Fitch Upgrades 1 & Affirms 4 Classes of E*Trade ABS CDO I

NEW YORK--()--Fitch Ratings has upgraded one class and affirmed four classes of notes issued by E*Trade ABS CDO I, Ltd. (E*Trade I) as follows:

--$1,735,202 class A-2 notes upgraded to 'BBsf' from 'Bsf', Outlook revised to Stable from Negative;
--$25,000,000 class B notes affirmed at 'Csf';
--$11,967,577 class C-1 notes affirmed at 'Csf';
--$5,030,929 class C-2 notes affirmed at 'Csf';
--$5,389,617 composite securities affirmed at 'Csf'.

SENSITIVITY/RATING DRIVERS

This review was conducted under the framework described in the report 'Global Rating Criteria for Structured Finance CDOs' using the Structured Finance Portfolio Credit Model (SF PCM) for projecting future default levels for the underlying portfolio. These default levels were then compared to the breakeven levels generated by Fitch's cash flow model of the CDO under various default timing and interest rate stress scenarios, as described in the report 'Global Criteria for Cash Flow Analysis in CDOs', for the class A-2 notes.

Since the last rating action in February 2012, the credit quality of the collateral has remained relatively stable with approximately 13% of the portfolio downgraded a weighted average of 4.7 notches. Approximately 91.7% of the portfolio has a Fitch derived rating below investment grade and 85.7% has a rating in the 'CCC' rating category or lower, compared to 92.4% and 75%, respectively, at last review.

The upgrade and Outlook revision on the class A-2 notes is due to continued amortization of the notes increasing credit enhancement to more than offset the negative migration in the underlying portfolio. The class has received approximately $4.9 million in principal repayment, or 73.7% of its previous balance, since the last review leaving 3.5% of the original balance outstanding. The portfolio continues to amortize and the class A-2 notes are supported by investment grade collateral, with cushion to protect against principal proceeds currently leaking to pay part of class B accrued interest.

The class B and C notes and the composite securities are undercollateralized, indicating default remains inevitable for these classes at or prior to maturity.

E*Trade I is a static structured finance collateralized debt obligation (SF CDO) that closed on Sept. 26, 2002. The initial portfolio was selected by E*Trade Global Asset Management, Inc. and is now monitored by Vertical Capital, LLC. The portfolio is comprised of residential mortgage-backed securities (56.3%), SF CDOs (29.1%), commercial mortgage-backed securities (11.9%) and commercial asset-backed securities (2.6%) from 2001 and 2002 vintage transactions.

Additional information is available at www.fitchratings.com. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

The information used to assess these ratings was sourced from the asset manager, periodic servicer reports, note valuation reports, and the public domain.

Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (June 6, 2012)
--'Global Rating Criteria for Structured Finance CDOs' (Oct. 3, 2012)
--'Global Criteria for Cash Flow Analysis in CDOs' (Sept. 13, 2012)
--'Criteria for Interest Rate Stresses in Structured Finance Transactions' (Jan. 25, 2013).

Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679923
Global Rating Criteria for Structured Finance CDOs
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=690203
Global Criteria for Cash Flow Analysis in CDOs
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=688518
Criteria for Interest Rate Stresses in Structured Finance Transactions
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=695535

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Contacts

Fitch Ratings
Primary Surveillance Analyst:
Erika Tsang, CFA, +1-212-908-0817
Director
Fitch, Inc.
One State Street Plaza
New York, NY 10004
or
Committee Chairperson:
Alina Pak, CFA, +1-312-368-3184
Senior Director
or
Media Relations:
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com

Sharing

Contacts

Fitch Ratings
Primary Surveillance Analyst:
Erika Tsang, CFA, +1-212-908-0817
Director
Fitch, Inc.
One State Street Plaza
New York, NY 10004
or
Committee Chairperson:
Alina Pak, CFA, +1-312-368-3184
Senior Director
or
Media Relations:
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com