Saxon Capital Group Inc. · OTC:SCGX
Saxon Capital — Debt Investor Presentation (September 2006)
36 slides from Saxon Capital's debt investor presentation, Sep 25, 2006
Slide 1: Saxon Capital, Inc. September 2006
Saxon Capital, Inc. September 2006
Slide 2: Forward Looking Statements
FORWARD LOOKING STATEMENTS Statements in this presentation other than statements of historical fact, are “forward-looking statements” that are based on current expectations and assumptions. These expectations and assumptions are subject to risks and uncertainty, which could affect Saxon’s future pla
Slide 3: Information & Where to Find It
INFORMATION & WHERE TO FIND IT q Reg AB static pool data can be found at www.saxonmortgage.com/staticpool . q Corporate presentations, company financials, corporate SEC filings and other useful links can be found at www.saxonmortgage.com ( click on the Investor Relations link). q Underwriting guidel
Slide 4: Merger Agreement
MERGER AGREEMENT Capital, Inc. Agrees to be Acquired by Morgan Stanley On Aug. 9, 2006 Saxon Capital, Inc. ("Saxon" or the "Company") (NYSE: SAX), a residential mortgage lending and servicing real estate investment trust (REIT), announced the signing of a definitive merger agreement pursuant to whic
Slide 5: Saxon Companies
SAXON COMPANIES A nationally recognized wholesale and correspondent mortgage lending company Name under which Saxon Mortgage, Inc. conducts retail lending business, through a network of regional lending centers and centralized lending platforms. A premier mortgage servicing company Capital Holdings,
Slide 6: Saxon Strategy
SAXON STRATEGY Data as of June 30, q is building a high-quality non-conforming mortgage loan portfolio • Portfolio accounting (no on-balance-sheet residual valuation) • Generally hold and securitize 100% of 1 st lien production • Holder of the first loss/residual risk (generally below BBB– credit ri
Slide 7: Saxon Strategy Con't
SAXON STRATEGY Con’t Data as of June 30, q Improve efficiencies and reduce costs • Consolidated the back-office operations of the wholesale and retail channels (2005) • I-deals – new automated underwriting engine (2005) • MRG – automated closing doc generation and delivery (2005) • Netox – new origi
Slide 8: Historical Performance
HISTORICAL PERFORMANCE Total Net Revenue (In Millions) Net Interest Income (In Millions) Debt-to-Equity Shareholders’ Equity (In Millions) Net Servicing Income (In Millions) Return on Average Assets Data as of June 30,
Slide 9: Condensed Consolidated Balance Sheet
CONDENSED CONSOLIDATED BALANCE SHEET Data as of June 30,
Slide 10: Portfolio Summary
PORTFOLIO SUMMARY Servicing Portfolio $19.7 billion = 75% $6.7 billion = 25% Data as of June 30,
Slide 11: Quarterly Production Statistics Second Quarter 2006
QUARTERLY PRODUCTION STATISTICS Second Quarter 2006 Data as of June 30,
Slide 12: SAST Collateral Summary
SAST COLLATERAL SUMMARY* *At settlement Data as of June 30,
Slide 13: Credit Score Migration
CREDIT SCORE MIGRATION Data as of June 30,
Slide 14: Static Pool Delinquency
STATIC POOL DELINQUENCEY Outstanding Portfolio Balance by Year: 2001 = 3.30% 2004 = 27.80% 2002 = 5.67% 2005 = 40.75% 2003 = 11.17% Data as of June 30,
Slide 15: Static Pool Losses by Funded Year
STATIC POOL LOSSES BY FUNDED YEAR Data as of June 30, actual actual actual actual
Slide 16: Loss Severity
LOSS SEVERITY Data as of June 30,
Slide 17: Loss Severity Con't
LOSS SEVERITY Con’t Data as of June 30,
Slide 18: Underwriting
UNDERWRITING q Underwriting • operations centers – VA, TX, CA • Automated U/W system • Automated review for borrower fraud using Appintell’s DISSCO system • Automated review of property valuation using Appintell’s VALVERIFY system • Automated review of appraisers against bad appraiser list • Full fi
Slide 19: Quality Control
QUALITY CONTROL q Post Funding Quality Control • Adversely selects 10+% of closed loans submitted for purchase based upon LTV ratio, seller, geographic location, product and collateral • Use a statistically based software, Cogent, which allows an adverse selection while maintaining a statistical sam
Slide 20: Conduit Program (Non-SAST)
CONDUIT PROGRAM (NON-SAST) q Sellers • Minimum tangible net worth of $1,000,000 • Minimum of (3) years experience in mortgage origination • $100MM in originations in prior 12 Months • Warehouse lines of at least $10MM q Pools: • Minimum Pool size of $10MM • Target $20MM to $100MM • Program provides
Slide 21: Conduit Process – Mitigating Risk
CONDUIT PROCESS – MITIGATING RISK q Full analysis of seller guidelines prior to bid for risk-based pricing q Exclusion of high cost loans, LTV’s over 100%, negative amortization loans etc. q 100% re-underwriting on loan pool by third-party contract underwriters q Fraud Prevention: • 100% borrower fr
Slide 22: Saxon Capital, Inc.
