Moody's Investors Service said in a report last week that despite concerns about subprime mortgage deterioration spilling over, the credit card sector's performance is still within the rating agency's expectations. In fact, Moody's expects no near term impact on ratings for credit card issuers and ABS.

The rating agency also noted that increasing delinquencies and defaults in subprime mortgages, particularly in 2006 originations, have drawn considerable attention lately.

"The increased scrutiny of the subprime mortgage sector has raised questions among market participants as to whether other asset classes would be affected," the report said. "The credit card sector, in particular, has been the focus for many of those on the lookout for signs that deterioration will extend beyond the subprime mortgage sector."

Although asset quality is expected to erode, according to Moody's senior vice president William Black, the rating agency does not expect the deterioration to be dramatic because of "the continuation of reasonably strong employment and income trends."

Moody's added that delinquencies as well as net charge-offs should move back toward, but probably not go over, the 2005 pre-bankruptcy legislation levels. However, the economy remains the wild card. The report said that if it slows faster than expected, then the pace of the credit card sector's deterioration could accelerate.

(c) 2007 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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