The class B notes issued by HarbourView CDO III Ltd., a collateralized debt obligation that includes mortgage-backed securities, has been downgraded from CCC to C by Fitch Ratings.Fitch also affirmed the rating on the class A notes. The rating agency said the deal has been technically in default since March 2005, because the principal balance of the collateral debt securities fell below the aggregate balance of the rated notes. "Fitch has determined that the class B noteholders will continue to experience an impairment of principal and interest over the remaining life of the transaction and that the current ratings of the class B notes no longer reflect the current risk to noteholders," Fitch said. HarbourView III is composed of residential MBS, asset-backed securities, commercial MBS, real estate investment trusts, CDOs, and corporate debt.

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