Fitch Downgrades 1 & Affirms 4 Classes From Merit Series 11

Business Wire, Feb 15, 2005

NEW YORK -- Fitch Ratings takes the following rating actions on Merit Securities Corp. (Merit), series 11:

-- Classes 2A-3 and 3A-1 affirmed at 'AAA';

-- Class B-1 affirmed at 'AA';

-- Class B-2 affirmed at 'A';

-- Class B-3 downgraded to 'B' from 'BBB'.

The downgrade reflects the poor performance of the collateral pool and its potential impact on the above-referenced subordinate certificates. Downgrades affect approximately $20 million of certificates while the affirmations affect $104.6 million.

The downgrades reflect collateral losses higher than initial expectations. A key to the poor performance of the collateral is the high percentage of manufactured housing loans remaining in the pool. Manufactured housing loans typically experience a higher rate of default and higher loss severities on liquidated loans. At origination, the collateral consisted of over 90% single family-detached units, 13% manufactured housing and 9% planned unit developments. Currently, the collateral is comprised of over 77% manufactured housing, 18% single family detached units and less than 1% planned unit developments.

Credit Enhancement in the form of over-collateralization (OC) declines at a rate of between 15-20 basis points (bps) a month.

This transaction's pool factor (the percentage of mortgage principal outstanding to the initial mortgage pool at closing) is just over 13%. The loans supporting Merit 11 were originated and continue to be serviced by Origen Financial (Origen), previously under the name Dynex Financial, Inc.

Further information is available on the Fitch Ratings web site at www.fitchratings.com.