UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C.  20549

                                    FORM 10-K

     [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

     For the fiscal year ended December 31, 2007

     [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

     For the transition period to __________ from _______________

     Commission file number of issuing entity: 333-130694-21

              Morgan Stanley ABS Capital I Inc. Trust 2007-HE3
          (Exact name of Issuing Entity as specified in its Charter)

                      Morgan Stanley ABS Capital I Inc.
           (Exact name of depositor as specified in its Charter)


      Morgan Stanley Mortgage Capital Holdings LLC, successor-in-interest
               by merger to Morgan Stanley Mortgage Capital Inc.
              (Exact name of sponsor as specified in its Charter)

                                          Pooling Tier REMIC-1 20-8525425
                                          Pooling Tier REMIC-2 20-8525462
                                              Lower-Tier REMIC 20-8525507
                                              Upper-Tier REMIC 20-8525545
                                                 Class X REMIC 20-8525583
                   New York                      Grantor Trust 20-7286456
           (State or other jurisdiction                  (I.R.S. Employer
         incorporation or organization                Identification Number
               of issuing entity)                        of issuing entity)

          c/o Deutsche Bank National Trust Company
          1761 East St. Andrew Place
          Santa Ana, California                                  92705
 (Address of principal executive offices                     (Zip Code of
         of issuing entity)                                issuing entity)

            Issuing Entity's telephone number, including area code:
                               (714) 247-6000

          Securities registered pursuant to Section 12(b) of the Act:
                                     None.

          Securities registered pursuant to Section 12(g) of the Act:

                                     None.

     Indicate by check mark if the registrant is a well-known seasoned
     issuer, as defined in Rule 405 of the Securities Act.  Yes [ ]  No[X]

     Indicate by check mark if the registrant is not required to file
     reports pursuant to Section 13 or Section 15(d) of the Act.  Yes[ ] No[X]

     Indicate by check mark whether the registrant (1) has filed all reports
     required to be filed by Section 13 or 15(d) of the Securities Exchange
     Act of 1934 during the preceding 12 months (or for such shorter period
     that the registrant was required to file such reports), and (2) has been
     subject to such filing requirements for the past 90 days.  Yes [X]  No [ ]

     Indicate by check mark if disclosure of delinquent filers pursuant to
     Item 405 of Regulation S-K (Section 229.405 of this chapter) is not
     contained herein, and will not be contained, to the best of the
     registrant's knowledge, in definitive proxy or information statements
     incorporated by reference in Part III of the Form 10-K or any amendment
     to this Form 10-K.         Not Applicable.

     Indicate by check mark whether the registrant is a large accelerated
     filer, an accelerated filer, a non-accelerated filer, or a smaller
     reporting company.  See the definitions of "large accelerated
     filer," "accelerated filer" and "smaller reporting company in Rule 12b-2
     of the Exchange Act.  (Check One):

      Large accelerated filer [  ]  Accelerated Filer [  ]
      Non-accelerated Filer [X] (Do not Check if a smaller reporting company)
      Smaller reporting company [  ]

     Indicate by check mark whether the registrant is a shell company (as
     defined in Rule 12b-2 of the Act).  [  ] Yes  [X] No

     State the aggregate market value of the voting and non-voting common
     equity held by non-affiliates computed by reference to the price at
     which the common equity was last sold, or the average bid and asked
     price of such common equity, as of the of the last business day of
     the registrant's most recently completed second fiscal quarter


     Not Applicable.

     DOCUMENTS INCORPORATED BY REFERENCE

     See Item 15(a).

                                     PART I

     ITEM 1.  Business.

     Not Applicable.

     ITEM 1A.  Risk Factors.

     Not Applicable.

     ITEM 1B.  Unresolved Staff Comments.

     None.

     ITEM 2.  Properties.

     Not Applicable.

     ITEM 3.  Legal Proceedings.

     Not Applicable.

     ITEM 4.  Submission of Matters to a Vote of Security Holders.

     Not Applicable.

                                     PART II

     ITEM 5.  Market for Registrant's Common Equity, Related Stockholder
     Matters and Issuer Purchases of Equity Securities.

     Not Applicable.

     ITEM 6.  Selected Financial Data.

     Not Applicable.

     ITEM 7.  Management's Discussion and Analysis of Financial Condition and
     Results of Operations.

     Not Applicable.

     ITEM 7A.  Quantitative and Qualitative Disclosures About Market Risk.

     Not Applicable.

     ITEM 8.  Financial Statements and Supplementary Data.

     Not Applicable.

     ITEM 9.  Changes in and Disagreements with Accountants on Accounting and
     Financial Disclosure.

     Not Applicable.

     ITEM 9A.  Controls and Procedures.

     Not Applicable.

     ITEM 9A(T).  Controls and Procedures.

     Not Applicable.

     ITEM 9B. Other Information.

     None.

