by Anonymous on 7/18/2007 08:29:00 AM

Fortunately there's a free market in bond ratings:

Moody's Investors Service says it is paying a high price for its tough stance on lax lending standards for commercial mortgage-backed securities.

In a new report that assesses the status of the market, the Moody's Corp. unit said it was passed over and not hired for 75% of the commercial mortgage-backed securities rating assignments issued in the past few months as a result of its requirement that issuers add an extra layer of credit enhancement. Moody's said issuers are "rating shopping" -- meaning they were hiring competitors that would hand out higher ratings on securities.

by Anonymous on 7/18/2007 07:28:00 AM

The Mackey saga continues:

July 17 (Bloomberg) -- Whole Foods Market Inc., the largest U.S. natural-foods grocer, said its board formed an independent committee to investigate postings made on financial message boards by Chairman and Chief Executive Officer John Mackey.

Whole Foods also has been contacted by the U.S. Securities and Exchange Commission, which is conducting its own inquiry into Mackey's messages, the company said today in a statement.

Mackey posted anonymous messages on Yahoo! Inc.'s financial chat boards from 1999 to 2006 using the name ``rahodeb.'' Some of his comments praised his company's performance while others criticized rivals such as Wild Oats Markets Inc., which Whole Foods is seeking to buy.

``I sincerely apologize to all Whole Foods Market stakeholders for my error in judgment in anonymously participating on online financial message boards,'' Mackey said today. ``I am very sorry and I ask our stakeholders to please forgive me.'' Mackey is also co-founder of the company.

The committee has retained Munger, Tolles & Olson LLP to assist in its internal investigation, the Austin, Texas-based company said.

That ought to produce about the most entertaining set of board minutes ever. Perhaps if Mackey's lucky they'll find enough variants on "hole f00dz diretorz r HOT!!1!!!" to keep them in a decent temper.

by Anonymous on 7/17/2007 07:33:00 PM

From Fitch:

Fitch Ratings-New York-17 July 2007: Fitch Ratings takes rating actions on the following First Horizon Home Loan Mortgage Trust issues:
Series 2006-AA3:
--Class A affirmed at 'AAA';
--Class B1 affirmed at 'AA';
--Class B2 affirmed at 'A';
--Class B3 rated 'BBB' is placed on Rating Watch Negative;
--Class B4 downgraded to 'B+' from 'BB';
--Class B5 downgraded to 'CCC' from 'B' and assigned distressed recovery (DR) rating of 'DR1'.

Series 2006-FA2:
--Class A affirmed at 'AAA';
--Class B1 affirmed at 'AA';
--Class B2 affirmed at 'A';
--Class B3 rated 'BBB' is placed on Rating Watch Negative;
--Class B4 downgraded to 'B+' from 'BB' and placed on Rating Watch Negative;
--Class B5 downgraded to 'CCC' from 'B' and assigned distressed recovery rating of 'DR2'.

The mortgage loans consist of conventional, fully amortizing, adjustable-rate, as well as conventional, fully amortizing, fixed-rate mortgage loans secured by first liens on single-family residential properties. As of the June 2007 distribution date, the transactions are 13 and 15 months seasoned and the pool factors (i.e., current mortgage loans outstanding as a percentage of the initial pool) are 0.73% and 0.81%, respectively. These transactions are serviced by First Horizon Home Loan Corporation, rated 'RPS2' by Fitch.

The affirmations reflect credit enhancement (CE) consistent with future loss expectations and affect approximately $554 million of outstanding certificates. All classes in the transactions detailed above have experienced small to moderate growth in CE since closing. The negative rating actions, affecting approximately $10.8 million of outstanding certificates, reflect deterioration in the relationship between CE and expected losses.

Approximately 4.76% of the current collateral balance for series 2006-AA3 is more than 60 days delinquent. This includes bankruptcy, foreclosures and real estate owned (REO) of 0.51%, 2.10% and 0.38%, respectively. The credit enhancement for the B-3, B-4 and B-5 classes is 1.60%, 0.92% and 0.37%, respectively.

For series 2006-FA2, approximately 2.71% of the current collateral balance is more than 60 days delinquent. This includes foreclosures and real estate owned (REO) of 1.70% and 0.30%, respectively. The credit enhancement for the B-3, B-4 and B-4 classes is 1.22%, 0.73% and 0.37%, respectively.

