Fitch Ratings Upgrades MCF 1997-MC2 Pass-Thru Certificates.

Business Editors

NEW YORK--(BUSINESS WIRE)--Aug. 6, 2003

Fitch Ratings upgrades Mortgage Capital Funding, Inc.'s, multifamily/commercial mortgage pass-through certificates, series 1997-MC2 as follows:

-- $52.2 million class B to 'AAA' from 'AA';

-- $43.5 million class C to 'AA-' from 'A';

-- $39.2 million class D to 'A-' from 'BBB'.

In addition, Fitch affirms the following certificates:

-- $37.2 million class A-1 'AAA';

-- $465.9 million class A-2 'AAA';

-- Interest-only class X 'AAA';

-- $26.1 million class E 'NR';

-- $43.5 million class F 'BB;

-- $8.7 million class G 'BB-';

-- $19.6 million class H 'B';

-- $10.9 million class J 'B-'.

The $13.8 million class K certificates are not rated by Fitch. The rating upgrades and affirmations follow Fitch's review of the transaction, which closed in November 1997. The upgrades are primarily a result of increased subordination levels due to loan payoffs and amortization.

Midland Loan Services, the master servicer, collected year-end (YE) 2002 financial statements for 92% of the pool balance. The YE 2002 weighted average debt service coverage ratio for these loans was 1.66 times (x), compared to 1.50x at issuance. To date, realized losses total $3.6 million and affect class K.

As of the July 2003 distribution date, the pool's aggregate principal balance has been reduced by 12.6%, to $760.7 million from $870.6 million at issuance. Of the 181 original loans in the pool, 162 loans remain outstanding. The pool is well diversified by property type and geographic location.

Two loans (1.5%) are in special servicing. The larger of the two loans (1.2%) is currently 30 days delinquent and is secured by a retail property in Victorville, CA. The borrower has stated that it can no longer make debt service payments due to a significant decline in net operating income (NOI), caused by two anchor tenants vacating. Current occupancy is 12%. The special servicer will be ordering an appraisal shortly. The second loan (0.3%) is real estate owned (REO). The property was actually sold in 2002, with all proceeds applied to P&I and property protection advances. However, losses on this loan have not been realized, due to the outstanding representations and warranties lawsuit between the special servicer and the issuer.

The fifth largest loan (2.3%) is secured by a hotel in San Francisco. The YE 2002 DSCR was 1.01x, due to the occupancy decline caused by economic conditions as well as the renovation of the nearby convention center.

Fitch applied various stress scenarios taking into consideration all of the above concerns. Even under these stress scenarios, subordination levels remain sufficient to upgrade and affirm the ratings. Fitch will continue to monitor this transaction, as surveillance is ongoing.