Class B of American Residential HE Loan Trust, series 1998-1, has been placed on Rating Watch Negative by Fitch Ratings.On the August distribution date, a principal prepayment reduced the pool balance by about $605,000, approximately 11% of the outstanding balance, Fitch reported. The prepayment was applied as a reduction of overcollateralization instead of a principal payment to the rated classes, and as a result, available credit enhancement was depleted and class B realized a loss of $56,320. Fitch said it believes the loss "would not have occurred had the distribution of principal been made in accordance with the terms of the pooling and servicing agreement," adding that the trustee, Deutsche Bank, is reviewing the transaction. The rating agency said class B will be downgraded if it is determined that the payment was made correctly, and affirmed if the payment was made in error.

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