NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed Saxon Mortgage Services, Inc.'s (Saxon) 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 Saxon's effective default capabilities and competitive performance metrics; robust analytical capabilities; strengthened internal control environment with an increased focus on foreclosure processes; and continued strong financial support from its parent, Morgan Stanley (rated 'A/F1' with a Stable Outlook by Fitch). The rating actions incorporate the settlement agreement that Saxon entered into with the U.S. Department of Justice relating to the mortgage foreclosure protections for active duty military personnel under the Servicemembers Civil Relief Act (SCRA).
The rating actions also reflect Fitch's overall concerns for the U.S. residential servicing industry, including the ability to maintain high performance standards while addressing the rising cost of servicing and changes to industry practices, which are likely to be mandated by regulators and other parties. In addition, the ratings were determined in accordance with Fitch's criteria ' U.S. Residential and Small Balance Commercial Mortgage Servicer Rating' and 'Global Rating Criteria for Structured Finance Servicers'.
As of April 30, 2011, Saxon's servicing portfolio consisted of more than 169,300 loans totaling $29.2 billion. This included more than 71,400 subprime first and second mortgage loans totaling $11.3 billion and more than 25,300 special servicing loans totaling $4.4 billion.
Saxon's servicing operations are located in Fort Worth and Irving, TX. The company's strategy remains focused on subservicing of distressed mortgage assets. In 2010, Saxon increased its capacity through sales of mortgage servicing rights and sub-servicing arrangements for its legacy
subprime portfolio. As a result, Saxon's current infrastructure and excess capacity have positioned the company for significant growth through its pursuit of subservicing opportunities. In recent months, Saxon boarded approximately 4,000 FHA loans, in addition to approximately 8,000 subprime loans under a subservicing agreement.
Since Fitch's prior review, Saxon completed the conversion of its servicing portfolio to Lender Processing Services' MSP; developed an internal policy portal as a central point of reference for all governance, policy, and procedural related matters; converted its in-house imaging repository
to a vendor web-hosted solution to enhance its imaging tools; and implemented a reconciliation processfor all documents received for each acquisition to identify all exceptions closer to the time of boarding. The company also strengthened its internal control environment with an increased
focus on SCRA compliance monitoring and foreclosure document execution processing.
Fitch believes that Saxon continues to provide a scalable servicing platform with the management, technology, procedures, and controls in place to support its current servicing portfolio. However, Fitch will continue to monitor Saxon's servicing performance as the company implements its servicing initiatives in this high delinquency environment.
In November 2010, Fitch assigned a Negative Outlook for the entire U.S. Residential Mortgage Servicer ratings sector on increased concerns surrounding alleged procedural defects in the judicial foreclosure process. Responses to Fitch's recent survey of its rated servicers regarding internal procedures used to verify and execute foreclosure affidavits indicate that all servicers are taking this matter seriously and are continuing to work to resolve any issues uncovered. Fitch may place an individual servicer's ratings on Rating Watch Negative and/or downgrade the ratings if the servicer does not diligently and timely review its processes and take immediate corrective action to remediate any foreclosure action or documentation failures. Fitch may take similar actions on a servicer's ratings if the impact of the additional costs that must be borne by the servicer significantly affects its financial condition. Until those conclusions are reached, the negative outlook on the sector affects all U.S. RMBS servicers.
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 and Small Balance Commercial Mortgage Servicer Rating Criteria', dated Jan. 31, 2011, which is available on the Fitch Ratings website at 'www.fitchratings.com'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
'Global Rating Criteria for Structured Finance Servicers' (Aug. 13, 2010);
'U.S. Residential and Small Balance Commercial Mortgage Servicer Rating' (Jan. 31, 2011).
Applicable Criteria and Related Research:
Global Rating Criteria for Structured Finance Servicers
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=547305
U.S. Residential and Small Balance Commercial Mortgage Servicer Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=600065
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