The ratings on four classes of the Merit Securities Corp. series 12-1 manufactured housing securitization are being reviewed for possible downgrade by Moody's Investors Service.The affected classes of the collateralized bond obligation are: 6.45% class 1-A-3, 6.88% class 1-M-1, 7.35% class 1-M-2, and 7.88% class 1-B. Moody's said the review was prompted by the weaker-than-anticipated performance of the MH loans that make up the collateral pool. As of February, cumulative losses exceeded 9%. "Moreover, the high cumulative losses and insufficient excess spread have caused overcollateralization to erode," the rating agency said. "Based on the weak performance, the rating changes could be significant." Merit is a wholly owned subsidiary of Dynex Capital Inc., Glen Allen, Va. The loans that make up the collateral pool are being serviced by Origen Financial.

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