Fitch Lowers & Removes from Rating Watch Negative 4 Classes of MKP CBO I.

NEW YORK -- Fitch Ratings has downgraded four classes of notes issued by MKP CBO I, Ltd. (MKP CBO) and removes all classes from Rating Watch Negative. The following rating actions are effective immediately:

-- $206,514,982 class A-1L to 'BBB-' from 'A-';

-- $25,000,000 class A-2L to 'CCC' from 'BB';

-- $7,375,000 class B-1A to 'CC' from 'B-';

-- $7,000,000 class B-1L to 'CC' from 'B-'.

MKP CBO is a collateralized debt obligation (CDO) managed by MKP Capital Management, LLC. The deal was established in February of 2001 to issue $307.4 million in notes and equity. The portfolio supporting the CDO is composed of residential mortgage-backed securities (RMBS), commercial mortgage-backed securities (CMBS), and commercial and consumer asset backed securities (ABS).

The rating actions are a result of continued deterioration in the credit quality of MKP CBO's collateral pool and the continued negative impact of its interest rate hedge. Since the last rating action, the class A overcollateralization (OC) ratio decreased to 100.3% as of the most recent trustee report dated March 28, 2005, from 103.1% as of Oct. 28, 2004, and continues to fail the minimum OC of 106.0%. The class B OC ratio has also decreased, to 94.3% from 97.6% during the same reporting periods, and also continues to fail the trigger of 101.0%. Defaulted assets have increased to 4.97% of the total collateral and eligible investments. Assets rated 'BB+' or lower represented approximately 25.27%, excluding defaults. Since the previous rating action, there has been one credit risk sale of AFT 1999-1A class C, which recovered approximately 21% of its $4.7 million balance. In addition, five collateral positions have had their principal balances written down, indicating additional future defaults in the portfolio.

The rating of the classes A-1L and A-2L notes addresses the likelihood that investors will receive full and timely payments of interest, as per the governing documents, as well as the stated balance of principal by the legal final maturity date. The ratings of the classes B-1A and B-1L notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the governing documents, as well as the stated balance of principal by the legal final maturity date.

As a result of this analysis, Fitch has determined that the current ratings assigned to the classes A-1L, A-2L, B-1A, and B-1L notes no longer reflect the current risk to noteholders.

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'.