Five classes from two securitizations of Merit Securities Corp. manufactured housing contracts have been downgraded by Fitch Ratings.The downgrades were as follows: series 13, class M-1, from BBB-plus to BBB-minus, class M-2, from BB-plus to B, and class B-1, from B-plus to C; and series 12-1, class M-2, from BBB-minus to BB-minus, and class B-1, from BB-minus to CCC. In addition, the ratings on four other classes in the two deals were affirmed. The downgrades were attributed to the poor performance of the collateral pools. About $10.1 million in overcollateralization remains for the series 12-1 classes, and "there is very little monthly excess spread to help cover losses," the rating agency said. For series 13, overcollateralization was exhausted in November 2003, and there is no monthly excess spread. "The manufactured housing industry is experiencing its worst downturn ever," Fitch said. "Relaxed credit standards, overbuilding by manufacturers, and the difficulties relating to servicing this unique asset have all contributed to poor performance of MH securities."

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