Fitch Expects 'Resilience' From RMBS Performance.

Fitch Ratings expects the structured finance market to show resilience this year, although some sectors may remain weak.

The good news is that the mortgage sector remains the strongest performer in the structured finance marketplace.

Overall, Fitch reported that upgrades of U.S. structured finance ratings exceeded downgrades by 5.4% last year, but the upgrades were heavily concentrated among deals backed by prime credit quality residential mortgage loans.

"This contrast reflects the divergent trend between the U.S. residential mortgage-backed securities and almost all other structured finance sectors," said Claire Mezzanotte, a managing director at Fitch.

A favorable interest rate environment and home price appreciation bolstered the performance of residential MBS, Fitch said. However, these factors are likely to be less favorable going forward, according to the rating agency.

While the outlook for prime mortgages remains favorable, Fitch was more cautious in assessing other aspects of the mortgage market.

"The outlook for Alt-A securities is generally stable, but the results are expected to vary by issuer, at times significantly," the Fitch report on the structured finance outlook for 2003 said. Historically, Alt-A pools have shown a "much wider dispersion in credit performance" between issuers than for prime quality jumbo mortgage pools, Fitch said.