Fitch Upgrades 10 & Affirms 56 Classes from 21 Vanderbilt Manufactured Housing Securitizations.

NEW YORK -- Fitch has taken rating action on the following Vanderbilt Mortgage Manufactured Housing securitizations:

Series 1998-A, Group 1

--Class IA-5 affirmed at 'AAA';

--Class IA-6 affirmed at 'AA'.

Series 1998-A, Group 2

--Class IIA-1 affirmed at 'AAA';

--Class IIB-2 upgraded to 'AA' from 'A+'.

Series 1998-B, Group 1

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

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

--Class IB-1 affirmed at 'A'.

Series 1998-B, Group 2

--Class IIA-1 affirmed at 'AAA';

--Class IIB-2 upgraded to 'AA' from 'A+'.

Series 1998-C, Group 1

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

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

--Class IM-1 affirmed at 'A'.

Series 1998-C, Group 2

--Class IIA-1 affirmed at 'AAA';

--Class IIB-2 upgraded to 'AA' from 'A+'.

Series 1998-D, Group 1

--Class IA-1 affirmed at 'AAA';

--Class IA-2 affirmed at 'AA';

--Class IM-1 affirmed at 'A+'.

Series 1998-D, Group 2

--Class IIA-1 affirmed at 'AAA';

--Class IIB-2 upgraded to 'AA' from 'A+'.

Series 1999-A, Group 1

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

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

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

--Class IM-1 affirmed at 'A'.

Series 1999-A, Group 2

--Class IIA-1 affirmed at 'AAA';

--Class IIB-2 upgraded to 'AA' from 'A+'.

Series 1999-B, Group 1

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

--Class IA-6 affirmed at 'AAA';

--Class IA-7 affirmed at 'AA';

--Class IM-1 affirmed at 'A+';

--Class IB-1 affirmed at 'BBB+'.

Series 1999-B, Group 2

--Class IIA-1 affirmed at 'AAA';

--Class IIB-2 upgraded to 'AA' from 'A+'.

Series 1999-C, Group 1

--Class IA-3 affirmed at 'AAA';

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

--Class IA-5 affirmed at 'AA';

--Class IM-1 affirmed at 'A+';

--Class IB-1 affirmed at 'BBB+'.

Series 1999-C, Group 2

--Class IIA-1 affirmed at 'AAA';

--Class IIB-2 upgraded to 'AA' from 'A+'.

Series 1999-D, Group 1

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

--Class IA-5 affirmed at 'AA';

--Class IM-1 affirmed at 'A';

--Class IB-1 affirmed at 'BBB'.

Series 1999-D, Group 2

--Class IIA-1 affirmed at 'AAA';

--Class IIB-2 upgraded to 'AA' from 'AA-';

--Class IIB-3 upgraded to 'A' from 'BBB+'.

Series 2000-A, Group 1

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

--Class IA-5 affirmed at 'AA';

--Class IM-1 affirmed at 'A';

--Class IB-1 affirmed at 'BBB'.

Series 2000-A, Group 2

--Class IIA-1 affirmed at 'AAA';

--Class IIB-1 upgraded to 'AA+' from 'AA';

--Class IIB-2 affirmed at 'BBB'.

Series 2000-C

--Class A ARM affirmed at 'AAA';

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

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

--Class M-1 affirmed at 'A+';

--Class B-1 affirmed at 'BBB+'.

Series 2000-D

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

--Class IA-5 affirmed at 'AA';

--Class M-1 affirmed at 'A';

--Class B-1 affirmed at 'BBB'.

Series 2001-B

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

--Class IA-5 affirmed at 'AA';

--Class IM-1 affirmed at 'A';

--Class IB-1 affirmed at 'BBB'.

The affirmations, affecting approximately $690 million of the outstanding certificates, are taken as a result of a stable relationship between credit enhancement (CE) and expected loss. The upgrades, affecting approximately $35 million of the outstanding certificates, are taken as a result of an improvement in the relationship between CE and expected loss.

Vanderbilt Mortgage and Finance (VMF) is a financing subsidiary of Clayton Homes, Inc. (CHI). VMF originates loans through CHI's company-owned retail centers and directly to customers. VMF has also acquired loans in bulk from other manufactured housing lenders. VMF was established in 1974 and started securitizing loans in 1992. In 2003, CHI was acquired by Berkshire Hathaway. After the acquisition, Fitch was no longer able to maintain an opinion on the financial strength of CHI as a separate entity. As a result, the ratings of CHI and 21 limited guarantee bonds in the VMF securitizations were withdrawn in January 2005.

To date, losses allocated to the trusts of above transactions have been minimal. This is because of CHI's practice of purchasing defaulted loans out of the trust prior to liquidation. Once a home is repossessed, CHI pays VMF the full remaining principal balance of the loan and allocates a cost to the originating sales center. It is then the responsibility of the originating sales center to dispose of the repossession. This relationship, in addition to CHI's ability to make necessary repairs on repossessed homes through retail centers and manufacturing plants as opposed to paying rates charged by unaffiliated parties, has helped recovery rates. CHI has never been obligated to repurchase defaulted loans and therefore could change the practice at any time.

Since CHI is not obligated to continue purchasing defaulted loans out of the trusts, Fitch assumed the practice ceases and the transactions begin incurring collateral loan losses. However, since the transactions have been protected from losses to date, the credit enhancement of the bonds has grown significantly and each bond is well-positioned to endure a scenario where CHI ceases to repurchase the defaulted loans.

In addition to assuming that CHI ceases to repurchase defaulted loans, Fitch assumed the servicing fee was in a senior position in the cash flow waterfall. Although the 125-basis point servicing fee is currently in a subordinate position and the transaction governing documents may not explicitly state that the fee be moved to a senior position in the event of a servicing transfer, Fitch assumed a senior fee would be required in the unlikely event that a servicing transfer was necessary.

The credit risk to the mezzanine and senior bonds is strengthened by relatively tight net loss rate performance triggers that would likely fail if CHI were to allow the trust to incur losses. The failed triggers would help retain the credit enhancement which has built to date.

The collateral of the above transactions consists of fixed-rate and adjustable-rate manufactured housing contracts that were originated or acquired by VMF. The contracts are currently serviced by VMF. In transactions where the collateral is divided into two groups, Group 1 primarily consists of fixed-rate bonds collateralized by fixed-rate loans and Group 2 primarily consists of floating-rate bonds collateralized by adjustable-rate loans. In addition, the Group 2 bonds have the benefit of overcollateralization.

The pool factors (i.e., current mortgage loans outstanding as a percentage of the initial pool) of the above transactions range from 13% (1998-A Group1) to 37% (2001-B). The seasoning ranges from 65 months (2001-B) to 106 months (1998-A). Fitch will continue to closely monitor the above transactions. Further information regarding current delinquency, loss, and credit enhancement statistics is available on the Fitch Ratings 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.