Fitch Affirms 19 & Downgrades 5 Classes from 7 GE Capital HE Issues

Business Wire, Dec 5, 2006

NEW YORK -- Fitch Ratings has taken rating actions on the following GE Capital home equity loan pass-through certificates:

Series 1997-HE1

--Classes A4, A5 affirmed at 'AAA';

--Class M affirmed at 'BBB';

--Class B1 remains at 'C/DR5'.

Series 1997-HE3

--Classes A5, A6 affirmed at 'AAA';

--Class M downgraded to 'A' from 'AA';

--Class B1 downgraded to 'C/DR4' from 'CC/DR4'.

Series 1998-HE1

--Classes A6, A7 affirmed at 'AAA';

Series 1998-HE2

--Classes A6, A7 affirmed at 'AAA';

Series 1999-HE1

--Classes A6, A7 affirmed at 'AAA';

--Class M affirmed at 'AA';

--Class B1 downgraded to 'BBB' from 'A';

--Class B2 downgraded to 'C/DR3' from 'CC/DR3'.

Series 1999-HE2

--Classes A5, A6 affirmed at 'AAA';

Series 1999-HE3

--Classes A5, A6 affirmed at 'AAA';

--Class M affirmed at 'AAA';

--Class B1 affirmed at 'AA';

--Class B2 affirmed at 'BBB';

--Class B3 downgraded to 'C/DR3' from 'CC/DR4'.

The affirmations, affecting $77.1 million of outstanding certificates, are due to stable collateral performance and moderate growth in credit enhancement.

The downgrades, affecting approximately $20.80 million of the outstanding certificates, reflect the deterioration of credit enhancement (CE) relative to consistent or rising monthly losses. As of the October 2006 distribution date, the transactions are seasoned from 85 (1999-HE3) to 115 (1997-HE1) months. The pool factors (current principal balance as a percentage of original) range approximately from 5% (1997-HE1) to 6% (1999-HE3).

The series 1997-HE3 has been experiencing monthly loss of about $40,000 on average. As a result, the class B2 has been entirely written down. At the current rate of loss, the class B1 bond ($1.6 million) will be entirely written down in about 38 months, at which time the class M will begin taking losses. As of the October 2006 distribution, the 60 delinquencies represent 12.05% of the mortgage pool, foreclosures and REO represent 3.45% and 2.58%, respectively.

Fitch is downgrading two bonds from the series 1999-HE1 transaction: the most subordinate B2 bond (from 'CC' to 'C'), and the B1 bond (from 'A' to 'BBB'). The B2 bond is currently being written down as a result of monthly losses. Over the past three months, the average monthly loss has been $128,000. At this rate, the B2 bond ($4.56 million), which provides the B1 bond with 11.7% credit enhancement, will be entirely written down in about 36 months. Once the B2 bond is gone, the B1 bond will begin taking losses. 60 day delinquencies are at a recent program high of 25%, a portion of which comprises foreclosures and REO which represent 6.5% of the portfolio.

Fitch is downgrading one bond from the series 1999-HE3 transaction: the most subordinate B3 bond (from 'CC' to 'C'). The B4 bond which provided CE for the B3 bond has been depleted. The three month average monthly loss has been about $30,000. At this rate, the B2 bond ($6.2 million), which provides the B1 bond with 9.9% credit enhancement, will be entirely written down in about 39 months. The 60 delinquencies represent 25.41% of the mortgage pool, foreclosures and REO represent 4.17% and 0.99%, respectively.

The mortgage loans consist of fixed- and adjustable-rate, closed-end home equity mortgage loans, secured by residential properties which have original terms to maturity of 15 or 30 years.

Fitch's Distressed Recovery (DR) ratings, introduced in April 2006 across all sectors of structured finance, are designed to estimate recoveries on a forward-looking basis while taking into account the time value of money. For more information on Distressed Recovery ratings, see the full report ('Structured Finance Distressed Recovery Ratings'), which is available on the Fitch Ratings web site at www.fitchratings.com.

Further information regarding current delinquency, loss, and credit enhancement statistics is available on the Fitch Ratings web site at www.fitchratings.com. Fitch will continue to monitor these deals.

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.