In another casualty of the Lehman Brothers failure, Fitch Ratings downgraded and placed on rating watch negative the servicer ratings of Capstone Mortgage Services, a subsidiary of Lehman Brothers Holdings and the U.K. servicer to the Eurosail, Preferred Residential, Southern Pacific, MARS 4, EMF-UK 2008-1 and Mortgage Funding 2008-1 transactions.

Fitch said it is concerned about Capstone’s ability to administer and manage residential mortgage loans even though the servicer is not currently in administration. Fitch also noted that back-up servicers Homeloan Management and Scarborough Mortgage Servicers are monitoring the situation.

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