Originations

Moody's Investors Service also issued a flood of negative rating actions Oct. 19, downgrading over 30 classes of mortgage-backed securities and placing over 50 MBS classes on review for possible downgrade.Among the securities affected by the downgrades were: 16 classes of Nomura Asset Acceptance Corp. Alternative Loan Trust certificates; 11 classes of Merrill Lynch Mortgage Investors Trust certificates; and six classes of Morgan Stanley Mortgage Loan Trust certificates. Among those placed under review were: 13 classes issued by Structured Asset Investment Loan Trust; and 11 classes issued by Credit Suisse. The rating actions were attributed to an analysis of the credit enhancement provided by subordination, overcollateralization, and excess spread relative to expected losses. Moody's can be found online at http://www.moodys.com.

Fitch Ratings also issued a flurry of additional downgrades Oct. 19, involving 55 classes of subprime mortgage-backed securities and seven classes of other MBS.Fitch also placed 10 classes of subprime MBS on Rating Watch Negative and affirmed the ratings on 91 such classes, as well as nine other classes of MBS. Among the securities affected by the downgrades were: 20 classes from six issues of Ameriquest Mortgage Securities Inc. mortgage pass-through certificates; eight classes from two issues of Asset Backed Funding Corp. mortgage pass-throughs; five classes from two issues by Credit-Based Asset Servicing and Securitization LLC; five classes from two issues of CDC Mortgage Capital Trust mortgage pass-throughs; four classes of Residential Asset Securities Corp. mortgage pass-throughs; and four classes of Countrywide Asset-Backed Securitization mortgage pass-throughs. The rating actions were attributed to a deterioration in the relationship between credit enhancement and loss expectations.

Seventy-eight more classes of mortgage- and asset-backed securities have been downgraded by Fitch Ratings as a result of changes to its subprime loss forecasting assumptions.Fitch also placed two classes on Rating Watch Negative and affirmed the ratings on classes with outstanding balances of more than $8 billion. Among the securities affected by the latest downgrades were: 26 classes from four issues of IndyMac INABS certificates; 18 classes from three issues of IXIS Real Estate Capital mortgage pass-through certificates; 14 classes from four issues of Asset Backed Funding Corp. mortgage pass-throughs; eight classes from one issue of Ameriquest mortgage pass-throughs; and seven classes from one issue of ACE mortgage pass-throughs. 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.

Standard & Poor's Ratings Services has announced downgrades of 1,413 classes of U.S. residential mortgage-backed securities (with an original par value of $22.0 billion) backed by first-lien subprime mortgage loans issued from the fourth quarter of 2005 through the fourth quarter of 2006.S&P also affirmed its ratings on securities representing $531.6 billion of original par value of such RMBS from the same period. S&P said the rating actions were based on expected further delinquencies and losses on the underlying loans, resulting reductions in credit support, and continued declines in home values. "While cumulative losses to date remain low, they have increased since our July 2007 review and we expect them to increase further," the rating agency said. For the downgraded transactions, overall delinquencies averaged 15.7% and serious delinquencies (loans that are delinquent by more than 90 days, in foreclosure, or real estate owned) averaged 23.3%, according to S&P. The rating agency said it expects the downgraded securities to be especially vulnerable to greater losses because 60%-70% of the loans backing them are subject to some type of payment adjustment in the near future. S&P can be found online at http://www.standardandpoors.com.

Irwin Financial Corp., a bank holding company and mortgage lender based in Columbus, Ind., has announced an expected loss of $15-20 million from discontinued mortgage operations for the third quarter."The sustained disruptions in the housing and mortgage markets during the third quarter have created a more difficult environment than we expected in which to wind down our discontinued operations and to restructure our home equity segment," said Will Miller, chairman and chief executive officer of Irwin Financial. "Nonetheless, we believe we are making progress in each of these segments. Our provision in the third quarter has created significant reserves for larger potential losses from future repurchase demands in the discontinued operations and loan losses in our consumer home equity portfolio." Irwin can be found online at http://www.irwinfinancial.com.

Accredited Home Lenders Holding Co., a San Diego-based nonprime mortgage company, and its Accredited Mortgage Loan REIT Trust subsidiary have announced plans to delist and deregister the subsidiary's preferred shares from the New York Stock Exchange.The real estate investment trust subsidiary has provided written notice to the NYSE of its intent to voluntarily delist its 9.75% series A perpetual cumulative preferred shares. "Current market conditions do not warrant the significant annual costs associated with our being a reporting company," said James A. Konrath, chairman and chief executive officer of the parent and subsidiary companies. "Our board of directors and board of trustees believe it is prudent to use these funds to enhance Accredited's and REIT's financial performance." Accredited can be found on the Web at http://www.accredhome.com.

