Fitch Takes Actions On Delta Funding Home Equity Loan A-B Transactions

NEW YORK–(BUSINESS WIRE)–Feb. 24, 2003

Fitch Ratings has performed a review of Delta Funding Corporation’s home equity loan asset-backed transactions. Based on the review, the following rating actions have been taken:

Delta Funding Home Equity Loan Trust 1997-2:

– Classes A7, A5-F, A6-F affirmed at ‘AAA’;
– Class M-1 affirmed at ‘AA’;
– Class M-2 affirmed at ‘A+’;
– Class B-3, rated ‘BBB’ is placed on Rating Watch Negative.

Delta Funding Home Equity Loan Trust 1997-3 Group F:

— Classes A5-F, A6-F affirmed at ‘AAA’;

— Class M-1F affirmed at ‘AA+’;

— Class M-2F affirmed at ‘A+’;

— Class B1-F downgraded to ‘CCC’ from ‘BBB’.

Delta Funding Home Equity Loan Trust 1997-3 Group A:

— Class M2-A affirmed at ‘A’;

— Class B1-A downgraded to ‘BB-’ from ‘BBB’ and placed on Rating

Watch Negative.

Delta Funding Home Equity Loan Trust 1998-1 Group 1:

— Classes A3-F - A6-F affirmed at ‘AAA’;

— Class B1-F, rated ‘BBB’, is placed on Rating Watch Negative.

Delta Funding Home Equity Loan Trust 1998-1 Group 2:

— Class M2-A affirmed at ‘A+’;

Delta Funding Home Equity Loan Trust 1998-2 Group 1:

— Classes A4-F - A6-F affirmed at ‘AAA’;

— Class M-1F affirmed at ‘AA’;

— Class M-2F affirmed at ‘A’;

— Class B1-F affirmed at ‘BBB’.

Delta Funding Home Equity Loan Trust 1998-2 Group 2:

— Class M1-A affirmed at ‘AA’;

The negative rating actions are a result of adverse selection, low pool factors, high delinquencies, and credit enhancement deterioration.

The Delta Funding 1997-3 Group I, class B1-F has been downgraded to ‘CCC’ from ‘BBB’ due to insufficient amounts of excess spread and overcollateralization, causing the bonds to experience principal write downs.

Additionally, in Fitch’s review, the Delta Funding 1998-2 Group II, class B1-A, after taking a write down, was not properly reimbursed. Fitch expects this to be corrected on the next distribution date.

The structure in these deals allow for the excess spread to be crossed between the groups at the certificate loss level. In addition, if bonds were to take a principal write down, they have the ability to be written back up.

Fitch will continue to closely monitor these deals.

Further information regarding current delinquency, loss, and credit enhancement statistics is available on the Fitch Ratings web site at ‘www.fitchratings.com’.