Interestingly, Moody's Investors Service has reported that in the second half of 1999, when Conseco Corp. guaranteed the outstanding bonds of Green Tree Financial Corp. (which had become Conseco Finance Corp.), the asset-backed market saw its first instance of significant bond upgrades due to an upgrade of the credit enhancer.

Because of that specific credit enhancement upgrade, 56 subordinated tranches were upgraded, Moody's said.

However, following the downgrade on Conseco's long-term senior debt rating to Ba1 from Baa3 in April of this year, Moody's downgraded 59 subordinate classes from Conseco's manufactured housing, home-improvement and home-equity deals.

In terms of the trends, for the second half of 1999 (July 1999 to Dec. 1999), poor credit performance was primary cause for most of the 47 downgrades.

"That's something that we started seeing in 1997, and it started growing in 1998; and in 1999, most of those downgrades were because of poor asset performance," said Joseph Snailer, a vice president and senior analyst at Moody's.

Prior to 1997, the majority of downgrades were the results of credit enhancer downgrades. One would expect that trend to temporarily reassert itself when the market tallies up the Conseco downgrades for first half of 2000.

However, anomalies aside, Snailer expects that, going forward, most ratings downgrades and upgrades will reflect asset performance quality, as opposed to the flux in rating of the credit enhancer.

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