Class M-3 of NovaStar Mortgage Funding Trust series 2001-1 has been placed under review for possible downgrade by Moody's Investors Service.Moody's also placed six classes from three NovaStar deals under review for possible upgrade. The negative watchlist placement was attributed to low credit enhancement levels given the projected losses on the underlying pools. "The transaction has taken losses, and pipeline loss could cause eventual erosion of the overcollateralization," the rating agency said. The transactions consist of subprime first-lien adjustable- and fixed-rate loans originated and serviced by NovaStar Mortgage Inc.

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