Prepayments on subprime mortgage-backed securities slowed in September, and it could be a sign that house price declines are preventing borrowers from taking advantage of low interest rates and refinancing into fixed-rate mortgages, according to a report by Friedman, Billings, Ramsey & Co.Nearly 75% of subprime borrowers current in July had a "compelling financial incentive" to refinance, but prepayment rates declined and defaults rose. This situation "strongly suggests that subprime borrowers are progressively less able to refinance," FBR managing director Michael Youngblood says in the report. House prices fell 1.3% from the first quarter to the second quarter in 140 metropolitan statistical areas, representing 44.3% of the U.S. housing stock. "House prices may have fallen in these areas in the third quarter sufficiently to deter subprime borrowers, especially those with second or higher liens, from refinancing," the FBR report says. The FBR report also indicates that subprime MBS issuance declined to $13.1 billion in September from $48.7 billion in September 2006. FBR can be found online at http://www.fbr.com.

Lack of income documentation on securitized subprime mortgages would allow borrowers to rescind the loan and recover transaction costs under a predatory-lending bill introduced by House Democrats that comes down hard on stated-income loans.The bill, co-sponsored by North Carolina Congressmen Brad Miller and Mel Watt, creates a minimum national standard for mortgage originations that applies to all lenders and mortgage brokers. Securitizers would be required to conduct due diligence and sampling to detect possible lending violations. The bill also creates a safe-harbor provision and allows securitizers 90 days to cure a mortgage to avoid penalties. To qualify for the safe harbor, the loans must meet four basic standards -- ability to repay, income documentation, a debt-to-income ratio not exceeding 50%, and disclosure of costs for insurance and taxes. House Financial Services Committee Chairman Barney Frank, D-Mass, stressed that the assignee liability provision only applies to securitizers, not investors. Democrats plan to mark up the bill in the next few weeks. "The securitizers don't have to guess what kinds of loans" would get them into trouble, Rep. Frank told reporters. "It is well spelled out in the bill."

Seven classes of GMAC 2005-C1 commercial mortgage pass-through certificates have been placed on Rating Watch Negative by Fitch Ratings.The affected securities are classes H, J, K, L, M, N, and O. The negative rating actions were attributed to "a significant decline" in the value of the largest specially serviced loan, representing 1.65% of the pool, which is secured by a parking garage in Detroit. The special servicer is in the process of taking title to the asset, Fitch reported.

Three certificates from MASTR Second Lien Trust series 2005-1 have been downgraded by Moody's Investors Service.The downgrades were as follows: class M-5, from Baa2 to B1; class M-6, from Ba2 to B3; and class M-7, from B2 to Ca. The downgrades were attributed to credit enhancement levels, including excess spread, that may be too low in view of the projected losses. "The projected pipeline loss has increased over the past few months and is likely to affect the credit support for these certificates," Moody's said. "Furthermore, many underlying first-lien loans are likely to have pending interest rate resets, which may cause an increase in delinquencies and defaults on the second-lien loans in the pool." The transaction is backed by subprime second-lien loans.

Eleven classes of GS Mortgage Securities Corp. certificates from two GSAMP transactions have been downgraded by Fitch Ratings.Fitch also affirmed the ratings on seven other classes in the two transactions, series 2004-AR2 and series 2004-OPT. The downgrades were attributed to a deterioration in the relationship between credit enhancement and expected losses. The deals consist of closed-end fixed-rate mortgage loans secured by second liens on residential properties. Fitch can be found online at http://www.fitchratings.com.

Capital One Financial Corp., McLean, Va., has reported a net loss of $81.6 million ($0.21 per share) for the third quarter that stemmed from an $898 million loss from discontinued operations related to the shutdown of GreenPoint Mortgage.Capital One said earnings totaled $2.09 per share for the quarter excluding the loss from discontinued operations. The company's net income a year earlier totaled $587.8 million ($1.89 per share). The shutdown of GreenPoint, announced in August, is now "largely complete," Capital One said. The company can be found on the Web at http://www.capitalone.com.

Credit Plus Inc., a credit information company based in Salisbury, Md., has announce the formation of Ariston, a provider of title and settlement services.Ariston's product line, which complements Credit Plus' customized mortgage solutions, simplifies the closing process and offers lenders of all sizes title insurance, settlement/closing services, home equity products, property reports, flood zone determinations, appraisals, alternative valuations, and field services, Credit Plus said. "Through Ariston, lenders obtain completely integrated title, settlement, appraisal, and home equity products plus the same stellar customer service they have grown accustomed to through Credit Plus," said Allen Johnson, vice president of sales and marketing for Credit Plus and Ariston. Ariston can be found online at http://www.aristonthebest.com.

