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Rating Action:

Moody's downgrades $340 million of Subprime RMBS issued by CIT and Finance America in 2003 and 2004

24 Mar 2011

New York, March 24, 2011 -- Moody's Investors Service has downgraded the ratings of 23 tranches and confirmed the ratings of two tranches from 5 Subprime deals issued by CIT and Finance America. The collateral backing these deals primarily consists of first-lien, fixed and adjustable rate Subprime residential mortgages.

RATINGS RATIONALE

The actions are a result of deteriorating performance of Subprime pools securitized before 2005. Although most of these pools have paid down significantly, the remaining loans are affected by the housing and macroeconomic conditions that remain under duress.

The actions reflect Moody's updated loss expectations on Subprime pools securitized before 2005.

The principal methodology used in these ratings was "Pre-2005 US RMBS Surveillance Methodology" published in January 2011.

Moody's final rating actions are based on current ratings, level of credit enhancement, collateral performance and updated pool-level loss expectations relative to current level of credit enhancement. Moody's took into account credit enhancement provided by seniority, cross-collateralization, excess spread, time tranching, and other structural features within the senior note waterfalls.

The above mentioned approach "Pre-2005 US RMBS Surveillance Methodology" is adjusted slightly when estimating losses on pools left with a small number of loans to account for the volatile nature of small pools. Even if a few loans in a small pool become delinquent, there could be a large increase in the overall pool delinquency level due to the concentration risk. To project losses on pools with fewer than 100 loans, Moody's first estimates a "baseline" average rate of new delinquencies of 11% for pools originated and securitized before 2005. The baseline rate is generally higher than the average rate of new delinquencies for larger pools. Once the baseline rate is set, further adjustments are made based on 1) the number of loans remaining in the pool and 2) the level of current delinquencies in the pool. The fewer the number of loans remaining in the pool, the higher the volatility in performance. Once the loan count in a pool falls below 75, the rate of delinquency is increased by 1% for every loan less than 75. For example, for a pool with 74 loans from the 2004 vintage, the adjusted rate of new delinquency would be 11.11%. In addition, if the current delinquency level in a small pool is low, future delinquencies are expected to reflect this trend. To account for that, the rate calculated above is multiplied by a factor ranging from 0.85 to 2.25 for current delinquencies ranging from less than 10% to greater than 50% respectively. Delinquencies for subsequent years and ultimate expected losses are projected using the approach described in the methodology publication.

The primary source of assumption uncertainty is the current macroeconomic environment, in which unemployment levels remain high, and weakness persists in the housing market. Overall, Moody's assumes a further 5% decline in home prices with stabilization in late 2011, accompanied by continued stress in national employment levels through that timeframe.

For more information please see www.moodys.com.

Moody's Investors Service received and took into account one or more third party due diligence reports on the underlying assets or financial instruments in this transaction and the due diligence reports had a neutral impact on the rating.

Complete rating actions are as follows:

Issuer: CIT Home Equity Loan Trust 2003-1

Cl. A-4, Downgraded to A3 (sf); previously on Apr 8, 2010 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. A-5, Downgraded to A3 (sf); previously on Apr 8, 2010 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. A-6, Downgraded to A2 (sf); previously on Apr 8, 2010 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. M-1, Downgraded to B1 (sf); previously on Apr 8, 2010 Aa2 (sf) Placed Under Review for Possible Downgrade

Cl. M-2, Downgraded to Ca (sf); previously on Apr 8, 2010 Baa2 (sf) Placed Under Review for Possible Downgrade

Cl. B, Downgraded to C (sf); previously on Apr 8, 2010 B2 (sf) Placed Under Review for Possible Downgrade

Issuer: Finance America Mortgage Loan Trust 2003-1

Cl. M-1, Downgraded to A2 (sf); previously on Apr 8, 2010 Aa2 (sf) Placed Under Review for Possible Downgrade

Cl. M-2, Downgraded to Ba1 (sf); previously on Apr 8, 2010 A2 (sf) Placed Under Review for Possible Downgrade

Issuer: Finance America Mortgage Loan Trust 2004-1

Cl. M2, Downgraded to B3; previously on Apr 8, 2010 Aa2 Placed Under Review for Possible Downgrade

Cl. M3, Downgraded to Ca; previously on Apr 8, 2010 Aa3 Placed Under Review for Possible Downgrade

Cl. M5, Downgraded to Ca; previously on Apr 8, 2010 Ba1 Placed Under Review for Possible Downgrade

Cl. M6, Downgraded to C; previously on Apr 8, 2010 Ba3 Placed Under Review for Possible Downgrade

Cl. M7, Downgraded to C; previously on Apr 8, 2010 Ca Placed Under Review for Possible Downgrade

Issuer: Finance America Mortgage Loan Trust 2004-2

Cl. M-1, Downgraded to A1 (sf); previously on Aug 13, 2004 Assigned Aa1 (sf)

Cl. M-2, Downgraded to Ba2 (sf); previously on Apr 8, 2010 Aa3 (sf) Placed Under Review for Possible Downgrade

Cl. M-3, Downgraded to B2 (sf); previously on Apr 8, 2010 A3 (sf) Placed Under Review for Possible Downgrade

Cl. M-4, Downgraded to Ca (sf); previously on Apr 8, 2010 Baa2 (sf) Placed Under Review for Possible Downgrade

Cl. M-5, Downgraded to Ca (sf); previously on Apr 8, 2010 Ba1 (sf) Placed Under Review for Possible Downgrade

Cl. M-6, Downgraded to Ca (sf); previously on Apr 8, 2010 B1 (sf) Placed Under Review for Possible Downgrade

Cl. M-7, Confirmed at Ca (sf); previously on Apr 8, 2010 Ca (sf) Placed Under Review for Possible Downgrade

Issuer: Finance America Mortgage Loan Trust 2004-3

Cl. M-1, Downgraded to Ba1 (sf); previously on Apr 8, 2010 Aa1 (sf) Placed Under Review for Possible Downgrade

Cl. M-2, Downgraded to Caa3 (sf); previously on Apr 8, 2010 A2 (sf) Placed Under Review for Possible Downgrade

Cl. M-3, Downgraded to Ca (sf); previously on Apr 8, 2010 Baa3 (sf) Placed Under Review for Possible Downgrade

Cl. M-4, Downgraded to Ca (sf); previously on Apr 8, 2010 Ba1 (sf) Placed Under Review for Possible Downgrade

Cl. M-5, Downgraded to Ca (sf); previously on Apr 8, 2010 B3 (sf) Placed Under Review for Possible Downgrade

Cl. M-6, Confirmed at Ca (sf); previously on Apr 8, 2010 Ca (sf) Placed Under Review for Possible Downgrade

A list of these actions including CUSIP identifiers may be found at:

Excel: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF240465

A list of updated estimated pool losses and sensitivity analysis is being posted on an ongoing basis for the duration of this review period and may be found at:

Excel: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF237255

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, public information, confidential and proprietary Moody's Investors Service information, and confidential and proprietary Moody's Analytics information.

Moody's Investors Service considers the quality of information available on the issuer or obligation satisfactory for the purposes of maintaining a credit rating.

Moody's adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

New York
Jayesh Joseph
Associate Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

San Francisco
Eric Fellows
VP - Senior Credit Officer
Structured Finance Group
Moody's FIS Domestic Sales Office - San Francisco CA
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's downgrades $340 million of Subprime RMBS issued by CIT and Finance America in 2003 and 2004
No Related Data.
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