Fitch Affirms Enhanced Mortgage-Backed Securities Fund IV, Ltd. (EMBS IV).

NEW YORK -- Fitch Ratings affirms five classes of notes issued by Enhanced Mortgage-Backed Securities Fund IV, Ltd. (EMBS IV). These affirmations are the result of Fitch's review process and are effective immediately:

--$130,000,000 class A-1 senior notes at 'AAA';

--$14,000,000 class A-2 senior subordinated notes at 'A+';

--$20,000,000 class A-3 subordinated notes at 'BBB+';

--$6,000,000 class A-4 junior subordinated notes at 'BBB';

--$30,000,000 preference shares at 'B-'.

EMBS IV, a mortgage market value CDO, is collateralized by fixed, floating, and adjustable rate mortgage-backed securities (MBS), collateralized mortgage obligations (CMOs), ABS, U.S. government obligations, corporate securities, and cash/cash equivalents. Portfolio restrictions limit the exposure to these particular assets as well as the percentage of assets that fall under the 'AAA', 'AA', 'A', and 'BBB' credit levels. Other key covenants include limits on effective duration, utilization of leverage, and net asset value (NAV). Effective duration, which measures total interest rate risk, and net asset value, the current asset value as a percentage of net asset value at inception, are the two main criteria used to measure these deals.

Since close, the collateral has continued to exhibit stable performance. EMBS IV currently has a NAV of 96.07%, which is in compliance with it performance trigger of 90.5%. Although the NAV is currently below 100%, representing a partial loss of principal, EMBS IV does not mature until 2010 and there is no current threat to noteholders. EMBS IV is currently passing all monthly performance and compliance tests. Babson Capital Management has a 'CAM2' CDO asset manager rating.

The ratings on the notes and preference shares address the likelihood of investors receiving principal and original balance, respectively, by the redemption date. In addition, the expected ratings address the likelihood that the noteholders and preference shareholders will receive timely interest and periodic distributions, respectively, through the redemption date.

Fitch will continue to monitor and review this transaction for future rating adjustments. Additional deal information and historical data are available on the Fitch Ratings web site at www.fitchratings.com. For more information on the Fitch VECTOR Model, see 'Global Rating Criteria for Collateralised Debt Obligations,' dated Sept. 13, 2004 and also available on Fitch's web site at 'www.fitchratings.com'.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.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.