                                     PART III

     ITEM 10.  Directors, Executive Officers and Corporate Governance.

     Not Applicable.

     ITEM 11.  Executive Compensation.

     Not Applicable.

     ITEM 12.  Security Ownership of Certain Beneficial Owners and Management
               and Related Stockholder Matters.

     Not Applicable.

     ITEM 13.  Certain Relationships and Related Transactions, and
               Director Independence.

     Not Applicable.

     ITEM 14.  Principal Accounting Fees and Services.

     Not Applicable.

              ADDITIONAL ITEMS REQUIRED BY GENERAL INSTRUCTION J(2)

     Item 1112(b) of Regulation AB, Significant Obligor Financial
     Information.

     No single obligor represents 10% or more of the pool assets held by the
     issuing entity.

     Item 1114(b)(2) of Regulation AB, Significant Enhancement Provider
     Information.

     No entity or group of affiliated entities provides any external credit
     enhancement or other support for the certificates within this
     transaction as described under Item 1114(a) of Regulation AB.

     Item 1115(b) of Regulation AB, Certain Derivative Instruments.

     Morgan Stanley Capital Services Inc. provides an interest rate swap
     derivative instrument for the issuing entity.  No additional disclosure
     is necessary because the significance percentage for the interest rate
     swap is less than 10%.

     Item 1117 of Regulation AB, Legal Proceedings.

     Legal Proceedings Regarding Morgan Stanley Mortgage Capital Holdings LLC

     In addition to the matters described below, in the normal course of
     business, Morgan Stanley Mortgage Capital Holdings LLC ("the Company")
     has been named, from time to time, as a defendant in various legal actions.
     Certain of the actual or threatened legal actions include claims for
     substantial compensatory and/or punitive damages or claims for
     indeterminate amounts of damages.

     Regulatory and Governmental Investigations:  The Company and its affiliates
     are currently responding to subpoenas and requests for information from
     certain regulatory and governmental entities concerning the origination,
     purchase, securitization and/or servicing of subprime and non-subprime
     residential mortgages and related issues.

     Civil Litigation re American Business Financial Services, Inc. The
     Company has been named as one of a number of defendants in a matter
     styled Miller v. Santilli, et al., which is pending in the Court of
     Common Pleas for Philadelphia County, Pennsylvania.  The complaint in
     this action was filed on July 13, 2006 and is being brought by the
     bankruptcy trustee for American Business Financial Services, Inc.
     ("ABFS").  The complaint alleges, inter alia, that the Company, certain
     of the Company's affiliates, and various other financial institutions
     deepened the insolvency of ABFS, and aided and abetted fraud and breaches
     of fiduciary duties committed by certain former officers and directors of
     ABFS, by providing warehouse loans to ABFS and participating in
     securitization transactions with ABFS.  The complaint seeks damages in
     excess of $750 million.  The deepening insolvency claim has been dismissed,
     and the case is currently in discovery.

     Bauer, et al., v. Saxon Mortgage Services, Inc., et al. is a matter filed
     on December 1, 2004 in the Civil District Court for the Parish of Orleans,
     State of Louisiana, Case No. 2004-17015. On February 17, 2005, the
     plaintiffs re-filed the case as two separate class action lawsuits, Bauer,
     et al., v. Dean Morris, et al., filed as Case No. 05-2173 in the Civil
     District Court for the Parish of Orleans, State of Louisiana, and
     Patterson, et al., v. Dean Morris, et al., filed as Case No. 05-2174 in
     the Civil District Court for the Parish of Orleans, State of Louisiana.
     On January 24, 2006, the United States District Court for the Eastern
     District of Louisiana granted the Company's motion to compel arbitration
     in Bauer, et al., v. Dean Morris, et al.  On January 25, 2006, the United
     States District Court for the Eastern District of Louisiana granted the
     Saxon Mortgage Services's motion to compel arbitration in Patterson, et
     al., v. Dean Morris, et al.  At the present time, neither plaintiff has
     initiated arbitration.

     Jumar Hooks and Diane Felder, et al., v. Saxon Mortgage, Inc. is a matter
     filed on October 12, 2005 in the Common Pleas Court for Cuyahoga County,
     Ohio as Case No. CV 05 574577.  The plaintiffs filed this case as a class
     action, on behalf of themselves and similarly situated Ohio borrowers,
     alleging that the Company's subsidiary, Saxon Mortgage, Inc. ("Saxon
     Mortgage") engaged in unlawful practices in originating and servicing
     the plaintiffs' loans.  During the second quarter of 2006, the court
     granted the Saxon Mortgage's motion to compel individual arbitration as
     to each of the two named plaintiffs and stayed the court proceedings
     with no class having been certified.

