Fitch Ratings has placed on all the notes of Eurohome Mortgages 2007-1 plc, a pan-European RMBS backed by German and Italian loans, on Rating Watch Negative.

The deal was originated by Deustche Bank AG and Deutsche Bank Mutui S.p.A.

Fitch said it is concerned with the levels of arrears and defaults seen in the Italian portfolio as well as the portion of terminated loans in the German pool.

The August 2008 investor report showed that the transaction drew 24.64% of the target amount on its reserve fund to provision for Italian loan defaults in the last quarter (cumulative defaults are 0.49% of total pool).

The draw was a result of the provisioning for defaulted loans in the Italian part of the pool, which, for the last quarter, were in the amount of €1.2 million ($1.8 million), bringing the cumulative balance of defaulted loans to 0.75% of the Italian pool or .49% of the total pool.

Loans in arrears by more than three months in the Italian pool have been increasing since close and as of June 2008, they stood at 6.02% of the Italian portfolio outstanding.

In the German portfolio, reported terminated loans represent 7.56% of the current portfolio outstanding, while loans with one or more missed payments make up 8.29% of the German portfolio outstanding. Neither of the two pools has reported any losses.

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