Unbeknownst to the ratings agencies, trustees, and investors, franchise-lender Enterprise Mortgage Acceptance Corp. (EMAC) had been providing financing on an ongoing basis to certain distressed borrowers that might have otherwise been in default, thus skewing the actual performance of its servicing portfolio and the viability of its borrowers, sources said. The extent of the impact is unclear at this point.

"Essentially, they were making these loans so that their servicing portfolio looked favorable to the securitization market, like rating agencies and investors, so that they could keep securitizing, while all the while, they pretty much had distressed companies in the servicing portfolio," an investor told ASR.

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