     Jones, et al., v. ABN AMRO Mortgage Group, et al. is a matter filed on
     September 24, 2007 in the Court of Common Pleas for Berks County,
     Pennsylvania as Civil Action-Law No. 07-10540.  The plaintiffs allege
     that the putative class members were not credited properly for payments
     made on their mortgage loans which were allegedly collected by non-
     affiliated intermediary entities and forwarded to the servicer defendants.
     Saxon Mortgage Services services two loans for putative class members.
     Saxon Mortgage Services and other defendants filed a consolidated motion
     to dismiss the case.

     Legal Proceedings Regarding Saxon Mortgage Services, Inc.

     Because Saxon Mortgage Services, Inc. ("Saxon") and its affiliates
     are subject to many laws and regulations, including but not limited to
     federal and state consumer protection laws, it is regularly involved in
     numerous lawsuits filed against it, some of which seek certification as
     class action lawsuits on behalf of similarly situated individuals.

     Saxon and/or its affiliates are also involved, from time to time, in
     other reviews, investigations and proceedings (both formal and informal)
     by governmental agencies regarding Saxon's and/or its affiliates
     businesses, certain of which may result in adverse judgments, settlements,
     fines, penalties, injunctions or other relief.

     Saxon contests liability and/or the amount of damages as appropriate in
     each pending matter. In view of the inherent difficulty of predicting the
     outcome of such matters, particularly in cases where claimants seek
     substantial or indeterminate damages or where investigations and
     proceedings are in the early stages, Saxon cannot predict with certainty
     the loss or range of loss, if any, related to such matters, how or if such
     matters will be resolved, when they will ultimately be resolved, or what
     the eventual settlement, fine, penalty or other relief, if any, might be.
     Subject to the foregoing, the following matters are potentially material
     to the financial condition of Saxon.

     Regulatory and Governmental Investigations:  Saxon and its affiliates are
     currently responding to subpoenas and requests for information from
     certain regulatory and governmental entities concerning the origination,
     purchase, and/or servicing of subprime and non-subprime residential
     mortgages and related issues.

     Bauer, et al., v. Saxon Mortgage Services, Inc., et al. is a matter filed
     on December 1, 2004 in the Civil District Court for the Parish of Orleans,
     State of Louisiana, Case No. 2004-17015. On January 26, 2005, the
     plaintiffs filed a motion to dismiss the case without prejudice, and the
     court entered an order dismissing the case on January 31, 2005.  On
     February 17, 2005, the plaintiffs re-filed the case as two separate class
     action lawsuits, Bauer, et al., v. Dean Morris, et al., filed as Case No.
     05-2173 in the Civil District Court for the Parish of Orleans, State of
     Louisiana, and Patterson, et al., v. Dean Morris, et al., filed as Case
     No. 05-2174 in the Civil District Court for the Parish of Orleans, State
     of Louisiana.  On January 24, 2006, the United States District Court for
     the Eastern District of Louisiana granted Saxon's motion to compel
     arbitration and stayed the court proceedings as to named plaintiffs
     Keenan and Karen Duckworth in Bauer, et al., v. Dean Morris, et al.,
     filed as Case No. 05-2173 in the Civil District Court for the Parish of
     Orleans, State of Louisiana.  On January 25, 2006, the United States
     District Court for the Eastern District of Louisiana granted the Saxon
     Mortgage Services's motion to compel arbitration and stayed the court
     proceedings as to named plaintiff Debra Herron in Patterson, et al., v.
     Dean Morris, et al., filed as Case No. 05-2174 in the Civil District
     Court for the Parish of Orleans, State of Louisiana.  The court
     subsequently remanded the underlying court proceedings in both the Bauer
     and Patterson cases to the Civil District Court for the Parish of Orleans,
     State of Louisiana.  At the present time, neither plaintiff has initiated
     arbitration.

     Jones, et al., v. ABN AMRO Mortgage Group, et al. is a matter filed on
     September 24, 2007 in the Court of Common Pleas for Berks County,
     Pennsylvania as Civil Action-Law No. 07-10540.  The matter was
     subsequently removed to the United States District Court for the Eastern
     District of Pennsylvania as Civil Action No. 2:07-cv-04328-JG.  The
     plaintiffs filed an Amended Complaint on October 9, 2007 naming Saxon as
     a defendant.   The plaintiffs allege that the putative class members
     were not credited properly for payments made on their mortgage loans
     which were allegedly collected by non-affiliated intermediary entities
     and forwarded to the servicer defendants.  Saxon services two loans for
     putative class members.  The plaintiffs subsequently voluntarily
     dismissed all named plaintiffs except for the Jones's.  Saxon Mortgage
     Services and other defendants filed a consolidated motion to dismiss the
     case.

