Saxon’s long-time CEO and president Mike Sawyer and several other top managers also departed in a move that Morgan Stanley says was anticipated.
A source familiar with Virginia-based Saxon says senior managers Jeff Parkhurst (wholesale), John Trapp (underwriting) and Dick Shepherd (legal) also left the company in late December.
A Morgan Stanley spokesman tells Mortgage Strategy:“When we agreed to buy the firm, Sawyer said he wanted to move on.”
The spokesman also confirmed the job cuts. Kevin Rodman, a Morgan Stanley executive, will replace Sawyer.
The investment bank took control of the publicly-traded Saxon on December 4, paying $706m in cash. At the time of purchase, the lender had 1,200 full-time employees.
Over the past three years several investment banks – Bear Stearns, Deutsche Bank, Merrill Lynch – have bought sub-prime franchises, focussing on lenders that fund mortgages through third party loan brokers.
At the end of Q3 2006, Saxon ranked among the top 30 sub-prime lenders and servicers in the US.
The Morgan Stanley spokesman says Saxon will focus on wholesale lending and servicing.
The Wall Street firm recently closed Saxon’s retail division and is consolidating servicing locations into its platform in Texas. Despite the jobs cuts and restructuring, the spokesman says it plans to grow the business and that “the cuts are short-term”.
The US sub-prime industry is in the throes of a downturn that has caused loan volumes to drop and companies to lay off workers.
Moreover, regulators are cracking down on loan disclosures to consumers. Exotic loans, as they are called, do not allow consumers to pay down principal in any significant way. Regulators believe that in some cases lenders are misleading customers about the risks of these mortgages.