Option One-Linked MBS Classes Downgraded

Nine tranches from several deals with loans originated by Option One Mortgage Corp. have been downgraded by Moody's Investors Service, and four have been placed under review for possible downgrade. The transactions were issued from 2002 to 2004 by Option One Mortgage Loan Trust, Asset Backed Funding Corp., Merrill Lynch Mortgage Investors Trust, and MASTR Asset Backed Securities Trust. In addition to the negative rating actions, Moody's upgraded four tranches and placed two under review for possible upgrade. "Although the deals' losses are performing within the area of original expectations, the subordinate certificates are being downgraded and placed on review for possible downgrade based on existing credit enhancement levels relative to the current projected losses on the underlying pools," Moody's said. "Overcollateralization amounts in most of the transactions are currently below their targets, and pipeline losses could cause further depletion of the overcollateralization and put pressure on the most subordinate tranches." The transactions consist primarily of first-lien, adjustable- and fixed-rate subprime mortgage loans. Moody's can be found online at http://www.moodys.com.