     Jumar Hooks and Diane Felder, et al., v. Saxon Mortgage, Inc. is a matter
     filed on October 12, 2005 in the Common Pleas Court for Cuyahoga County,
     Ohio as Case No. CV 05 574577.  The plaintiffs filed this case as a class
     action, on behalf of themselves and similarly situated Ohio borrowers,
     alleging that Saxon's affiliate, Saxon Mortgage, Inc. ("Saxon Mortgage")
     engaged in unlawful practices in originating and servicing the plaintiffs'
     loans.  During the second quarter of 2006, the court granted the Saxon
     Mortgage's motion to compel individual arbitration as to each of the two
     named plaintiffs and stayed the court proceedings with no class having
     been certified.

     Legal Proceedings Regarding Countrywide Financial Corporation

     Pursuant to a Form 10-K filed by Countrywide Financial Corporation
     ("the Company") on February 29, 2008 (Commission File No. 001-8422;
     CIK No. 0000025191), the parent of Countrywide Home Loan Servicing LP,
     one of the servicers and original loan sellers, the Company stated
     that various lawsuits alleging claims for derivative relief on behalf
     of the Company and securities, retirement plan, and other class action
     suits have recently been brought against us and certain current and
     former officers, directors and retirement plan administrators in
     either federal district court in Los Angeles, California, or state
     superior court in Los Angeles, or state court in Delaware.  The
     Company stated that among other things, these lawsuits allege breach
     of state law fiduciary duties and violation of the federal securities
     laws and the Employee Retirement Income Security Act of 1974 ("ERISA").
     The Company stated that these cases allege, among other things, that
     the Company did not disclose complete and accurate information about
     mortgage lending practices and financial condition. The Company stated
     that shareholder derivative cases brought in federal court are brought
     on the Company's behalf and do not seek recovery of damages from
     the Company.

     The Company stated that two consolidated cases alleging claims for
     derivative relief on behalf of the Company are also pending in
     federal district court in Delaware, and allege, among other things,
     that certain of the Company's proxy filings contain incorrect
    statements relating to the compensation of the Chief Executive Officer.

     The Company stated that various class action lawsuits relating to the
     proposed merger with Bank of America have been filed in the state courts
     of California and Delaware on behalf of a proposed class of
     shareholders against the Company, the Company's directors and Bank of
     America.  The Company stated that the class action lawsuits filed in
     state court in California have been removed to federal court in Los
     Angeles and that these lawsuits allege that the Company's directors
     breached their fiduciary duties to the Company's shareholders by
     entering into the merger agreement with Bank of America and that Bank
     of America allegedly aided and abetted those alleged breaches.  The
     Company stated that, similarly, the plaintiffs in the shareholder
    derivative lawsuits brought in California state and federal court
     recently have amended their complaints to add similar class action
     allegations relating to the proposed merger with Bank of America.

     The Company stated that it is difficult to predict the resulting outcome
     of these proceedings, particularly where investigations and proceedings
     are in early stages.  The Company stated that given the inherent
     difficulty in predicting the outcome of legal proceedings, the Company
     cannot estimate losses or ranges of losses for legal proceedings where
     there is only a reasonable possibility that a loss may be incurred, such
     as those discussed in the two immediately preceding paragraphs.  The
     Company stated that it provides for potential losses that may arise out
     of legal proceedings to the extent such losses are deemed probable and
     can be estimated.  The Company stated that although the ultimate outcome
     of the legal proceedings discussed above cannot be ascertained at this
     time, the Company believes that any resulting liability will not
     materially affect the consolidated financial position; such resolution,
     however, could be material to operating results for a particular
     future period depending upon the outcome of the proceedings and the
     operating results for a particular period. The Company stated that its
     assessment is based, in part, on the existence of insurance coverage.

     Legal Proceedings Regarding Fremont General Corporation

     Pursuant to a Form 8-K filed by Fremont General Corporation (the
     "Company") (Commission File No.: 001-08007, CIK: 0000038984), parent
     of Fremont Investment & Loan ("FIL"), the servicer and one of the original
     loan sellers, on March 5, 2007 (the "March 5th Announcement"), the
     Company stated that on June 2004, the then State of California
     Insurance Commissioner, John Garamendi (the "Commissioner"), as
     statutory liquidator of Fremont Indemnity Company ("Fremont
     Indemnity"), filed suit in Los Angeles Superior Court against the
     Company, alleging the improper utilization by the Company of certain
     net operating loss deductions ("NOLs") allegedly belonging to its
     Fremont Indemnity subsidiary. The Company stated that this
     complaint involves issues that were considered resolved in an
     agreement dated July 2, 2002, among the California Department of
     Insurance, Fremont Indemnity and the Company (the "Letter Agreement").
     According to the announcement, the Letter Agreement was executed on
     behalf of the California Department of Insurance by the Honorable
     Harry Low, the State of California Insurance Commissioner at that
     time. On November 22, 2005, upon the Third Amended Complaint, the
     Court dismissed the lawsuit. Shortly thereafter, the Commissioner
     commenced an appeal.

