Fitch Affirms Saxon's Resi Servicer Ratings

2008-10-01 02:24:04 -

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

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

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

The recommended rating actions reflect SMSI's effective loan administration processes, 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 strength of SMSI's parent, Morgan Stanley, rated 'AA-' Rating Outlook Negative, by Fitch. On Sept. 9, 2008, the Federal Reserve converted Morgan Stanley to a Financial Holding Company and Morgan Stanley is now under the direct supervision of the Federal Reserve.

SMSI has been servicing subprime loans for more than 14 years and as of March 31, 2008, serviced a portfolio of over 366,000 loans with an outstanding principal balance in excess of $64 billion. The portfolio is comprised of over 83% subprime, 12% prime, 4% HELOC and 1% Alt-A product by loan volume.

Since the prior review, SMSI restructured the platform for both subprime and special servicing. In addition, there was a significant change in senior management across the servicing division in areas such as Financial Management, Servicing Operations, Loss Mitigation, Default, REO, and Special Servicing. The president also left the company in the second quarter of 2008, so the Chief Operating Officer of Morgan Stanley Home Loans took over leadership of the servicing division. Although the majority of the management team is new, they have significant collective years of industry experience.

SMSI continued to make enhancements in various servicing areas. Notably, SMSI increased staffing and training in the default areas to more effectively manage the risk of delinquencies, foreclosed loans and REO properties.

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

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.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 Ratings, New York
Stephanie Whited, 562-481-1368
Mary Kelsch, 212-908-0563
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