Morgan Stanley’s Saxon and Novastar Mortgage

Two weeks ago I had never heard of Saxon Mortgage. Now I have been notified that I am a valued customer and they will be the new servicer for my Novastar mortgage. Saxon Mortgage Services Inc., a unit of New York-based Morgan Stanley, will acquire the rights to do billing and collection on home loans from NovaStar, the Kansas City, Missouri-based mortgage company said in a statement today. The transaction doesn’t include any of NovaStar’s operations.

Morgan Stanley is the latest bank to scale back its mortgage business amid rising defaults and falling prices in the U.S. real-estate market. They have consolidated mortgage operations and separated 600 more employees from their jobs. However their recent acquisitions do not appear to be scaling down in the least.

Morgan Stanley has three mortgage businesses in the U.S. Saxon Capital, which services and offers subprime loans through brokers; Morgan Stanley Credit Corp., a retail originator of prime loans; and Morgan Stanley Mortgage Capital Holdings, an aggregator of loans purchased from so-called correspondent lenders.

Morgan Stanley bought Saxon for more than $700 million in December of 2006. The price paid for Novastar servicing rights was $175 million. The sale is tentatively scheduled to be completed November 1, 2007.

I don’t know whether the transactions taking place are part of the bail out of subprime lenders, but Morgan Stanley seems to have entered the fray with sword drawn. Morgan Stanley said that it suffered net trading losses on 13 days in the quarter, including that $390 million no-good day in early August. It also said that its trading losses exceeded its value at risk, a barometer of exposure to potential trading losses, six times during the quarter. Let’s see if they can also keep their shield raised.

In the meantime, Saxon provided the notification that they would be the new servicer effective November 1, 2007. After research, the sale hasn’t closed yet and won’t be completed until November 1, 2007. Are they jumping the gun a little, or has Novastar lost the servicing rights whether the sale closes or not? It has me more than a little concerned.

3 thoughts on “Morgan Stanley’s Saxon and Novastar Mortgage”

  1. Jackie,

    This goes to the old adage garbage in, garbage out. Apparently Saxon received outdated information from Novastar. There may have been a breakdown in communications within Novastar between departments and the transfer of mortgage servicing to Saxon.

    You should have some proof of the amount you sent to Novastar, either by refinancing or your pay-off. Cancelled checks, receipts, or new mortgage contract. If Novastar still has customer service or on-line support, access your information and print every page to use to prove to Saxton the information is correct. You will need to document everything, and sorry to say the burden of proof is a 3 way intersection in this situation.

    In a similar situation I contacted the both mortgage servicers. The first servicer had to provide the updated information to the second servicer. For the correction to be made, all of us had to have the same information. I proved it to both mortgage servicers, then they still had to agree with each other that my information was correct to correct their data.

    In your case, Novastar must make the first correction and provide their information to Saxon. Then Saxon makes their correction. In the meantime, you will be pretty much in the dark. You will receive correspondence from them after the fact with their findings and actions to resolve the matter.

    You must review their information carefully to be sure it is fully accurate. Keep copies of all correspondence. If you are required to provide documents from your files, send only copies of your originals. Do not lose control of your original documents.

    Best wishes,


  2. I paid off my mortgage with Novastar and now Saxton is sending me a bill for the full amount of the loan I had. Now I’m really confused and feeling cheated.They are saying that I am late with my payment.

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