Fitch: Rising Interest Rates To Have Little Effect on U.S. RMBS 2004 Performance Outlook.

Business Editors

NEW YORK--(BUSINESS WIRE)--Dec. 11, 2003

The positive performance of the prime jumbo U.S. residential mortgage-backed securities (RMBS) sector will continue into 2004 despite the likelihood of rising interest rates, according to the Global Structured Finance 2004 Outlook and 2003 review published today by Fitch Ratings. Although some adjustment to the projected rising interest rate environment has already taken place in 2003 , the housing market is expected to remain healthy, with most regions exhibiting stable market conditions.

"Refinancing activity, robust for much of 2003, has subsided and will continue to do so into 2004, and prepayment speeds for most RMBS pools will slow as the sector adjusts to the rising interest rate environment," said Tom Albertson, Senior Director, Fitch Ratings. "The strengthening economy should lead to rising incomes that will help mitigate the effect of interest rate increases. Fitch, as a result, expects that 2004 housing prices will be stable, which is good news for all RMBS sectors."

Predatory lending issues, and most recently, allegations of increased predatory servicing practices became more prominent for subprime RMBS in 2003. Although both troubling developments, neither appear to have a significant impact on subprime RMBS performance in 2004. "Issuers have provided protective measures to significantly reduce transaction risk and investor assignee liability from predatory lending, while changes in servicing practices and strengthening of control by servicers will help stem the spread of predatory servicing," said Albertson.

High delinquencies and high loss severities that have plagued the manufactured housing sector should lead to additional downgrades in 2004. Exacerbating the Negative Outlook for manufactured housing are changes in servicing practices which have led to inconsistent performance results and made it difficult to ascertain whether the sector has made any meaningful strides towards recovery.

"Total upgrades had a slight edge over downgrades for global structured finance during the first three quarters of 2003 with a 1.4:1 ratio, demonstrating impressive resiliency amid the stagnant credit environment," said Claire Mezzanotte, Managing Director, Fitch Ratings. "U.S. RMBS has reflected the overall resiliency of structured finance with solid performance in 2003, albeit to a lesser degree due to deleveraging effects. Fitch expects similar performance trends for U.S. RMBS in 2004."

'Global Structured Finance: 2004 Outlook and 2003 Review' examines rating performance for 2003 and provides 2004 outlooks for structured finance markets in the U.S., Europe, Asia and Latin America, along with the global CDO markets. The report is available on the Fitch Ratings web site at 'www.fitchratings.com'.