Saxon Capital, Inc.”
Slide 23: Rating Agency Summary
RATING AGENCY SUMMARY Standard and Poor’s Ratings: Category Rating Residential Mortgage Subprime Servicer Above Average Residential Mortgage Special Servicer Average Commentary: q Solid management q Sound application of technology q Effective and dynamic training programs q Effective borrower contac
Slide 24: Rating Agency Summary Con't
RATING AGENCY SUMMARY Con’t Rating: Category Rating Primary Servicer of Subprime Loans SQ2 Special Servicer SQ2- Commentary: q Strong collection abilities q Above average loss mitigation results q Above avg. foreclosure and REO timeline management • Review of borrower’s collection history at 75th da
Slide 25: Mortgage Loan Servicing
MORTGAGE LOAN SERVICING q Total 2006 portfolio growth 6.45% q Portfolio Performance: Total Portfolio • Delinquency 60+: 7.95% • Loss Severity: 38.86% q Cost to service 17 bps (2Q06) q Annualized employee turnover rate 27.98% SCI: Organic Origination 3rd Party: Purchased Data as of June 30,
Slide 26: Geographic Servicing Concentration
GEOGRAPHIC SERVICING CONCENTRATION q Top 10 states equal 65.88% of servicing portfolio q Bottom 20 states equal 4.55% of servicing portfolio 1. California 28.55% 2. Florida9.00% 3. New York4.64% 4. Texas4.47% 5. Illinois3.67% Top States (based on Total Portfolio) 6. Maryland3.64% 9. Michigan3.00% 7.
Slide 27: Servicing Structure
SERVICING STRUCTURE
Slide 28: Customer Service & Early Collections
CUSTOMER SERVICE & EARLY COLLECTIONS Predictive Modeling q Calling Campaigns • The Call Center uses the Freddie Mac Early Indicator Scores product monthly on the entire 0 – 59 portfolio • The scores range from 000 - 099 with the lower numbers having a higher probability of serious delinquency • The
Slide 29: Loss Mitigation
LOSS MITIGATION Department Structure q The Loss Mitigation department is focused on curing delinquencies through aggressive collection efforts and workout options. q Staffing • Loss Mitigation Teams - All staff are skilled in managing delinquency types from 60 to 120+ days • Workout Team - Specializ
Slide 30: Loss Mitigation Con't
LOSS MITIGATION Con’t Predictive Modeling q Early Indicator Scores are utilized in daily collections to identify higher risk delinquencies and to delay foreclosure referrals for lower risk borrowers. • Foreclosure referrals are delayed according to scores: - EIS below 200 (higher risk) refer at 76 d
Slide 31: Loss Mitigation Con't
LOSS MITIGATION Con’t eDRP (Default Resolution Plan) q A web-based proprietary system that provides access to information used in monthly Risk Management meetings for pre-foreclosure reviews • Automated recovery analysis - Review Loss AnalysisProperty Valuation Credit Report/SummaryHUD-1 Closing Sta
Slide 32: Loss Mitigation Con't
LOSS MITIGATION Con’t Data as of June 30,
Slide 33: Saxon Capital, Inc.
* rN | Saxon Capital, Inc.”
Slide 34: Foreclosure/Bankruptcy
FORECLOSURE/BANKRUPTCY Data as of June 30,
Slide 35: REO Timeline
REO TIMELINE 2001 2002 2003 2004 2005 2006 Average Days on Market 117 120 123 Data as of June 30,
Slide 36: Summary
Strong Management Existing Portfolio Servicing Platform Discipline SUMMARY n Saxon’s management team has one of the strongest reputations in the industry n Team is made up of seasoned professionals in the mortgage industry n has been building its on-balance sheet portfolio since n Portfolio at 6/30/
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