     According to the March 5th Announcement, on February 28, 2007, the
     Court of Appeal of the State of California reversed the trial
     court's dismissal and sent the case back to the trial court for
     further proceedings. The Company stated that they continue to believe
     that this lawsuit is without merit and intends to vigorously defend
     against it.

     In addition, according to the March 5th Announcement, in August 2004,
     the Commissioner, as statutory liquidator of Fremont Indemnity, filed
     an additional and separate complaint against the Company on behalf
     of Fremont Indemnity as successor in interest to Comstock Insurance
     Company ("Comstock"), a former affiliate of Fremont Indemnity, which was
     subsequently merged into Fremont Indemnity. This case alleged similar
     causes of action regarding the usage of Comstock's NOLs as improper
     transactions with other insurance subsidiaries and affiliates of Fremont
     Indemnity. This complaint also involves issues that were considered
     resolved in the Letter Agreement. The Company stated that on April 22,
     2005, the Court dismissed, without leave to amend, the entire complaint.
     Shortly thereafter, the Commissioner appealed.

     According to the March 5th Announcement, on February 28, 2007, the Court
     of Appeal of the State of California reversed the trial court's
     dismissal and sent the case back to the trial court for further
     proceedings. The Company stated that they continue to believe that
     this lawsuit is without merit and intends to vigorously defend against it.

     Pursuant to a Form 8-K filed on March 8, 2007 (the "March 8th
     Announcement"), the Company announced that it, FIL and the Company's
     wholly owned subsidiary, Fremont General Credit Corporation, entered into
     a voluntary formal agreement, to be designated as a cease and desist
     order, with the Federal Deposit Insurance Corporation. According to
     the announcement, the cease and desist order requires, among other
     things, FIL to cease and desist from the following:

        Operating with management whose policies and practices are detrimental
        to FIL;

        Operating FIL without effective risk management policies and
        Procedures in place in relation to FIL's brokered subprime mortgage
        lending and commercial real estate construction lending businesses;

        Operating with inadequate underwriting criteria and excessive risk
        in relation to the kind and quality of assets held by FIL;

        Operating without an accurate, rigorous and properly documented
        methodology concerning its allowance for loan and lease losses;

        Operating with a large volume of poor quality loans;

        Engaging in unsatisfactory lending practices;

        Operating without an adequate strategic plan in relation to the
        volatility of FIL's business lines and the kind and quality of
        assets held by FIL;

        Operating with inadequate capital in relation to the kind and quality
        of assets held by FIL;

        Operating in such a manner as to produce low and unsustainable
        earnings;

        Operating with inadequate provisions for liquidity in relation to
        the volatility of FIL's business lines and the kind and quality of
        assets held by FIL;

        Marketing and extending adjustable-rate mortgage products to
        subprime borrowers in an unsafe and unsound manner that greatly
        increases the risk that borrowers will default on the loans or
        otherwise cause losses to FIL, including (1) adjustable-rate
        mortgage products that qualify borrowers for loans with low initial
        payments based on an introductory rate that will expire after an
        initial period, without adequate analysis of the borrower's ability
        to repay at the fully indexed rate, (2) adjustable-rate mortgage
        products containing features likely to require frequent refinancing
        to maintain affordable monthly payment or to avoid foreclosure, and
        (3) loans or loan arrangements with loan-to-value ratios approaching
        or exceeding 100 percent of the value of the collateral;

        Making mortgage loans without adequately considering the borrower's
        ability to repay the mortgage according to its terms;

        Operating in violation of Section 23B of the Federal Reserve Act,
        in that

        FIL engaged in transactions with its affiliates on terms and under
        circumstances that in good faith would not be offered to, or would not
        apply to, nonaffiliated companies; and

        Operating inconsistently with the Federal Deposit Insurance
        Corporation's Interagency Advisory on Mortgage Banking and Interagency
        Expanded Guidance for Subprime Lending Programs.

