Nine classes of certificates from five deals issued by NovaStar Mortgage Funding Trust in 2003 and 2004 have been downgraded by Moody's Investors Service.The actions were based on an analysis of the credit enhancement provided by subordination, overcollateralization, excess spread, and mortgage insurance relative to the expected loss, Moody's said. Four of the deals have already stepped down, and losses have begun to erode the overcollateralization while reducing credit enhancement provided by subordination, leaving the rated bonds less protected, the rating agency said. The deals are backed by fixed- and adjustable-rate subprime mortgage loans.

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