Fitch Affirms Saxon's U.S. Residential Servicer Ratings

NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed Saxon Mortgage Services, Inc.'s (SMSI) U.S. residential servicer ratings as follows:

--Residential primary servicer rating for subprime product at 'RPS2+';

--Residential special servicer rating at 'RSS2+'.

The rating actions reflect SMSI's strong servicing management team, robust analytical capabilities, solid control environment, and focused default management practices. The special servicer rating is based on SMSI's established processes for managing and liquidating non-performing loans and real estate owned (REO) assets. The ratings also reflect the financial condition of SMSI's parent, Morgan Stanley, rated 'A' with a Stable Rating Outlook by Fitch. In addition, the ratings were determined in accordance with Fitch's criteria 'Rating U.S. Residential Mortgage Servicers' and 'Global Rating Criteria for Structured Finance Servicers'.

SMSI's servicing operations are located in Fort Worth and Irving, TX. As of April 30, 2010, the company was servicing over 235,000 loans totaling $38.9 billion, a decrease from 310,000 loans totaling $51.3 billion as of April 30, 2009. A significant portion of the decrease is due to SMSI's strategy of selling the mortgage servicing rights or entering into sub-servicing arrangements for its legacy subprime portfolio in order to free up capacity to take on special sub-servicing of distressed assets.

Since Fitch's prior review, SMSI implemented a proprietary risk-based scoring model to drive collection call campaigns and upgraded its dialer and 'best time to call' software, resulting in increased right party contact rates. SMSI also expanded its portfolio manager approach to focus on consistent performance and compliance with investor requirements across the servicing platform. Portfolio managers provide a single point of contact for investors and are responsible for directing late stage default management for assigned portfolios. SMSI's analytics group continues to refine the company's proprietary performance expectation models that forecast delinquency, liquidation, loss severity, and cash flow at the loan and portfolio levels, and its proprietary decision engines that are utilized for both HAMP and non-HAMP modifications, foreclosure bidding instructions, and determination of principal and interest advance recoverability.

Fitch believes that SMSI continues to provide a scalable servicing platform with the appropriate management, technology, procedures, and controls in place to support its current servicing portfolio. However, Fitch will continue to monitor SMSI's servicing performance as the company implements its servicing initiatives in this high delinquency environment.

Fitch rates residential mortgage primary, master, and special servicers on a scale of 1 to 5, with 1 being the highest rating. Within some of these rating levels, Fitch further differentiates ratings by plus (+) and minus (-) as well as the flat rating. For more information on Fitch's residential servicer rating program, please see Fitch's report 'Rating U.S. Residential Mortgage Servicers', dated Nov. 29, 2006 and 'Global Rating Criteria for Structured Finance Servicers' dated Sept. 30, 2009, which are available on the Fitch Ratings web site at 'www.fitchratings.com'.

Additional information is available at 'www.fitchratings.com'.

Related Research:

Global Rating Criteria for Structured Finance Servicers

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=469366

Rating U.S. Residential Mortgage Servicers

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=302964

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