Fitch Ratings is warning that disparities in the alternative-A sector of the residential mortgage-backed securities market have rendered the term Alt-A nearly meaningless for investors.The rating agency said bonds issued by many sellers in the alt-A market "bear unprotected credit risks because of the implications from borrower credit, risk layering, and intangibles." Fitch maintains that the alt-A sector should be segmented into three subsectors: Prime Alt-A, Alt-A-minus, and Alt-B. "As lenders have embraced a wider credit spectrum under the alt-A banner, there is such a blurring of the original definition of alt-A that the term should hold little meaning to investors," said Cheryl Glory, co-author of a new Fitch report titled "Who Put the Alt in Alt-A?" The report is based on a study of over 71,000 alt-A loans issued by GMAC-RFC and Indy Mac Mortgage Corp. in 1999 and 2000. "The analysis of intangibles is vital to understanding the credit risk in alt-A," said the other report co-author, Sarbashis Ghosh. "An issuer's underwriting and credit standards have a great impact on pool performance." Examples of such intangibles are FICO sourcing, valuation procedures, and multiple risk layering, Fitch said. The rating agency can be found online at http://www.fitchratings.com.

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