     According to the March 8th Announcement, the Company stated that the
     cease and desist order also requires FIL to take a number of steps,
     including (1) having and retaining qualified management; (2) limiting
     the Company's and Fremont General Credit Corporation's representation
     on FIL's board of directors and requiring that independent directors
     comprise a majority of FIL's board of directors; (3) revising and
     implementing written lending policies to provide effective guidance
     and control over FIL's residential lending function; (4) revising and
     implementing policies governing communications with consumers to
     ensure that borrowers are provided with sufficient information;
     (5) implementing control systems to monitor whether FIL's actual
     practices are consistent with its policies and procedures; (6)
     implementing a third-party mortgage broker monitoring program and plan;
     (7) developing a five-year strategic plan, including policies and
     procedures for diversifying FIL's loan portfolio; (8) implementing a
     policy covering FIL's capital analysis on subprime residential loans;
     (9) performing quarterly valuations and cash flow analyses on
     FIL's residual interests and mortgage servicing rights from its
     residential lending operation, and obtaining annual independent
     valuations of such interests and rights; (10) limiting extensions of
     credit to certain commercial real estate borrowers; (11) implementing
     a written lending and collection policy to provide effective guidance
     and control over FIL's commercial real estate lending function, including
     a planned material reduction in the volume of funded and unfunded
     non-recourse lending and loans for condominium conversion and
     construction as a percentage of Tier I capital; (12) submitting a
     capital plan that will include a Tier I capital ratio of not less than
     14% of FIL's total assets; (13) implementing a written profit plan;
     (14) limiting the payment of cash dividends by FIL without the prior
     written consent of the Federal Deposit Insurance Corporation and the
     Commissioner of the California Department of Financial Institutions;
     (15) implementing a written liquidity and funds management policy to
     provide effective guidance and control over FIL's liquidity position
     and needs; (16) prohibiting the receipt, renewal or rollover of
     brokered deposit accounts without obtaining a Brokered Deposit Waiver
     approved by the Federal Deposit Insurance Corporation; (17) reducing
     adversely classified assets; and (18) implementing a comprehensive plan
     for the methodology for determining the adequacy of the allowance for
     loan and lease losses.

     Pursuant to the March 8th Announcement, the Company announced that it
     has consented to the terms of the cease and desist order issued by the
     Federal Deposit Insurance Corporation without admitting to the
      allegations contained in the cease and desist order.

     Pursuant to a Form 8-K filed on October 5, 2007 (the "October 5th
     Announcement"), the Company, doing business primarily through its
     wholly-owned industrial bank, FIL (collectively, "Fremont"), issued
     a press release responding to the lawsuit filed against Fremont by
     the Massachusetts Attorney General's office. According to the
     October 5th Announcement, the Massachusetts Attorney General's
     Office announced the filing of a lawsuit in Massachusetts Superior
     Court for Suffolk County on behalf of borrowers in Massachusetts,
     alleging that Fremont engaged in unfair or deceptive practices in
     connection with origination and servicing of residential mortgage
     loans. The complaint seeks injunctive relief and equitable relief
     for Massachusetts borrowers and civil penalties. Fremont stated that
     they believes the lawsuit is without merit and will defend itself
     vigorously.

     In addition, pursuant to a Form 10-Q filed on November 9, 2007 by
     the Company, the parent of Fremont, the original loan seller and
     servicer, on October 23, 2007, Morgan Stanley Mortgage Capital Holdings
     LLC filed a lawsuit in the United States District Court for the
     Southern District of New York against Fremont alleging breaches with
     respect to residential mortgage loans it sold to Morgan Stanley
     Mortgage Capital Holdings LLC between May 1, 2005 and December
     28, 2006. The complaint alleges damages of at least $10 million.

     Pursuant to a Form 8-K filed on January 14, 2008 (the "January
     14th Announcement") by the Company, the Company stated that on
     January 8, 2008, a purported shareholder derivative complaint,
     entitled Frank Taylor, Jr. vs. Fremont General Corporation, et
     al., was filed in the United States District Court for the Central
     District of California.  The Company stated that the derivative
     complaint was brought for the benefit of the Company against former
     members of the Company and alleges that all of such individuals
     breached their fiduciary duties, resulting in substantial monetary
     losses and other damages to the Company, and that the former
     Chairman of the Board engaged in insider trading and was thereby
     unjustly enriched.

     In addition, pursuant to the January 14th Announcement, the Company
     stated that the derivative complaint seeks, among other things, (i)
     unspecified damages equal to the amount by which the Company has been
     damaged by the defendants as a result of their breach of fiduciary
     duties; (ii) the establishment of a constructive trust in favor of
     the Company for both the amount of proceeds received by the former
     Chairman from both the sale of his Company common stock during the
     period specified in the complaint as well as for proceeds otherwise
     derived from his service as a director and/or executive officer of
     the Company; (iii) an order requiring the former Chairman to disgorge
     to the Company all proceeds derived from his sale of the Company common
     stock during the period specified in the complaint in addition to all
     proceeds otherwise derived from his service as a director and/or
     executive officer of the Company; (iv) the establishment of a
     constructive trust in favor of the Company for proceeds derived from
     the service by the former President and Chief Executive Officer
     and Executive Vice President and Chief Operating Officer as directors
     and/or executive officers of the Company; and (v) an award to the
     plaintiff of costs and disbursements of action, including reasonable
     attorneys' and experts' fees, costs and expenses.

     On February 25, 2008, Judge Ralph D. Gants, in Massachusetts Suffolk
     Superior  Court, granted a preliminary injunction against Fremont.
     The order prohibits Fremont from initiating or advancing foreclosures
     on loans that are "presumptively unfair."

