Originations

Fitch Ratings has revised the rating outlook to negative for iStar Financial Inc., which provides structured financing and corporate leasing of commercial real estate, while affirming the company's triple-B Issuer Default Rating. The rating agency cited iStar's acquisition of Fremont General Corp.'s CRE lending business as a concern. "Although the loans acquired by [iStar] are first mortgages, the acquisition structure of the Fremont transaction places [iStar] effectively in the first-loss position," Fitch said. "In addition, the majority of the portfolio consists of condominium construction loans. Fitch is concerned that the continued slowdown in the single-family residential mortgage market, which drives the purchase of condominium units, may impact the timing and amount of ultimate repayment of loans made to many [iStar] borrowers." In addition to affirming iStar's IDR, Fitch also affirmed the New York-based company's debt and preferred stock ratings.

Commercial real estate prices were down 1.5% in December, compared with a decline of 0.2% in November, according to Moody's Investors Service. "The last few months of the index have represented a bit of a plateau, but one with more 'down months' than 'up months'," said Sally Gordon, a Moody's analyst and senior vice president. "The asymmetry of the number of months when prices increased or decreased is striking and clearly indicative of where we are in the real estate cycle -- the beginnings of a downturn after a long run-up in prices." The findings are based on indices maintained by the rating agency. Meanwhile, Standard & Poor's, another rating agency, has reported that commercial real estate prices were 4.9% higher in November than they were a year earlier. Regionally, the mid-Atlantic South is the only region showing an annual decline, at 1.9%, S&P reported. In addition, the apartment sector showed its first positive return in eight months. Annual CRE returns flattened on a national basis, but "it would be premature to assume that this indicates an end to the deceleration in commercial real estate prices seen in prior months, and visible in both the sector and regional indices," said David Blitzer, chairman of the index committee at S&P. The rating agencies can be found online at http://www.moodys.com and http://www.standardandpoors.com.

More than 200 additional classes of subprime mortgage pass-through certificates were downgraded by Fitch Ratings on Feb. 15 as a result of changes to its subprime loss forecasting assumptions. Fitch also affirmed the ratings on classes with outstanding balances of more than $2.6 billion. The securities affected by the latest downgrades were: 138 classes from 13 Securitized Asset Backed Receivables LLC deals; 37 classes from three IXIS deals; 20 classes from two Wells Fargo Home Equity Trust deals; and 12 classes from one Centex deal. All were first-lien subprime transactions. The rating actions were attributed to changes to 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.

All the members of the Hope Now alliance have adopted the "Project Lifeline" approach focused on helping prime and subprime borrowers who are 90-days past due avoid foreclosure, according to the Treasury Department. Six alliance members endorsed the expanded Hope Now effort last week, and now the rest of the alliance servicers, including GMAC ResCap and HSBC North American Holdings Inc., have signed up for Project Lifeline. "Now that all the Hope Alliance members have signed on, more than 90% of the subprime servicing market and nearly 70% of the entire mortgage servicing market is committed to this coordinated method of reaching more homeowners," Treasury Secretary Henry Paulson said.

Home prices in California are falling faster than in the last housing downturn (1990-1993) and faster than home price reports indicate, according to a Friedman Billings Ramsey & Co. report. "Most national housing price indices are lagging the actual price declines in this pocket by a wide margin, and it will take another six months before anyone will have any insight into the depth of the crisis," the FBR research report warns. The FBR report on two California thrifts points out that falling prices are making it harder to modify loans, and cure rates on delinquent loans are declining, too. "Additionally, the severity of loan losses has been on the rise, as housing inventory is forcing banks to sell the properties at even further discounted prices," the report says.

Class K of Banc of America Large Loans Inc. commercial mortgage pass-through certificates series 2004-BBA4 has been downgraded from BB-plus to B by Fitch Ratings. Fitch also affirmed the ratings on nine other classes in the transaction. The downgrade was attributed to the continuing decline in performance of the Heritage Square I and II loan and the Arapaho Portfolio. The collateral consists of 10 industrial/flex space buildings.

Two classes from J.P. Morgan Chase Commercial Mortgage Securities Corp. commercial mortgage pass-through certificates series 2001-CIBC1 have been downgraded by Fitch Ratings. Class J was downgraded from BB to BB-minus, and class K was downgraded from CCC/DR1 to CC/DR4. Fitch also affirmed the ratings on 10 other classes in the deal. The downgrades were attributed to an increase in specially serviced assets and projected losses.

