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FITCH ASSIGNS V-RATINGS TO $1.28 BILLION KIDDER CMO REMICS -- FITCH FINANCIAL WIRE --

 FITCH ASSIGNS V-RATINGS TO $1.28 BILLION KIDDER CMO REMICS
 -- FITCH FINANCIAL WIRE --
 NEW YORK, Nov. 10 /PRNewswire/ -- Fitch assigns V-Ratings to four CMO REMICs underwritten by Kidder, Peabody & Co. with an aggregate original principal of $1.28 billion. The issues are FNMA 1992-160, FHLMC 1372, FHLMC 1382, and FHLMC 1386. The V-Ratings of the individual tranches in the deals are listed below. This raises the total number of rated deals to 705, encompassing 9,839 tranches and over $298 billion in original principal.
 FNMA 1992-160 illustrates an important property of V-Ratings: highlighting a tranche's downside risk. Although the collateral backing this deal is a V3, the deal's three individual tranches are less predictable and therefore have ratings which indicate potentially higher volatility. Each tranche has upside potential but is also exposed to large downside risk should interest rates rise or fall. The PO class is susceptible to lengthening and the AQ and BQ classes, especially the AQ, are at risk if prepayments rise.
 Tranches AQ and BQ, which are Index Allocation Bonds, exhibit unique behavior. Their principal and interest payments, governed by 12 formulas based on LIBOR, are centered around a LIBOR rate of 3.375 percent. As LIBOR moves away from this rate, the AQ tranche receives more principal, and the BQ less. As LIBOR rises, BQ receives more interest, and AQ less. As LIBOR falls, BQ receives less interest and AQ more.
 If rates go up and prepayment speeds fall, then tranche AQ increases principal payments on a lesser cash flow and decreases interest payments. Tranche BQ performs in the opposite way, decreasing principal payments and increasing interest payments. When LIBOR falls, and prepayment speed increases, AQ again receives an increased percentage of the greater incoming principal and its coupon also goes up. BQ receives a lesser percentage of the principal, and has its coupon fall. The net effect is that tranche BQ is more stable than AQ, as it offloads some of the prepayment risk onto the AQ. The third tranche is a 30-year principal-only class.
 The Fitch V-Ratings offer a common, independent framework for evaluating CMO performance under 13 different interest rate scenarios. The ratings, scaled V1 through V5, provide a relative measure of each tranche's total return, price, and cash flow variability given changing interest rates. Securities rated V1, V2, or V3 perform predictably over a range of interest rate scenarios, and indicate low to moderate market volatility. Those securities rated V4 or V5 have the potential for greater market volatility, and may perform less predictably under stressful interest rate scenarios.
 V-Ratings are available on Bloomberg by typing "FVR" and pressing "GO", Telerate beginning on page 26300 and Knight Ridder Money Center beginning on page 5300.
 FHLMC 1372
 A:V2, B:V1, C:V4, D:V2, E:V4
 FHLMC 1382
 A:V1, AB:V1, B:V1, C:V1, D:V2, E:V3, F:V3, G:V4, H:V4, I:V4, J:V4,
 KA:V2, KB:V5, LA:V2, LB:V3, LC:V2, LD:V4, M:V2, N:V5, OA:V3, OB:V2,
 OC:V5, PA:V3, PB:V5, PC:V5, PD:V3, PE:V3, PF:V5, QB:V5, QC:V5,
 QD:V3, S:V4
 FHLMC 1386
 A:V2, B:V4, C:V2, CA:V5, D:V2, E:V4, F:V2, G:V2, H:V5, S:V4
 FNMA 1992-160
 AQ:V5, BQ:V4, C:V4
 -0- 11/10/92
 /CONTACT: Henry H. Wilson, 212-908-0617, or Brandon H. Einhorn, 212-908-0672, both of Fitch/ CO: Fitch Investors Service ST: New York IN: FIN SU: RTG


WB -- NY063 -- 9291 11/10/92 12:31 EST
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Date:Nov 10, 1992
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