With the integration of its servicing platform into Washington Mutual's Northridge completed, Long Beach Mortgage collateral should begin performing more consistently, according to Banc One Capital Markets. But even with improved performance, expected supply increases in 2003 is seen pressuring spreads.

With roughly a six-month lag period between performance improvements and investor comfort in the improvements, Banc One's Glenn Schultz notes that investors have not yet recognized the improved performance in the Long Beach portfolio. Now, with delinquencies and losses continuing lower from last December through June 2002, Long Beach's collateral may start to outperform industry averages.

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