Eleven classes from three subprime second-lien issues of Soundview Home Loan Trust mortgage pass-through certificates have been downgraded by Fitch Ratings. Fitch also placed one class on Rating Watch Negative and affirmed the ratings on 16 other classes. The negative rating actions were based on deterioration in the relationship between credit enhancement and loss expectations, and "reflect continued poor loan performance and home price weakness," Fitch said.

Nineteen classes from five subprime second-lien issues of Terwin Mortgage Trust mortgage pass-through certificates have been downgraded by Fitch Ratings. Fitch also placed five classes on Rating Watch Negative and affirmed the ratings on eight other classes. The negative rating actions were based on deterioration in the relationship between credit enhancement and loss expectations, and "reflect continued poor loan performance and home price weakness," Fitch said.

Data Warehouse Corp., a Boca Raton, Fla.-based provider of marketing information to the mortgage and financial industries, has announced the formation of a wholesale division. The new division is aimed at providing data and analytic services to meet "the growing demands" of list brokers, data resellers, telemarketing call centers, and direct mail and marketing agencies, the company said. Ben Waldshan, founder of Data Warehouse and executive vice president of its parent company, Fort Lee, N.J.-based Tranzact, said the new unit will enable data-dependent organizations to "further refine the effectiveness of their lead generation and customer acquisition efforts." The companies can be found online at http://www.dwcsolutions.com and http://www.tranzact.net.

The number of subprime-related cases filed in federal courts is "dramatically outpacing" the litigation filed during the savings-and-loan crisis of the early 1990s, according to Navigant Consulting Inc., Chicago. According to a Navigant study, 278 subprime-related cases were filed in 2007, nearly half the total of 559 S&L cases handled by the Resolution Trust Corp. over several years. "The S&L crisis has been a high-water mark in terms of the litigation fallout of a major financial crisis," said Jeff Nielsen, managing director of Navigant Consulting. "The subprime-related cases appear on their way to eclipsing that benchmark." Mr. Nielsen said the wave of litigation "appears to be just the beginning" and that there has been "a steady acceleration" of such cases so far this year. Navigant can be found on the Web at http://www.navigantconsulting.com.

The insurance financial strength ratings of FGIC Corp.'s operating subsidiaries -- including Financial Guaranty Insurance Co. and FGIC UK Ltd. -- have been downgraded from Aaa to A3 by Moody's Investors Service, partly as a result of mortgage market exposure. Moody's also downgraded FGIC's senior debt rating from Aa2 to Ba1, among others. The ratings remain on review for possible further downgrade. Moody's attributed the downgrades to its assessment of FGIC's "meaningfully weakened capitalization and business profile," which it said resulted partly from FGIC's exposures to the U.S. residential mortgage market. Noting its recent downgrade of XL Capital Assurance Inc., Moody's said its ratings of MBIA and Ambac, the other primary financial guarantors, remain under review for possible downgrade. The rating agency said it believes that, in contrast to XL Capital and FGIC, MBIA and Ambac "are better positioned from a capitalization and business franchise perspective." Moody's can be found online at http://www.moodys.com.

More than 750 additional classes of subprime mortgage pass-through certificates have been downgraded by Fitch Ratings as a result of changes to its subprime loss forecasting assumptions. Fitch also affirmed the ratings on classes with outstanding balances of more than $14 billion. Among the securities affected by the latest downgrades were: 177 classes from 16 Morgan Stanley deals; 158 classes from 14 SASCO deals; 87 classes from seven HASCO deals; 84 classes from seven SAIL deals; 64 classes from five Nomura deals; 44 classes from four NovaStar deals; 43 classes from four Soundview deals; 27 classes from two BNC deals; 26 classes from two Renaissance deals; 25 classes from two UBS deals; 22 classes from two Citigroup deals; and 13 classes from one GE-WMC deal. All were first-lien subprime transactions. The rating actions were attributed to changes to 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.

Radian Group Inc., Philadelphia, has reported a net loss of $618 million ($7.74 per share) for the fourth quarter, compared with net income of $158.4 million ($1.96 per share) a year earlier. For the full year, Radian lost $1.2 billion ($14.92 per share), compared with net income of $582.2 million ($7.08 per share) in 2006. At the end of the year, Radian had $1.3 billion in mortgage insurance loss reserves. S.A. Ibrahim, chief executive of Radian, noted that among the challenges the company faced during the year was the collapse of its proposed merger with MGIC. "In considering the book value of our company, we think it is important to take into consideration the significant embedded value within our financial guaranty business, as well as our ownership stake in Sherman," he said. "Our claims-paying resources in both business segments are strong, and we stand to benefit from a stable and well-capitalized financial guaranty business."

