Four classes of notes issued by Duke Funding High Grade II-S/EGAM I Ltd., a collateralized debt obligation used to acquire mortgage-backed securities, have been downgraded by Fitch Ratings and placed on Rating Watch Negative.The downgraded notes were as follows: class C and series 2 class C, from A to BB; and class D and series 2 class D, from BBB to B. Also placed on Rating Watch Negative were classes B1, series 2 class B1, class B2, and series 2 class B2. The downgrades were attributed to a reduction in credit enhancement from realized losses and a drop in the market value of the underlying assets. The watchlist placements were based on concerns about the continued availability of repo funding at current terms, the rating agency said. Fitch said the proceeds of the notes are used to buy a diversified portfolio of triple-A rated, primarily private-label residential MBS.

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