CORRECTION/United Cos Financial Corp. Lower Rated Tranches Downgraded -- see 11th graf.NEW YORK--(BUSINESS WIRE)--June 24, 1999-- Fitch IBCA IBCA International Braille Chess Association IBCA Institute of Burial and Cremation Administration IBCA Integrated Business Communications Alliance IBCA International Barbeque Cookers Association IBCA Department of Interior Board of Contract Appeals downgrades the ratings of six classes of United Companies Financial Corp.'s manufactured housing Manufactured housing (also known as prefab housing) is a type of housing unit that is largely assembled in factories and then transported to sites of use. In the United States, the term "manufactured home" specifically refers to a house built entirely in a protected deals. Additionally, five classes of bonds are moved to RatingAlert Negative from RatingAlert Evolving. In October, 1998, UCFC UCFC United Community Funds and Councils of America announced that it would sell or close its manufactured housing business. The company begun to transition the servicing from the Minneapolis manufactured housing operation to Baton Rouge Baton Rouge (băt`ən r  zh) [Fr.,=red stick], city (1990 pop. 219,531), state capital and seat of East Baton Rouge parish, SE La. where the company's home equity loan servicing Loan servicing is the process by which a mortgage bank or subservicing firm collects the timely payment of interest and principal from borrowers. The level of service varies depending on the type loan and the terms negotiated between the firm and the investor seeking their services. shop is located. Additionally, growing financial difficulties of the company caused heightened concerns regarding maintenance of servicing quality. The company filed for Chapter 11 bankruptcy protection on March 1, 1999. Since Oct. 30, 1998, numerous rating actions have been taken (see press releases dated Oct. 30, 1998 and Feb. 4, 1999). These actions reflect Fitch IBCA's concerns regarding the possibility of any adverse impact on pool performance as a result of the sale/closing of the company and/or the bankruptcy filing. As of Feb. 4, 1999, the `BB' rated B-2 bonds of series 1996-1 and 1998-2 have been on RatingAlert Negative. The `BBB' rated B-1 bonds for eight deals (series 1996-1, 1997-1 through 1997-4, 1998-1 through 1998-3) have been on RatingAlert Evolving. The disruption disruption /dis·rup·tion/ (dis-rup´shun) a morphologic defect resulting from the extrinsic breakdown of, or interference with, a developmental process. in servicing has contributed to a particularly high level of delinquencies and repossessions. On May 5, 1999, Fitch IBCA conducted an onsite review of the servicing operation. Fitch IBCA found that the collection process had been fully transitioned to Baton Rouge and there was a sufficient level of staffing and servicing capability. However, with regard to recovery, due to its lack of dealer relationships as a result of exiting the origination Origination The process through which a mortgage lender creates a mortgage secured by some amount of the mortgagor's real property. Notes: Also known as loan origination, everyone must go through the origination process when securing a mortgage for a piece of real business, the company is reliant upon wholesale liquidation The collection of assets belonging to a debtor to be applied to the discharge of his or her outstanding debts. A type of proceeding pursuant to federal Bankruptcy of repossessed homes. Recovery rates on wholesale liquidations are generally substantially lower than retail liquidation recoveries. In February, 1999, UCFC liquidated DAMAGES, LIQUIDATED, contracts. When the parties to a contract stipulate for the payment of a certain sum, as a satisfaction fixed and agreed upon by them, for the not doing of certain things particularly mentioned in the agreement, the sum so fixed upon is called liquidated damages. (q.v. a large number of homes through a bulk sale of its repossession The taking back of an item that has been sold on credit and delivered to the purchaser because the payments have not been made on it. For example, if an individual fails to render prompt payments on a new car, the car might be subject to repossession by the finance company, inventory. The high liquidation caused a spike in losses, which resulted in considerable interest shortfalls on a number of deals. Although those shortfalls were quite severe, causing the mezanine bonds to receive only a portion of their interest, all bonds, except one, have been paid back in full by available cash in subsequent months, leaving no outstanding shortfalls. Fitch IBCA's rating actions reflect the status of the servicing operation and the high loss severity expectation. Since the reestablishment of a full collection operation is relatively recent, it may take some time before any real improvement in delinquencies is seen. However, the bulk sale of repossessed homes has reduced the inventory down to a more manageable level. Additionally, fewer repossessed homes in inventory allows field representatives to assist in collections rather than focus on re- marketing efforts. The affected securities are: United Companies Financial Corp.'s manufactured housing contracts pass through certificates: --Series 1996-1, class B-1, moved to RatingAlert Negative from RatingAlert Evolving; --Series 1996-1, class B-2, downgraded to `B' from `BB' and placed on RatingAlert Negative; --Series 1997-RS1, class A, downgraded to `BB-` from `BBB BBB A medium grade assigned to a debt obligation by a rating agency to indicate an adequate ability to pay interest and repay principal. However, adverse developments are more likely to impair this ability than would be the case for bonds rated A and above. +' and placed on RatingAlert Negative; --Series 1997-1, class B-1 downgraded to `BB' from `BBB' and placed on RatingAlert Negative; --Series 1997-1, class B-2, downgraded to `CCC' from `B-`; --Series 1997-2, class B-1, moved to RatingAlert Negative from Rating Alert Evolving; --Series 1997-2, class B-2, downgraded to `CCC' from `B-`; --Series 1997-3, class B-1, moved to RatingAlert Negative from Rating Alert Evolving; --Series 1997-3, class B-2 downgraded to `CCC' from `B-`; --Series 1997-4, class B-1, moved to RatingAlert Negative from Rating Alert Evolving; --Series 1998-1, class B-1, moved to RatingAlert Negative from RatingAlert Evolving; Additionally, the following securities are removed from RatingAlert Evolving: --Series 1998-2, class B-1; --Series 1998-3, class B-1; Series 1998-2, class B-2 remains on RatingAlert Negative (The issue was incorrectly stated as class B-1 in an earlier release) Three of the securities (1997-1 through 1997-3) are enhanced by a limited guarantee from United Companies Financial Corp. The ratings on these securities typically reflect the ability of United Companies to make payments under the limited guarantee. On Feb. 4, 1999, Fitch IBCA downgraded these securities to `B-` despite the rating of `CCC-` on the company. If the limited guarantee were the only credit enhancement Credit Enhancement A method whereby a company attempts to improve its debt or credit worthiness. Notes: Credit enhancements take many different forms. An example of a credit enhancement would be conversion rights added on to a debt instrument in order to lower the issuing for these securities they would have been downgraded to `CCC-`, as well. However, each of these securities are also supported by the application of monthly excess interest to loss coverage. The additional credit enhancement was the determinant determinant, a polynomial expression that is inherent in the entries of a square matrix. The size n of the square matrix, as determined from the number of entries in any row or column, is called the order of the determinant. of Fitch IBCA's `B-` rating. Since that time, Fitch IBCA has revised its loss assumptions on the pools, given higher loss expectations, the available excess interest is no longer sufficient to support that rating. These securities are now rated `CCC'. Fitch IBCA will continue to monitor the performance of the collateral pools backing the securities as well as the status of the servicing platform. |
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