Senate Democrats have crafted a second stimulus bill that includes bankruptcy changes lenders will oppose and a net operating loss carry-back supported by homebuilders. "This package is aimed at the bull's-eye of our economic crisis -- the housing market," said Sen. Charles E. Schumer, D-N.Y. Included in the package was a bill by Sen. Richard Durbin, D-Ill., that would allow bankruptcy judges to restructure subprime mortgages. "Small changes to the bankruptcy code could help 600,000 at-risk families keep their homes," the Illinois senator said. The Mortgage Bankers Association said there is "much in this bill to applaud." However, the MBA served notice that it will oppose the bill because the bankruptcy provision will increase the cost of mortgage credit. The National Association of Home Builders has been pushing for an NOL carry-back. But it wants a tax credit for homebuyers even more. The builders have frozen all political contributions because the first stimulus bill did not include a homebuyers' tax credit.

New York Gov. Eliot Spitzer has set a three- to five-day deadline for bond insurers hurt by certain mortgage securities exposures to bolster their flagging ratings, according to the Wall Street Journal. A call to the New York insurance department about the deadline had not been returned by deadline time. Mr. Spitzer indicated in congressional testimony Feb. 14 that he feels officials in his state should take the lead in tackling the bond insurance issue because "insurance is regulated by the states, and most of the bond insurance companies are domiciled in and primarily regulated by New York." Moody's Investors Service on Thursday downgraded some ratings of bond insurer FGIC, a New York-based company in which mortgage insurer PMI owns a 42% stake.

Countrywide Financial Corp., the nation's largest servicer (with a market share of almost 17%), says its foreclosure rate almost doubled in January from that of a year earlier, according to new figures released Friday. At Jan. 31, 1.5% of the loans in its massive $1.48 trillion servicing portfolio ($21.8 billion) had entered the foreclosure process, a 92% increase from the level of a year earlier. Moreover, 7.5% of loans serviced by Countrywide were 30 days or more late. A year ago the ratio stood at 4.3%. Countrywide would not provide separate figures for subprime foreclosures, lumping all its servicing into one number. As for originations, Countrywide funded $21.8 billion in residential loans during January, a 41% decline from the level of a year earlier. Countrywide, which is being sold to Bank of America, saw its wholesale fundings plunge by 65%. Retail production was off 26%, with correspondent purchases falling 38%. Retail originations totaled $9.4 billion and wholesale just $2.5 billion, with correspondent coming in at $9.8 billion. The company also saw its commercial production plunge to just $50 million, a stunning 92% decline from the same month last year.

Two classes of subprime certificates issued by Aames Mortgage Trust have been downgraded by Moody's Investors Service, and nine classes have been placed on review for possible downgrade. Class M-2 of Aames Mortgage Trust 2002-1 has been downgraded from Baa1 to Baa2, and class B has been downgraded from B1 to Caa2. The securities placed under review are classes M-6, M-7, M-8, and M-9 of Aames Mortgage Investment Trust 2004-1 and classes M-5, M-6, M-7, M-8, and M-9 of Aames Mortgage Investment Trust 2005-1. The actions were based on an analysis of the credit enhancement provided by subordination, overcollateralization, and excess spread relative to expected losses, Moody's said.

Eighteen tranches from four deals issued by Fieldstone Mortgage Investment Trust in 2004 and 2005 have been downgraded and placed under review for possible downgrade by Moody's Investors Service. The actions were based on "the analysis of the credit enhancement provided by subordination, overcollateralization, and excess spread relative to expected losses," Moody's said. The transactions are backed primarily by first-lien adjustable subprime mortgage loans originated by Fieldstone Mortgage Co.

Twenty-six classes totaling $1.2 billion from two subprime issues of Ace pass-through certificates have been downgraded by Fitch Ratings. In addition, Fitch affirmed the ratings on Ace classes totaling $250 million. The downgrades were based on changes to Fitch's subprime loss forecasting assumptions that the rating agency says "better capture the deteriorating performance of pools from 2007, 2006, and late 2005 with regard to continued poor loan performance and home price weakness." The collateral for the transactions, both issued in 2006, consists of first-lien subprime mortgage loans.