Spending for home improvement is projected to be 2.3% lower this year than in 2006, which would be the first decline since 2003, according to Harvard's Joint Center for Housing Studies.The Leading Indicator for Remodeling Activity, an updated version of an indicator maintained by the JCHS since 1998, suggests that the slowdown ("well into 2008") is a direct reaction to the current weakness in house prices and consumer confidence, which have taken a toll on home improvement expenditures. "The recent problems in credit markets are expected to dramatically reduce the level of cash-out mortgage refinancing activity," said Kermit Baker, director of the JCHS Remodeling Futures Program. "Given that equity withdrawals have been a key source of funding for home improvements, market spending is expected to suffer."

The Mortgage Bankers Association is urging the Department of Housing and Urban Development to reconsider a scheduled premium hike on Federal Housing Administration multifamily mortgages."At a time when many families are losing their homes and turning to rental housing, HUD should not impose a new tax on rental housing," MBA chairman Kieran Quinn said. "This decision will slow the development and rehabilitation of affordable rental housing across the nation." HUD has published a Federal Register notice that it is planning to increase the annual mortgage insurance premium on its most popular multifamily program from 45 basis points to 61 bps on Dec. 1. The comment period ends Nov. 19. Over 100 representatives and 38 senators have signed letters opposing an increase in the MIP. The MBA can be found online at http://www.mortgagebankers.org.

Property values in key mortgage markets like California, Nevada, Florida, and Arizona continued to decline significantly in August, according to the latest LoanPerformance Home Price Index."Within these states, cities like Los Angeles, Las Vegas, Miami, and Phoenix are leading the market downwards," said Damien Weldon, vice president of collateral and prepayment analytics for the San Francisco-based First American LoanPerformance. The LoanPerformance HPI provides a comprehensive set of monthly home price indices and median sales prices covering 7,376 ZIP codes and 655 counties in all 50 states and the District of Columbia, the company said. The index incorporates more than 30 years of repeat sales transactions from the property database of its parent company, First American CoreLogic Inc. First American LoanPerformance can be found online at http://www.loanperformance.com.

The housing market is deteriorating so quickly that credit assumptions made only a few months ago are now "unrealistic," and many banks and thrifts will likely have to hike their provisions for loan losses again, according to an analyst at Friedman, Billings, Ramsey.Washington Mutual "revised its provision for loan losses by $1 billion on two separate occasions over the last two months, and [WaMu] is not the only financial company that has revised its credit costs," an FBR equity research report says. In July, WaMu executives estimated that loss provisions would range from $1.5 billion to $1.7 billion this year. Now the giant Seattle thrift estimates that provisions will be in the $2.7 billion to $2.9 billion range. In reporting third-quarter results, WaMu increased its loan-loss reserve from $372 million to $967 million. The company also reported a 72% drop in earnings from a year ago. "We still believe there could be more upside to [WaMu's] provision levels, which would result in lower earnings estimates," the FBR report says. FBR can be found online at http://www.fbr.com.

Standard & Poor's has announced that DCT Industrial Trust Inc., Denver, will replace Equity Inns Inc. in its S&P REIT Composite Index.DCT will replace Equity Inns, which is being acquired by Whitehall Street Global Real Estate LP, after the close of trading on Oct. 22, S&P said. DCT primarily invests in commercial real estate properties.

Digital Realty Trust Inc., a San Francisco-based real estate investment trust, has priced a public offering of 3.5 million shares of common stock at $39.38 per share.The company said it plans to use the net proceeds from the offering to temporarily repay borrowings under its credit facility. Digital Realty has granted the underwriters an option to buy up to 525,000 additional shares of common stock to cover any overallotments. Merrill Lynch & Co. and Credit Suisse Securities served as the joint book-running managers for the offering. Digital Realty, which focuses on the ownership of technology real estate, can be found online at http://www.digitalrealtytrust.com.

Five certificates issued by NovaStar Mortgage Funding Trust have been placed on review for possible downgrade by Moody's Investors Service.The affected securities were as follows: series 2004-1, classes B-2 and B-3; series 2004-2, classes B-2 and B-3; and series 2004-4, class B-3. The negative rating actions were based on an analysis of credit enhancement provided by subordination, overcollateralization, excess spread, and mortgage insurance relative to expected losses, Moody's said. The transaction is backed by subprime fixed- and adjustable-rate mortgage loans. Moody's can be found on the Web at http://www.moodys.com.