Last week\'s residential mortgage ratings actions
By SAM GARCIA
2/22/2002

Fitch Ratings rated classes C-BASS CBO III, Ltd.'s and its co-issuer C-BASS CBO III Corp.'s floating-rate notes at 'AAA' to 'BBB', based upon the capital structure of the transaction, the quality of the collateral, and the overcollateralization and interest coverage tests provided for within the indenture. The proceeds of the notes will be used to purchase a static investment portfolio consisting primarily of approximately 76% of residential mortgage-backed securities (61% First Lien RMBS, 14% Manufactured Housing), as well as approximately 18% in asset-backed securities, 4% in commercial asset-backed securities, and approximately 2% in collateralized debt obligations. The investment manager, C-BASS, will purchase all investments for the portfolio on behalf of the co-issuers, which are special purpose companies incorporated under the laws of the Cayman Islands and Delaware, respectively. C-BASS, which has been acquiring and managing mortgage assets since 1996, is a joint venture among 'AA+' rated Mortgage Guaranty Investment Corp. (MGIC) and 'AA' rated Radian Group Inc. Each of MGIC and Radian owns a 46% interest in the company with the remaining 8% owned by C-BASS management.

Ratings on MGIC and related units were affirmed by Standard & Poor's (S&P) based on their capitalization (which is many times what S&P), membership in the Investment organization and high-quality professional reinsurance. The ratings on MGIC are based on its underlying profile, which has demonstrated extremely strong earnings and very to extremely strong capitalization for many years. S&P provided the following major ratings factors:

* Market position
* Operating performance
* Capital
* Financial flexibility
* Strategy
* Lack of market dominance and monoline structure
* Industry conditions

S&P expects MGIC to use its extremely strong capitalization to continue to underwrite aggressively in the bulk market, an activity that will boost reported earnings. In addition, the refinance boom of 2001 will have been largely exhausted in 2002, lowering expenses. Extra losses, particularly in subprime acceptances, will be an offset, but MGIC could increase earnings moderately in 2002 if the economy does not decline further.

Article © MortgageDaily.com All Rights Reserved