Fitch Downgrades 9 & Affirms 18 Classes from 9 UCFC MH Securitizations.

NEW YORK -- Fitch Ratings has taken action on the following United Companies Financial Corp. (UCFC) manufactured housing (MH) securitizations:

Series 1996-1

--Class A-5 affirmed at 'AAA';

--Class A-6 affirmed at 'AA-';

--Class M remains at 'C';

--Class B-1 remains at 'C'.

Series 1996-2

--Class A affirmed at 'AAA'.

Series 1997-1

--Class A-4 affirmed at 'AAA';

--Class M remains at 'C';

--Class B-1 remains at 'D'.

Series 1997-2

--Class A-4 affirmed at 'AAA';

--Class M affirmed at 'B-';

--Class B-1 remains at 'C'.

Series 1997-3

--Class A-4 downgraded to 'BB+' from 'BBB';

--Class M remains at 'C';

--Class B-1 remains at 'C'.

Series 1997-4

--Class A-4 downgraded to 'BBB+' from 'A-';

--Class M remains at 'C';

--Class B-1 remains at 'C'.

Series 1998-1

--Class A-3 downgraded to 'A-' from 'AA-';

--Class M affirmed at 'B-';

--Class B-1 remains at 'C'.

Series 1998-2

--Class A-3 downgraded to 'A-' from 'AA';

--Class A-4 downgraded to 'B+' from 'BB';

--Class M-1 downgraded to 'CCC' from 'B-';

--Class M-2 remains at 'C'.

Series 1998-3

--Class A-1 downgraded to 'B+' from 'BB';

--Class M-1 downgraded to 'CCC' from 'B';

--Class M-2 downgraded to 'CC' from 'CCC'.

The affirmations, affecting approximately $108 million of the outstanding certificates, reflect a stable relationship between credit enhancement and expected losses. Series 1996-2 is insured by MBIA, which maintains an insurer financial strength rating of 'AAA' with Fitch. The downgrades, affecting approximately $172 million of the outstanding certificates, are taken as a result of deterioration in the relationship between credit enhancement and future expected losses.

Transactions issued prior to 1998-2 pay interest and principal to the senior class prior to paying interest to subordinate classes. This structure is often referred to as IPIP (Interest-Principal, Interest-Principal). The mezzanine and subordinate classes in the IPIP transactions are generally experiencing interest shortfalls. Fitch considers the likelihood of the recovery of the interest shortfall when determining the rating. Series 1998-2 and 1998-3 pay interest to all classes prior to paying principal to senior classes. This structure is often referred to as IIPP (Interest-Interest, Principal-Principal).

The collateral supporting the above transactions consists of fixed-rate contracts secured by manufactured housing. All of the contracts were originated by United Companies Funding, Inc. (UCFI) and were originally serviced by UCFC.

UCFI was formed in 1995 and was a wholly owned manufactured housing lending subsidiary of UCFC. In 1998, UCFI announced plans to close down its manufactured housing business. In 1999, UCFC filed for Chapter 11 bankruptcy protection and in December 2000, its manufactured housing portfolio, servicing rights, and residual interests were acquired by EMC, which is a wholly owned subsidiary of the Bear Stearns Companies, Inc. EMC is currently rated 'RPS1' by Fitch.

Fitch expects loss severities to remain high. The rating actions reflect the expectation that losses will continue to exceed excess spread for most transactions and credit enhancement for many bonds will continue to deteriorate.

The pool factors (i.e., current mortgage loans outstanding as a percentage of the initial pool) for the transactions range from 20% (1996-2) to 46% (1998-3) and the seasoning ranges from 89 months (1998-3) to 113 months (1996-1). Cumulative losses range from approximately 16% (1997-3) to 26% (1996-1 & 1997-3) of original pool balance.

Fitch will continue to closely monitor all rated UCFC transactions. Further information regarding current delinquency, loss, and credit enhancement statistics is available on the Fitch Ratings website 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.