     Under the terms of the injunction, Fremont must provide the
     Massachusetts Attorney General's Office with at least a 30-day notice
      of all foreclosures it intends to initiate for the approximately
     2,200 loans that Fremont still owns and services, and allow the
     Attorney General an opportunity to object to the foreclosure going
     forward.  If Fremont has issued a loan that is considered
     "presumptively unfair," and the borrower occupies the property as
     his or her principal dwelling, the Attorney General has 45-days to
     object to the foreclosure.  A loan is "presumptively unfair" if
     it possesses the following characteristics:

        The loan is an adjustable rate mortgages with an introductory period
        of three years or less:

        The loan has an introductory or "teaser" interest rate that is at
        least three percent lower than the fully-indexed rate (the relevant
        index at the time of origination plus the margin specified in the
        mortgage note);

        The borrower has a debt-to-income ratio (the ratio between the
        borrower's monthly debt payments, including the monthly mortgage
        payment, and the borrower's monthly income) that would have exceeded
        50% if Fremont had measured the debt, not by the debt due under the
        teaser rate, but by the debt due under the fully-indexed rate;
        and

        Fremont extended 100% financing or the loan has a substantial
        prepayment penalty or penalty that lasts beyond the introductory
        period.

     After the notice and objection process, Fremont may only proceed with
     a foreclosure to which the Attorney General objects if Fremont files
     a request with the court, and the court reviews the matter and agrees
     that a foreclose is appropriate.  In considering whether to allow the
     foreclosure, the court will consider, among other factors, whether the
     loan is unfair and whether Fremont has taken reasonable steps to work
     out the loan and avoid foreclosure.  The preliminary injunction does
     not release borrowers from their monthly mortgage obligations.

     The Attorney General's Office filed suit on October 5, 2007, in
     Suffolk Superior Court against Fremont based on the defendant's
     alleged unfair and deceptive loan origination and sales conduct.
     The complaint specifically alleges that the company was selling risky
     loan products that it knew was designed to fail, such as 100%
     financing loans and "no documentation" loans.  The complaint further
     alleges that the company sold these loans through third party brokers
     and provided financial incentives to these brokers to sell high cost
     products.  In addition to injunctive relief, the Attorney General's
     Office is seeking civil penalties and restitution.

     Pursuant to a Form 8-K filed on March 28, 2008 (the "March 28th
     Announcement") by the Company, the Company stated that on March 26,
     2008 the Federal Deposit Insurance Corporation ("FDIC"), with the
     concurrence of the California Department of Financial Institutions,
     issued a Supervisory Prompt Corrective Action Directive ("Directive")
     to FIL, to the Company and to Fremont General Credit Corporation ("FGCC"),
     the Company's wholly-owned subsidiary and direct parent to FIL.  According
     to the March 28th Announcement, the Directive requires FIL, the Company
     and FGCC to take one or more of the following actions to recapitalize
     FIL within 60 days, or by May 26, 2008:

        FIL shall sell enough voting shares or obligations of FIL so that FIL
        will be "adequately capitalized, " as defined under the Federal Deposit
        Insurance Act and the related FDIC regulations, after the sale; and/or

        FIL shall accept an offer to be acquired by a depository institution
        holding company or combine with another insured depository institution;
        and

        The Company and FGCC shall divest themselves of FIL.

     According to the March 28th Announcement, the Company states that in the
     Directive, the FDIC has categorized FIL as being an "undercapitalized"
     depository institution, as defined under the Federal Deposit Insurance Act
     and FDIC rules and regulations.  Additionally, the Company stated that
     the Directive also sets forth certain limitations and restrictions on FIL
     and its business. The Company stated that the Directive restricts the
     interest rates that FIL may pay on deposits to prevailing rates paid on
     deposits of comparable amounts and maturities paid by other FDIC insured
     depository institutions in the State of California. In addition, the
     Company stated that FIL is not permitted to make any capital distributions
     to the Company, FGCC or any affiliate of FIL, or to pay bonuses or increase
     the compensation of any director or officer of FIL. The Directive further
     restricts transactions between FIL and its affiliates.

     Legal Proceedings Regarding NC Capital Corporation

     Pursuant to a Form 8-K filed on February 21, 2007 (the "February 21st
     8-K") by New Century Financial Corporation ("NCFC") (Commission File
     No. 001-32314; CIK  No. 00001287286), the parent of NC Capital
     Corporation, one of the original loan sellers, NCFC stated that on
     February 14, 2007, NCFC was served with the complaint for a
     purported securities class action (the "Original Complaint") filed
     in the United States District Court for the Central District of
     California against NCFC and certain of its officers and directors.
     NCFC stated that the complaint alleges that NCFC and the other named
     defendants violated federal securities laws by issuing false and
     misleading statements and failing to disclose material facts about
     NCFC, which resulted in artificially inflated market prices of
     NCFC's common stock, and that the plaintiff and the purported class
     members purchased the registrant's stock at these artificially
     inflated market prices between April 7, 2006 and February 7, 2007.
      NCFC stated that the complaint seeks money damages in favor of
     its purported class of purchasers of NCFC's securities, the costs
     and expenses of the action and other relief that may be granted by
     the court.