So what are these loans? Well, according to the prospectus for 2006-AA3:

Substantially all the mortgage loans were underwritten pursuant to the seller’s “Super Expanded Underwriting Guidelines,” which guidelines generally allow for FICO scores, loan-to-value ratios and debt-to-income ratios that are less restrictive than the seller’s standard full/alternative documentation loan programs.

And 2006-FA2? You guessed it: "Super Expanded."

by Calculated Risk on 7/17/2007 06:27:00 PM

On Bear Stearns:

New York, July 17, 2007 -- Moody's Investors Service has placed under review for possible downgrade thirteen tranches from eight deals issued by Bear Stearns in 2006. The collateral backing these classes consists of primarily first lien, fixed and adjustable-rate, Alt-A mortgage loans.

The ratings were placed under review for downgrade based on higher than anticipated rates of delinquency in the underlying collateral compared to current credit enhancement levels.

On IndyMac:

New York, July 17, 2007 -- Moody's Investors Service has placed under review for possible downgrade two tranches from two deals issued by IndyMac INDX Mortgage Loan Trust in 2006. The collateral backing these classes consists of primarily first lien, fixed and adjustable-rate, Alt-A mortgage loans.

The ratings were placed under review for downgrade based on higher than anticipated rates of delinquency in the underlying collateral compared to current credit enhancement levels.

It is worth repeating: the collateral consists primarily of Alt-A, first lien mortgage loans.

UPDATE: Reuters story: Moody's may cut Bear Stearns, IndyMac ABS (hat tip AllenM)

In addition, Moody's also said it may cut the ratings of eight tranches from three deals issued by Nomura Asset Acceptance Corporation in 2006. The collateral backing these classes consists of primarily first lien, fixed and adjustable-rate, Alt-A mortgage loans.

UPDATE2: More from Moody's (hat tip Brian)

Moody's has noted a negative trend in delinquencies for first-lien, Alt-A mortgage loans originated in late 2005 and 2006. Recent data shows that these first-lien, Alt-A mortgage loans have delinquency rates that are higher than original expectations, and a number of transactions may, in light of their current rating levels, be insufficiently protected against the greater than anticipated losses implied by such high delinquency levels. These loans were originated in an environment of aggressive underwriting, which combined with prolonged home price pressure has caused significant loan performance deterioration and is the primary factor in these reviews.

During the course of these reviews, Moody's will seek to identify the underlying cause of delinquency within each of the 33 transactions, as well as to assess the overall impact these early delinquencies will have on each transaction's projected lifetime losses. It is anticipated that the current rating reviews will be resolved over the next two months as more information becomes available and Moody's completes its analysis.
emphasis added

by Calculated Risk on 7/17/2007 06:02:00 PM

DataQuick reports: Southland home sales slowest since 1993

Southern California's real estate market slowed to its lowest sales pace in 14 years last month, led by steep sales drop-offs in the Inland Empire and other affordable markets, a real estate information service reported.

A total of 20,166 new and resale homes sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was up 1.5 percent from 19,874 for the month before, and down 36.2 percent from 31,602 for June last year, according to DataQuick Information Systems.

Last month's sales were the slowest for any June since 1993, when 19,947 homes sold, the lowest for any June in DataQuick's statistics, which go back to 1988. The strongest June was in 2005, when 40,156 homes sold. The June sales average is 29,041.

Sales in June 2007 were almost exactly 50% of June 2005. In '93 (a similar June for SoCal), existing home sales were 3.74 million nationwide. Activity in California has probably fallen much more than other areas of the country, but this suggests that nationwide existing home sales have declined significantly, and might have fallen below the 5 million level (SAAR).

by Calculated Risk on 7/17/2007 05:31:00 PM

From the WSJ: Two Bear Funds Nearly Worthless, Investors Told

The assets in Bear's more levered fund, the High-Grade Structured Credit Strategies Enhanced Leverage Fund, are worth virtually nothing, according to people familiar with the matter. The assets in the other larger, less-levered fund are worth roughly 9% of the value since the end of April, these people said. The April valuations weren't immediately available but in March, before their sharp losses, the enhanced leverage fund had $638 million in investor money, while the other fund had $925 million.
...
Bear disclosed this information to investors earlier Tuesday and is expected to make a statement Tuesday evening, these people said.