Origination

Eleven classes of ARCap Resecuritization Inc. series 2006-RR7 commercial mortgage-backed securities have been downgraded by Fitch Ratings. Fitch also removed 13 classes in the deal from Rating Watch Negative and affirmed the ratings on four other classes. "In reviewing CMBS Re-REMICs, Fitch has targeted expected losses in different rating stresses based on the quality of the underlying CMBS collateral," the rating agency said. "The overall expected losses reflect the single-sector exposure, the concentrated nature of these portfolios, and the low expected recoveries upon bond default, especially for more junior and thinner classes of CMBS tranches."

Thirteen classes of subprime mortgage pass-through certificates issued by UBS Mortgage Asset Securitization Transaction Asset Backed Securities Trust have been downgraded by Fitch Ratings. Fitch also removed one class from Rating Watch Negative and affirmed the ratings on classes with outstanding balances of $456 million. Fitch can be found online at http://www.fitchratings.com.

Helios AMC LLC, San Francisco, has been assigned a special servicer rating of CSS3 for commercial mortgage-backed securities by Fitch Ratings. The rating reflects "the extensive workout experience of the company's veteran management team, its thorough policies and procedures, and the development of its robust special servicing system," Fitch said. Fitch rates commercial mortgage servicers on a scale of 1 to 5, with 1 being the highest rating.

The American Bankers Association and the Federal Agricultural Mortgage Corp. have announced an expansion of their alliance to include special pricing for Farmer Mac's Part-Time Farm program. The program involves loans secured by first liens on agricultural real estate in which a significant portion of the property's value comes from a rural residence where agricultural production is under way or planned, Farmer Mac said. The program is designed to enable rural homeowners on agricultural properties to obtain more flexible terms on their loans. "This program will give our members a real advantage because it provides an outlet for the sale of qualified mortgages on properties where the land exceeds the value of the improvements," said William Kroll, president of ABA Total Business Solutions. The organizations can be found online at http://www.aba.com and http://www.farmermac.com.

Homebuilders point to strong demographics in predicting a return to normal production levels once the current downturn ends, but the executive director of Harvard University's Joint Center for Housing Studies says fundamentals alone may not be enough to float housing's boat. "Market conditions can swamp favorable demographic projections," Eric Belsky said at the National Association of Home Builders' Spring Construction Forecast Conference in Washington. Mr. Belsky pointed out that potential homebuyers "keep getting hit with other things" that may keep them on the sidelines for longer than most analysts are predicting. Rising energy costs, higher gasoline prices, and larger food bills are just a few of the things that are putting a big dent in the pockets of not just low-income families but also those with more substantial earnings, he said, and they are not offset by lower mortgage costs resulting from lower interest rates. "When in a pothole," Mr. Belsky said of would-be buyers, "it's hard to look at the road ahead of you." The NAHB can be found online at http://www.nahb.com.

The nation's giant homebuilding firms must pull back if they are to survive the current downturn, an analyst with Wachovia Capital Markets in San Francisco warned at the National Association of Home Builders' Spring Construction Forecast Conference. "Geographic diversification didn't help anybody," Carl Reichardt, Wachovia's managing director and senior equity research analyst, told the conference in Washington. Whereas nine public builders were operating in just California and Florida in 1989, he pointed out, the same nine are now banging heads in a dozen states. Moreover, more than six of the 13 public builders Mr. Reichardt follows on a regular basis go at each other in more than half the 78 metropolitan areas where they build houses. The analyst said the options on the table are to "merge, die, or shrink," and since acquisitions "seem unlikely" given the current state of the financial markets, big builders must reorganize into super-regional operations. "Otherwise," he said, "they are going to continue to beat each other up." Mr. Reichardt also said the industry giants would do well to "focus more on manufacturing" and reducing construction cycle times while de-emphasizing such factors as maximum unit growth and land margins. "Wall Street recognizes that good margins can be made in the contractor business," he said.

Class G of LNR CDO III Ltd./Corp., a commercial real estate collateralized debt obligation, has been downgraded from BBB-minus to BB by Fitch Ratings and removed from Rating Watch Negative. Fitch also removed classes B through F from Rating Watch Negative and affirmed the ratings on eight other classes in the deal, which is primarily backed by B-pieces of commercial mortgage-backed securities. The rating agency said it believes investment-grade CMBS "will perform well even in a heightened stress environment," but that the risks facing first-loss and junior-rated bonds in CMBS have risen along with expectations of an increase in commercial real estate defaults.

Nine tranches from EquiFirst Loan Securitization Trust 2007-1 have been downgraded by Moody's Investors Service. Three of the downgraded tranches remain on review for possible further downgrade. The ratings were downgraded, in general, based on higher-than-expected rates of delinquency, foreclosure, and real estate owned in the underlying collateral relative to credit enhancement levels, Moody's said. The collateral consists primarily of first-lien subprime residential mortgage loans. Moody's can be found online at http://www.moodys.com.

Eleven classes of G-Force LLC commercial mortgage pass-through certificates, series 2005-RR2, have been downgraded by Fitch Ratings. Fitch also affirmed the ratings on seven other classes in the transaction, which is backed primarily by B-pieces of commercial mortgage-backed securities. "In reviewing CMBS Re-REMICs, Fitch has targeted expected losses in different rating stresses based on the quality of the underlying CMBS collateral," the rating agency said. "The overall expected losses reflect the single-sector exposure, the concentrated nature of these portfolios, and the low expected recoveries upon bond default, especially for more junior and thinner classes of CMBS tranches."

Twenty-nine classes of subprime asset-backed pass-through certificates issued by Asset Backed Securities Corp. have been downgraded by Fitch Ratings as a result of changes to the rating agency's subprime loss forecasting assumptions. Fitch also affirmed the ratings on classes with outstanding balances of $1.4 billion. The rating actions were attributed to changes in Fitch's subprime loss forecasting assumptions that "better capture the deteriorating performance of pools from 2006 and late 2005 with regard to continued poor loan performance and home price weakness." Fitch can be found online at http://www.fitchratings.com.