings of 28 classes in the transaction. The rating agency attributed the downgrades to expected losses on the six assets in special servicing, five of which are real estate owned. The largest of the specially serviced loans is the Country Inn and Suites in Omaha, Neb.

Seven classes of notes issued by one collateralized debt obligation linked to subprime residential mortgage-backed securities has been downgraded by Fitch Ratings. All the downgraded classes were removed from Rating Watch Negative. The affected securities are as follows: seven classes from Bluegrass ABS CDO III Ltd., a cash flow structured finance CDO. The downgrade was attributed to collateral deterioration in subprime RMBS and structured finance CDOs with underlying exposure to subprime RMBS.

Commercial real estate markets have not yet begun their rebound to market equilibrium, according to the 2Q 2008 SIOR Commercial Real Estate Index, compiled by the Society of Industrial and Office Realtors in association with the National Association of Realtors. In the survey, 83% said their local markets are feeling the impact of the decline in the national economy -- 59% higher than a year ago. Leasing activity is down, according to 75% of respondents, while 23% believe virtually no new construction is going on in their marketplace, the SIOR reported. Half the respondents predict a 1%-15% decline in activity for the third quarter. The index indicates that the office market has been hard hit, scoring only 67.8 points, down almost 48 points from a year ago. The industrial market index, at 68.5 points, is more than 53 points off its first-quarter 2006 high. Underperforming all regions, the Midwest tallied a score of 73.1 -- the lowest index value for the second quarter. Respondents from the South, with a score of 84.6, were the most optimistic about the next three months. The West, weighing in with a score of 68.4 points, experienced the greatest decline in positive attitudes regarding the office and industrial markets.

Omega Commercial Finance Corp., Miami, has announced the formation of Omega Opportunity Fund I LLP, which will focus on identifying distressed U.S. and Canadian commercial real estate development projects that have been delayed or temporarily halted. The fund's strategy will be "optimize development-stage projects and, upon their completion, produce a high-quality stabilized asset," Omega said. Because the cost of capital to borrowers will exceed standard bank rates, the fund's exit strategy is to enable Omega's lending arm to structure the permanent financing, the company said. Omega can be found on the Web at http://www.omegacommercialfinancecorp.com.

Fifteen classes of notes issued by two collateralized debt obligations linked to subprime residential mortgage-backed securities have been downgraded by Fitch Ratings. All the downgraded classes were removed from Rating Watch Negative. The affected securities are as follows: eight classes from Fourth Street Funding Ltd./LLC and seven classes from Jupiter High-Grade CDO VII Ltd./Inc. Both are cash CDOs. The downgrades were attributed to collateral deterioration in subprime RMBS and structured finance CDOs with underlying exposure to subprime RMBS.

Liquidity pressures are limiting the ability of asset managers to remove underperforming loans from U.S. commercial real estate loan CDOs, according to Fitch Ratings. The rating agency said its delinquency index for CREL collateralized debt obligations increased to 1.46% in July, up from 0.36% in October 2007 when Fitch began tracking the numbers. Karen Trebach, a Fitch senior director, said the CREL CDO index has remained relatively low partly because asset managers had been removing underperforming loans, but that many now face capital constraints that will hamper their ability to keep doing so. "Reduced CDO cushions are becoming more commonplace with the dual pressures of reduced liquidity and increased delinquencies," Ms. Trebach said. "Constrained liquidity may also lead to more managers' modifying and extending loans rather than repurchasing them, which, if not merited, may only serve to delay the possible realization of losses on these loans." Fitch can be found on the Web at http://www.fitchratings.com.

The percentage of first-time buyers in California able to afford an entry-level home rose to 48% in the second quarter, compared with 24% a year earlier, according to the California Association of Realtors. The minimum household income needed to purchase an entry-level home at $329,120 in California stood at $62,870 in the second quarter, based on an adjustable interest rate of 5.69% and assuming a 10% downpayment, according to CAR's First Time Buyer Housing Affordability Index. (First-time buyers typically purchase a home equal to 85% of the prevailing median price.) The monthly payment, including taxes and insurance, stood at $2,100. At 68%, the High Desert region was the most affordable area in the state, and the San Francisco Bay area was the least affordable, at 32%, the association reported. CAR can be found on the Web at http://www.car.org.

Apollo Real Estate Advisors, New York, has announced the raising of more than $300 million of additional capital for its debt investment fund, Apollo Real Estate Finance Corp. Apollo said it increased overall capital for the fund from $621 million to $930 million through the formation of AREFIN Co-Investment Corp. The fund originates loans for development, redevelopment, and repositioning and invests in whole loans, B-notes, and mezzanine loans. Bradford Wildauer, an Apollo partner who oversees the firm's U.S. debt investments, said the new entity was formed to accommodate the growing deal flow and to handle loan commitments of up to $250 million. "The new vehicle gives us the ability and the flexibility to handle large portfolio transactions," he said. Apollo can be found on the Web at http://www.apollorealestate.com.

The Market Composite Index, an overall measure of mortgage applications, fell from 425.9 to 419.3 on a seasonally adjusted basis during the week ended Aug. 15, according to the Mortgage Bankers Association's Weekly Mortgage Applications Survey. The Purchase Index fell from 315.2 to 314.0 on a seasonally adjusted basis, while the Refinance Index declined from 1074.6 to 1034.5. Refinancings represented 34.8% of total applications, down from 35.2% the previous week, while adjustable-rate mortgages accounted for 8.0%, the MBA said. The average contract interest rate for 30-year fixed-rate mortgages fell from 6.57% to 6.47%, and points (including the origination fee) decreased from 1.14 to 1.10 for loans with 80% loan-to-value ratios, the association reported. The MBA can be found online at http://www.mortgagebankers.org.