Originations

Ten classes of Anthracite 2006-HY3 Ltd./Corp., a commercial real estate collateralized debt obligation, have been downgraded by Fitch Ratings and removed from Rating Watch Negative. The deal is backed primarily by B-pieces of commercial mortgage-backed securities. The downgrades were based on losses and projected losses to the collateral, Fitch said. 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.

Ten classes of G-Force CDO 2006-1, a commercial real estate collateralized debt obligation, have been downgraded by Fitch Ratings and removed from Rating Watch Negative. Fitch also affirmed the ratings on three 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."

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.

Rust Consulting Inc., Minneapolis, has announced the formation of a task force to deal with developments related to the subprime mortgage crisis. Rust said the task force is composed of experts from the company's antitrust, consumer finance, labor and employment, and securities practice areas. Jim Parks, a principal consultant with Rust, said the company's clients have been forming internal task groups to deal with the "many nuances" of subprime market litigation. This prompted Rust to form the task force "to work alongside those clients in tracking and monitoring case development in this area," he said. The company, which is part of the class action settlement administration industry, can be found online at http://www.rustconsulting.com.

Credit Suisse took a loss of 2.1 billion Swiss francs ($2.0 billion) in the first quarter and 5.3 billion Swiss francs ($5.1 billion) in net writedowns, about 3.6 billion Swiss francs ($3.5 billion) of which appear to be mortgage-related. The mortgage-related writedowns stem from collateralized debt obligations (2.7 billion Swiss francs, or $2.6 billion), commercial mortgage-backed securities (848 million Swiss francs, or $819 million), and residential MBS (96 million Swiss francs, or $93 million). The remaining writedowns reflect leveraged-finance concerns. While the writedowns remain sizable, the company said it has made progress reducing exposures in problem areas like commercial mortgage, which has been cut by 25%. Credit Suisse also said it has reduced leveraged-finance exposures by 41%. Credit Suisse can be found on the Web at http://www.creditsuisse.com.

In response to strong criticism from fair-lending groups, Fannie Mae has indicated that it is reconsidering recent moves to tighten underwriting standards on affordable housing mortgages and impose new fees. "We have met extensively with advocates, listened to their concerns, and are considering making some changes to our methodologies," Fannie spokesman Brian Faith said. Freddie Mac has also met with the fair-housing and civil rights organizations that have accused the two government-sponsored enterprises of abandoning their affordable housing mission. "While we disagree with their conclusions, we have had helpful discussions with the housing groups and take their concerns very seriously," a Freddie spokesman said. The GSEs can be found online at http://www.fanniemae.com and http://www.freddiemac.com.

New-homes sales fell 8.5% in March to the lowest level since October 1991, and it appears that homebuyers are taking advantage of lower prices on existing homes. The U.S. Census Bureau reported that sales of new single-family homes fell from a seasonally adjusted annual rate of 575,000 in February to 526,000 in March. (The February sales number was revised downward from 590,000.) The March decline was the steepest since November and has "erased" any perception that new-home sales are bottoming, according to Adam York, an economic analyst at Wachovia Corp. "Look for further declines into the summer months," he said. Stephen Stanley, chief economist of RBS Greenwich Capital, noted that builders were quick to cut prices on their inventories last year, but he said existing homes are catching up and it is reflected in the sales numbers. "Over the past six months or so, existing-home sales are down 3.5%, while new-home sales have plummeted by 24%," Mr. Stanley said. The Census Bureau, an agency of the Commerce Department, can be found online at http://www.doc.gov.

Classes B-3 and B-4 of CAPCO American Securitization Corp. commercial mortgage pass-through certificates, series 1998-D7, have been placed on Rating Watch Negative by Fitch Ratings. Fitch also lowered the Distressed Recovery rating of class B-5 from C/DR5 to C/DR6 and affirmed the ratings on eight other classes in the transaction. The ratings watch placement was attributed to the recent transfer to the special servicer of the Eastland Mall loan, the third-largest nondefeased loan in the pool.

Two classes of Anthracite 2004-HY1 Ltd., a commercial real estate collateralized debt obligation, have been downgraded by Fitch Ratings and removed from Rating Watch Negative. Class E was downgraded from BBB to BB, and class F was downgraded from BBB-minus to BB. Fitch also affirmed the ratings on four other classes in the deal, which is primarily backed by B-pieces of commercial mortgage-backed securities. The downgrades were based on losses and projected losses to the collateral, Fitch said. 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.

Two classes of Morgan Stanley Capital I Inc. series 2006-XLF commercial mortgage-backed securities have been downgraded by Fitch Ratings and removed from Rating Watch Negative. Class M was downgraded from BBB-minus to BB-plus, and class N-RQK was downgraded from BBB-minus to BB-minus. Fitch also upgraded one class and affirmed the ratings on 12 other classes in the transaction. The downgrades were attributed to the transfer of the Holiday Inn-Columbus loan to special servicing and the declining performance of the ResortQuest Kauai and Laurel Mall loans.

Six classes of ARCap Resecuritization Inc. series 2004-RR3 commercial mortgage-backed securities have been downgraded by Fitch Ratings. The downgrades were as follows: class G, from BBB-minus to BB; class H, from BB-plus to B; class J, from BB to B-minus; class K, from BB-minus to B-minus; class L, from B-plus to B-minus; and class M, from B to B-minus. Fitch also affirmed the ratings on eight other classes in the deal. "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." The rating agency can be found on the Web at http://www.fitchratings.com.