Fitch Ratings, Chicago, has downgraded the $12.6 million Class C notes and $12.5 million preference shares SFA ABS III Ltd., a collateralized debt obligation managed by Structured Finance Advisors.The deal closed on June 25, 2002, and is composed of 71.7% residential mortgage-backed securities, 18.2% of asset-backed securities, 6.6% other CDOs and 3.5% commercial mortgage-backed securities. The Class C notes were cut to "B" from "BB-" while the preference shares were dropped from "CC" to "C." According to a statement from Fitch, "These downgrades are due to the lower credit quality of the collateral and declining coverage on the subordinate notes. Since last review, the percentage of the assets 'CCC+' and below has increased to 23.6%, as of the Jan. 31, 2006 trustee report, from 17.8%, as of the July 29, 2005 trustee report, and the weighted average rating factor has increased to 25.7 from 23.7, above its trigger of 17.0. In addition, the Class C overcollateralization test has declined to 101.4% from 102.5%, below its trigger level of 102.3%. The preference shares are not expected to receive any further distributions." More information is available at http://www.fitchratings.com.

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