Initially, news of Kensington Mortgages' non-conforming RMBS, Residential Mortgage Securities tapping its reserve accounts (see ASR 7/4/05) was met with no immediate concern from Fitch Ratings. Just one month later, the rating agency announced that it has affirmed 90 tranches of eight RMS transactions, as well as upgrading one tranche.

Using its default and cashflow models Fitch reported that, following the RMS 15 and 16 reserve draws, the mortgage pools backing these transactions have again been fully re-modeled. The portfolios backing RMS 17 and RMS 18 have also been re-modeled assuming a higher level of arrears for these transactions, relative to their vintage peer group, which could ultimately see draws on the reserve funds in both transactions, according to Fitch.

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