Fitch Ratings has affirmed Saxon Mortgage Services Inc.'s primary servicer rating for subprime product at RPS2+ and its special servicer rating at RSS2+. The rating actions reflect Saxon's strong servicing management team, robust analytical capabilities, solid control environment, and focused default management practices, Fitch says.
The special servicer rating is based on the company's established processes for managing and liquidating nonperforming loans and real estate owned (REO) assets. The ratings also reflect the financial condition of Saxon's parent company, Morgan Stanley.
As of the end of April, Saxon was servicing over 235,000 loans totaling $38.9 billion – a decrease from 310,000 loans totaling $51.3 billion a year earlier. A significant portion of the decrease is due to Saxon's strategy of selling the mortgage servicing rights or entering into subservicing arrangements for its legacy subprime portfolio in order to free up capacity to take on special subservicing of distressed assets, Fitch says.
In April, for example, Saxon sold to Ocwen servicing rights on 38,000 loans with an aggregate unpaid principal balance of approximately $6.9 billion.
Since Fitch's last review, Saxon has 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. Saxon has also expanded its portfolio manager approach to focus on consistent performance and compliance with investor requirements across the servicing platform, Fitch says. Portfolio managers provide a single point of contact for investors and are responsible for directing late-stage default management for assigned portfolios.
Saxon's analytics group continues to refine the company's proprietary performance expectation models that forecast delinquency, liquidation, loss severity and cashflow at the loan and portfolio levels, and its proprietary decision engines used for modifications, foreclosure bidding instructions, and determination of principal and interest advance recoverability.
SOURCE: Fitch Ratings