A number of employees, including two partners, have recently left residential mortgage financing and asset management firm The Winter Group. Sources close to the company adamantly deny the departures are related to any financial trouble whatsoever, although rumors are circulating that the firm is clamoring to keep up on high salary and office space expenses amid losses stemming primarily from its subprime second mortgage portfolio.

Partners Karey Geddes and Kimberly Maska recently retired from TWG. Also gone from the firm is scratch and dent trader James Dooley, now employed at Washington Mutual. Whole loan trader Mike Flynn and banker Mary Rappaport are also no longer employed by the company. Despite all the talk, TWG closed a second lien securitization on Thursday, and is expected to complete several more by yearend.

TWG was founded in 2003 by Richard Winter and seven partners as an integrated firm specializing in mortgage products. Winter left Credit Suisse, where he was co-head of the residential mortgage group, following its acquisition in 2000 of Donaldson, Lufkin and Jenrette. The majority of TWG partners worked together at DLJ and, subsequently, Credit Suisse. Terwin Money Management LLC, a subsidiary of TWG's asset management arm led by Chief Investment Officer Sam Rainieri, is an active CDO manager with nine deals totaling $5.2 billion in assets under management as of late August, according to Standard & Poor's.

Tip of the iceburg?

One source called the toll poorly performing subprime loans are beginning to take on those players caught with too much of it "the tip of the iceburg." The characterization, ironic if it is applicable to The Winter Group, seems to be taking on legs within the industry, as trouble becomes apparent at what is now a spattering of companies across the sector.

Firms caught in the wake of rapidly defaulting subprime collateral say they are revisiting reps and warranties and working with the companies in charge of servicing the troubled loans. Subprime lenders are reporting a higher portion of buyback requests for loans that experience early payment defaults. And, to protect themselves, secondary market participants say they are noticing an uptick in stipulations within whole loan contracts aimed to protect them from being burned by the buybacks.

As one example, the originator with the first 2006 loans in a securitization to be watchlisted for a downgrade, Fremont Investment & Loan repurchased and re-priced $345.7 million worth of loans in the third quarter, compared to $238.4 million in the second quarter. The company lost $9.6 million on the sale of whole loans and securitizations of $8.15 billion, compared with a gain of $8.4 million on the sale of $9.89 billion in the second quarter. The lender said last month that buyback requests had increased to between 90% and 100% of delinquent loans from about 30% of all delinquent loans last year.

(c) 2006 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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