Fitch Places Wachovia Auto Owner Trust Series 2006-A on Rating Watch Negative

Through month 17 (the October collection period), total delinquencies stood at 3.58% and CNL were at 1.42%. Fitch has noted that the performance in both delinquency and CNL have exhibited weaker trends in the recent months. Furthermore, a CNL performance-based CNL trigger was breached earlier in the year preventing the transaction's payment waterfall from switching from a sequential payment structure to a pro-rata payment structure. Had the trigger not been breached, the switch would have occurred only after the class A-2 notes were paid off, which at the time were still outstanding. Despite current performance, cash flow available to service the outstanding debt in the transaction currently continues to be adequate and credit enhancement (CE) continues to build in the transaction. The reserve account and overcollateralization (OC) are at their target levels.

Fitch's analysis of the transaction incorporated stresses of the revised base case CNL assumptions, the timing of the remaining losses and various prepayment assumptions. Even though current loss performance is considerably worse than originally expected, CE is expected to continue to build. However, the continued negative trends in both delinquency and CNL is concerning and warrants the placement of both classes of the notes on rating watch.

The company has indicated that the reasons for the weaker-than-expected performance of 2006-A may be due to several factors including: a decision to originate lower tier credit loans relative to prior transactions issued by the company during the integration of the legacy Westcorp platform, continued geographic expansion by Wachovia into certain markets at the time of originating the 2006-A collateral; and lower than originally expected recovery rates. The company indicated that losses in certain geographical areas, particularly New York, have been higher than anticipated.

Wachovia has indicated that they are currently conducting a review of the defaulted pool. Through November, the company has repurchased approximately $1.05 million worth of loans for which title had not been received within 180 days of closing (or subsequent closing with respect to loans added in the prefunding period). In addition, approximately $400,000 worth of loans have been repurchased to date in order to comply with various representations and warranties in the deal.

Fitch will continue to closely monitor the performance of this transaction over the next three to six months, and will take rating action within that time period to resolve the Rating Watch Negative status.

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