Fitch Downgrades 3 & Affirms 22 Classes from 5 Salomon Brothers Mtg. Securities VII Transactions

Business Wire, Feb 6, 2007

NEW YORK -- Fitch Ratings has taken rating actions on the following Salomon Brothers Mortgage Securities (SBMSI) VII, Inc. mortgage pass-through certificates:

Series 1997-HUD1

--Class A affirmed at 'AAA';

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

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

--Class B-3 affirmed at 'BBB';

--Class B-4 downgraded to 'C/DR4' from 'CCC/DR2'.

Series 1997-HUD2

--Class A affirmed at 'AAA';

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

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

--Class B-3 downgraded to 'B ' from 'BB';

--Class B-4 remains at 'C'; Distressed Recovery (DR) rating lowered to 'DR6' from 'DR3'.

Series 1999-2

--Class A affirmed at 'AAA';

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

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

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

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

--Class B-5 affirmed at 'A'.

Series 2001-UP2 Group 1

--Class AF affirmed at 'AAA';

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

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

--Class BF-3 affirmed at 'BBB';

--Class BF-4 downgraded to 'CC/DR3' from 'CCC/DR3';

--Class BF-5 remains at 'C/DR6'.

Series 2001-UP2 Group 2

--Class AV affirmed at 'AAA';

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

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

--Class BV-3 affirmed at 'BB';

--Class BV-4 remains at 'CC/DR3';

--Class BV-5 remains at 'C/DR5'.

The affirmations, affecting approximately $9.8 million of outstanding certificates, are due to credit enhancement (CE) and collateral performance generally consistent with expectations.

The negative rating actions on series 1997-HUD1, series 1997-HUD2, and series 2001-UP2 Group 1 reflect the deterioration of CE relative to consistent monthly losses.

As of the December 2006 distribution date, the CE level for the series 1997-HUD1 class B-3 has declined from 11.75% at closing to 11.06%. The original CE of 8.24% for class B-4 provided by classes B-5 through B-6 certificates has been fully depleted. At the current rate of monthly loss (net of excess spread), it is expected that losses will begin writing down the class B-3 bond in approximately 16 months. The 90-plus delinquencies represent 19.75% of the mortgage pool, and foreclosures and real estate owned (REO) represent 2.89% and 0.73%, respectively.

As of the December 2006 distribution date, the CE level for the series 1997-HUD2 class B-3 has declined from 11.53% at closing to 2.05%. The original CE of 8.77% for class B-4 provided by classes B-5 through B-6 certificates has been fully depleted. The 90-plus delinquencies represent 15.08% of the mortgage pool, and foreclosures and real estate owned (REO) represent 2.73% and 0.63%, respectively.

As of the December 2006 distribution date, the CE level for the series 2001-UP2 class BF-4 has declined from 0.35% at closing to 0.05%. The original CE of 0.20% for class BF-5 provided by class BF-6 has been fully depleted. The 90-plus delinquencies represent 3.44% of the mortgage pool, and foreclosures and real estate owned (REO) represent 0.49% and 0.61%, respectively.

The HUD transactions are collateralized by 20-30-year fixed-rate seasoned mortgage loans. Substantially all of the mortgage loans had defaulted in the past and were re-performing mortgage loans as of the closing of these securitizations. The mortgage loans were acquired from the U.S. Department of Housing and Urban Development (HUD).

The series 1999-2 and 2001-UP2 (Groups 1 and 2) comprise 15- to 30-year fixed- and adjustable-rate, fully amortizing mortgage loans. Groups 1 and 2 of the 2001-UP2 are not cross-collateralized. The Group 1 pool is further sub-divided into two sub-groups, IA and IB, which are not fully cross-collateralized, but which do in certain circumstances provide limited cross support.

The mortgage loans are being serviced by Ocwen Financial Corp., rated 'RSS2' as special servicer and 'RPS2' for subprime products, and by Regions Mortgage, rated 'RPS2-' for Alt-A and subprime products by Fitch.

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.

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.