Fitch Downgrades 1 & Affirms 3 Classes of Diversified Asset Securitization Holdings III, L.P.

CHICAGO -- Fitch downgrades one and affirms three classes of notes issued by Diversified Asset Securitization Holdings III, L.P (DASH III).These rating actions are the result of Fitch's review process and are effective immediately:

--$96,772,652 class A-1L notes affirmed at 'AA';

--$30,000,000 class A-3L notes downgraded to 'CCC/DR3' from 'B/DR1'; and removed from Rating Watch Negative;

--$22,217,521 class B-1L notes remain at 'C/DR6'.

Diversified Asset Securitization Holdings III, L.P is a cash collateralized debt obligation (CDO) that was originated and managed by Asset Allocation & Management, LLC (AAMCO) in June 2001. TCW Asset Management Co. (TCW) became the substitute asset manager for AAMCO in October 2002. The portfolio is composed of residential mortgage backed securities (RMBS), asset-backed securities (ABS), commercial mortgage-backed securities (CMBS), and real estate investment trusts (REITs). Included in this review, Fitch conducted cash flow modeling for various default timing, interest rate scenarios, and prepayment assumptions to measure the breakeven default rates going forward relative to the minimum cumulative default rates required for the rated liabilities.

Fitch's rating actions reflect considerable credit quality deterioration within the portfolio. Since the last rating action on April 20, 2007, the recovery estimates on the distressed portion of the portfolio have decreased. According to Fitch's analysis, the rated liabilities are approximately $21M undercollateralized. As of the most recent trustee report dated July 28, 2007, the class A overcollateralization (OC) ratio is 99.84% versus 99.4% as of March 28, 2007 and below its trigger level of 105%. The class B OC ratio has decreased to 85.87 from 87.3% in the same period of time. It remains below its covenant of 101.5%. The interest coverage (IC) test is currently at 120.53% which is below the trigger of 122%. A substantial portion of the collateral represents fixed coupon assets and, with a scheduled decline in the interest rate swap notional over the life of the deal, the deal has been exposed to the risk of a rising 3-month LIBOR. The transaction is in the amortization period and while the senior notes are de-leveraging, the class B-1L notes continue to be cut off from interest.

The ratings of the classes A-1L, A-2, and A-3L notes address the likelihood that investors will receive full and timely payments of interest, as per the governing documents, as well as the stated balance of principal by the legal final maturity date. The rating of the class B-1L notes addresses the likelihood that investors will receive ultimate and compensating interest payments, as per the governing documents, as well as the stated balance of principal by the legal final maturity date.

Fitch will continue to monitor and review this transaction for future rating adjustments. Additional deal information and historical data are available on the Derivative Fitch web site at www.derivativefitch.com. For more information on the Fitch VECTOR Model, see 'Global Rating Criteria for Collateralised Debt Obligations,' dated Oct. 18, 2006 and also available at www.derivativefitch.com.

Fitch's Distressed Recovery (DR) ratings, introduced in April 2006 across all sectors of structured finance, are designed to estimate recoveries on a forward-looking basis while taking into account the time value of money. For more information on Distressed Recovery ratings, see the full report ('Structured Finance Distressed Recovery Ratings'), which is available on the Fitch Ratings web site at www.fitchratings.com.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.derivativefitch.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site. Fitch means Fitch, Inc., Fitch Ratings, Ltd. and their subsidiaries including Derivative Fitch, Inc. and Derivative Fitch Ltd. and any successor or successors thereto.