Fitch Affirms $420MM & Downgrades $164.4MM of Independence VII CDO, Ltd.

NEW YORK -- Fitch affirms two and downgrades six classes of notes issued by Independence VII CDO, Ltd. (Independence VII). The following rating actions are effective immediately:

--$360,000,000 class A-1A notes affirmed at 'AAA';

--$60,000,000 class A-1B notes affirmed at 'AAA';

--$30,600,000 class A-2 notes downgraded to 'AA+' from 'AAA';

--$60,000,000 class B notes downgraded to 'A' from 'AA';

--$28,500,000 class C notes downgraded to 'BBB+' from 'AA-';

--$15,000,000 class D notes downgraded to 'BBB' from 'A-';

--$24,900,000 class E notes downgraded to 'BB-' from 'BBB' and removed from Rating Watch Negative;

--$5,400,000 class F notes downgraded to 'B' from 'BB+' and removed from Rating Watch Negative.

Independence VII is a collateralized debt obligation (CDO) that closed on March 28, 2006 and is managed by Declaration Management & Research LLC (Declaration), which is rated 'CAM2' by Fitch. The portfolio is currently composed of residential mortgage-backed securities (RMBS) (86.0%), commercial mortgage-backed securities (CMBS) (5.1%) and collateralized debt obligations (8.9%).

Fitch conducted cash flow modeling utilizing various default timing and interest rate scenarios to measure the breakeven default rates going forward relative to the minimum cumulative default rates required for the rated liabilities. Fitch's rating actions also reflect the recent credit quality deterioration within the portfolio. The majority of these actions has taken place in the last two months and was the result of credit deterioration in the subprime RMBS space.

Since Fitch's last review of Independence VII, approximately 10.6% of the portfolio has been downgraded. In addition, 5.7% of the underlying assets remain on Rating Watch Negative. Of the exposure to subprime RMBS in Independence VII, 78.8% consists of the 2005 through 2007 vintages, which are experiencing higher levels of delinquencies and defaults. Fitch believes that this subprime exposure, along with credit deterioration in the portfolio has increased the risk profile of the notes. As of the most recent trustee report dated Aug. 8, 2007, the Fitch weighted average rating factor (WARF) of 6.0 is failing the covenant of 5.0. All overcollateralization (OC) and interest coverage (IC) ratios are passing their covenants. This rating analysis also incorporated Fitch's revised methodology for rating structured finance CDOs. For more information, see 'Global Criteria Change for U.S. Structured Finance CDOs Reflects Heightened Subprime Risks,' dated Aug. 15, 2007 and available on the Derivative Fitch web site at www.derivativefitch.com.

The ratings on the class A-1A, A-1B, A-2, B and C notes address the timely payment of interest and ultimate payment of principal as outlined in the governing documents. The ratings on the class D, E and F notes address the ultimate payment of interest and principal as outlined in the governing documents.

Fitch will continue to monitor and review this transaction for future rating adjustments. Additional deal information and historical data are available on the Derivative Fitch web site at www.derivativefitch.com. For more information on the Fitch VECTOR Model, see 'Global Rating Criteria for Collateralised Debt Obligations,' dated Oct. 4, 2006 and also available at www.derivativefitch.com.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.derivativefitch.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site. Fitch means Fitch, Inc., Fitch Ratings, Ltd. and their subsidiaries including Derivative Fitch, Inc. and Derivative Fitch Ltd. and any successor or successors thereto.