Fitch Takes Negative Actions on 9 First Marblehead Student Loan ABS Deals

NEW YORK, Feb 06, 2009 (BUSINESS WIRE) -- STU | Quote | Chart | News | PowerRating -- Fitch Ratings has downgraded the ratings on 12 classes from the National Collegiate Student Loan Trust (NCSLT) 2006-1, 2006-2, and 2007-1 asset-backed securities (ABS) transactions issued by the First Marblehead Corporation (FMD), and places the ratings of three classes on Rating Watch Negative. Ten classes from these three trusts are either placed or remain on Rating Watch Negative. In addition, Fitch places the ratings of 25 classes from the NCSLT 2005-1, 2005-2, 2005-3, 2006-3, 2006-4 trusts on Rating Watch Negative, with 25 classes remaining on Rating Watch Negative where they were placed on Sept. 24, 2008. (See the full list of rating actions at the end of this release.)

The downgrades and Rating Watch Negative actions reflect default rates that continue to exceed Fitch's initial expectations and Fitch's ongoing concerns regarding the level of recoveries on defaulted loans in an environment post The Education Resources Institute (TERI). (TERI is the guarantor of the loans in the NCSLT transactions.) As a result of the higher than expected defaults, amounts held in the TERI funds pledged to certain older trusts to cover losses have been depleted sooner than expected. In addition, the TERI bankruptcy remains unresolved, clouding the recovery picture further. Although the TERI bankruptcy proceedings are ongoing, FMD has commenced collection activities on defaulted student loans financed by each trust.

Fitch's analysis focuses on further refining default levels and loss timing projections for each pool. In addition, Fitch will consider sensitivity analysis with regard to various recovery levels and timing patterns including an analysis of the availability of funds held in escrow and the impact of the suspension of 'rehab' loan sales which formerly resulted in near-term recoveries on re-performing loans.

Fitch will continue to monitor the transactions closely.

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