Fitch Lowers 5 & Affirms 3 RMBS Classes From 2 Merit MH Issues

Business Wire, August 17, 2005

NEW YORK -- Fitch Ratings has taken rating actions on the following Merit Securities Corporation (Merit) manufactured housing (MH) issues:

Series 12-1

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

--Class M-1 downgraded to 'BBB-' from 'A';

--Class M-2 downgraded to 'B' from 'BB-';

--Class B-1 downgraded to 'CC' from 'CCC'.

Series 13

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

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

--Class M-1 downgraded to 'BB-' from 'BBB-';

--Class M-2 downgraded to 'B-' from 'B';

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

All of the MH loans in the aforementioned transactions were originated by Dynex Financial, Inc. In 1999, the servicing and origination platforms of Dynex were acquired by Bingham Financial Services. In 2001, Dynex changed its name to Origen, and, in 2003, converted to a publicly traded real estate investment trust. Origen continues to service the loans from a national servicing center in Fort Worth, Texas.

The affirmations of the senior classes reflect a stable relationship between credit enhancement and future loss expectations and affect approximately $227.1 million of outstanding certificates. The negative rating actions on the subordinate classes, which affect approximately $142.9 million of outstanding certificates, are taken due to the continued poor performance of the underlying collateral.

Merit 12-1 and 13 were both issued in 1999. Merit 12-1 included loans that were called from a previous transaction, Merit 9. Merit 13 included loans that were called from Merit 10.

Merit 12-1 benefits from an additional credit enhancement feature. On the closing date, Merit deposited additional MH loans into a separate collateralization fund with an original principal balance of $11.3 million ($4.7 million currently outstanding). The interest and principal payments from this fund are available to cover shortfalls and losses on the pool. However, monthly losses in the series 12-1 transaction have exceeded this supplemental cash flow and resulted in the continued reduction of overcollateralization.

Merit 13 benefits from two additional credit enhancement features. On the closing date, Merit deposited additional MH loans into a separate collateralization fund with an original principal balance of $15.1 million ($5.8 million currently outstanding). The interest and principal payments from this fund are available to cover shortfalls and losses on the pool. Additionally, as losses occur, interest payments to classes B-2 and B-3 will be redirected as part of a principal payment amount to the transaction. However, monthly losses in the series 13 transaction have exceeded this supplemental cash flow and resulted in the write-down of classes B-3 and B-2, which were privately placed.

Fitch will continue to closely monitor these 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.