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Deals Downgraded

Deals DowngradedFitch downgrades RMBS, Moody’s downgrades CDO

August 31, 2007


Negative ratings actions were taken on residential mortgage-backed securities by one agency because of changes to loss forecasting, while another agency cited a stressed market for its downgrade of a collateralized debt obligation.

Fitch Ratings downgraded a total of $86 million in classes of ABSC 2006-HE1, ABSC 2006-HE2, ABSC 2006-HE3 and ABSC 2006-HE6 because of changes to the agency’s subprime loss forecasting assumptions

Downgrades were issued by Fitch on Merrill Lynch Mortgage Investors 2005-NCA, 2005-NCB, 2005-SL1, 2005-SL2 and 2005-SL3, an announcement said. The actions were taken against the second lien deals totaling $178.8 million.

Moody’s Investors Service placed $164 million in classes of notes issued by Enhanced Mortgage-Backed Securities Fund V Limited on review for possible downgrade. The action was taken on the market value CDO because of current stressful market conditions.

“While the underlying assets remain highly rated, the unprecedented illiquidity in the market for mortgage backed securities has created a high level of uncertainty around the valuation of the assets, which makes it difficult to assess the probability of the manager achieving certain prices,” Moody’s said.

In a note about tightening credit conditions in the U.S. leveraged finance market, Fitch Managing Director Eric Tutterow said, “The debt market environment for the remainder of 2007 will be more conservative with higher borrowing costs and tighter lending standards for issuers.”


Sam Garcia worked in mortgage lending for twenty years prior to becoming publisher of


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