The franchise loan sector, which saw no traditional loan pools securitized in 2005, is expected to begin a slow turnaround in 2006, with stabilizing loan pools and improvements in the underlying franchise business operations. But it will be a hard-won recovery, predict analysts from Fitch Ratings. They are maintaining a negative outlook on the sector as they expect more credit downgrades versus upgrades going forward.

In most franchise transactions, said Fitch, the trusts rely heavily on the servicer to resolve defaulted loans in a timely and efficient manner in order to preserve the senior notes' credit quality.

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