     In addition, pursuant to the February 21st 8-K, NCFC stated that
     nine additional purported class actions were filed in the United
     States District Court for the Central District of California
     between February 8, 2007 and February 20, 2007.  NCFC stated that
     these complaints present in large degree the same legal and factual
     issues as the Original Complaint and allege various class periods,
     the longest of which is from April 7, 2006 to February 7, 2007.

     Pursuant to a Form 8-K filed by NCFC on March 13, 2007 (the
     "March 13th 8-K"), NCFC stated that on February 28, 2007, NCFC
     received a letter from the United States Attorney's Office for the
     Central District of California (the "U.S. Attorney's Office")
     indicating that it was conducting a criminal inquiry under the
     federal securities laws in connection with trading in NCFC's securities,
     as well as accounting errors regarding NCFC's allowance for
     repurchase losses.  NCFC stated that it has subsequently received a
     grand jury subpoena requesting production of certain documents.  NCFC
     stated that it intends to cooperate with the requests of the U.S.
     Attorney's Office.

     In addition, pursuant to the March 13th 8-K, NCFC stated that on
     March 12, 2007, it received a letter from the staff of the Pacific
     Regional Office of the Securities Exchange Commission stating that
     the staff was conducting a preliminary investigation involving NCFC
     and requesting production of certain documents.  NCFC stated that the
     staff of the SEC had also previously requested a meeting with NCFC to
     discuss the events leading up to NCFC's previous announcement of the
     need to restate certain of its historical financial statements.

     Pursuant to a Form 8-K filed by NCFC on March 14, 2007 (the "March
     14th 8-K"), NCFC stated that on March 13, 2007, NCFC and certain of
     its subsidiaries received cease and desist orders from regulators in
     the States of Massachusetts, New Hampshire, New Jersey and New York (the
     "March 13 Orders").  NCFC stated that the cease and desist orders
     contain allegations that certain of NCFC's subsidiaries have engaged in
     violations of applicable state law, including, among others, failure to
     fund mortgage loans after a mortgage closing, failure to meet certain
     financial requirements, including net worth and available liquidity, and
     failure to timely notify the state regulators of defaults and
     terminations under certain of its financing arrangements.  NCFC stated
     that the cease and desist orders seek to restrain the subsidiaries from
     taking certain actions, including, among others, engaging in further
     violations of state law, taking new applications for mortgage loans in
     the relevant jurisdiction, and paying dividends or bonuses to officers,
     directors or shareholders of the applicable subsidiaries.  NCFC stated
     that the cease and desist orders also seek to cause the subsidiaries
     to affirmatively take certain actions, including the creation of escrow
     accounts to hold fees relating to pending mortgage applications, the
     transfer to other lenders of the outstanding mortgage applications and
     unfunded mortgage loans held by the subsidiaries, and the provision of
     regular information to the state regulators regarding the
     subsidiaries' activities in the applicable state, including the status
     of all outstanding mortgage applications and unfunded mortgage loans
     in that state.  NCFC stated that certain of the cease and desist
     orders also require one or more of the subsidiaries to show cause
     why their license should not be revoked or why administrative
     penalties should not be assessed.  NCFC stated that the cease and
     desist orders generally become permanent if not promptly appealed by
     the applicable subsidiaries.

     Pursuant to a Form 8-K filed on March 19, 2007 (the "March 19th 8-K"),
     NCFC stated that on March 14 and 15, 2007, NCFC received additional
     cease and desist orders from the States of Connecticut, Maryland,
     Rhode Island and Tennessee (collectively, the "March 14-15 Orders").
     NCFC stated that consistent with the March 13 Orders, the March
     14-15 Orders contain allegations that certain of NCFC's subsidiaries
     have engaged in violations of applicable state law, including,
     among others, failure to fund mortgage loans after closing.
     Additionally, pursuant to the March 19th 8-K, NCFC stated that on
     March 14, 2007, New century Mortgage Corporation ("NCMC") and Home123
     Corporation, an indirect wholly owned subsidiary of NCFC ("Home123"),
     entered into a Consent Agreement and Order, dated March 14, 2007,
     with the Commonwealth of Pennsylvania Department of Banking, Bureau
     of Supervision and Enforcement (the "Consent Agreement").   NCFC
     stated that consistent with the March 13 Orders, the March 14-15
     Orders and the Consent Agreement seek to restrain NCFC's subsidiaries
     from taking certain actions, including, among others, engaging in
     alleged violations of state law and taking new applications for
     mortgage loans in the relevant jurisdiction.  NCFC stated that the
     March 14-15 Orders and the Consent Agreement also seek to cause the
     subsidiaries to affirmatively take certain actions, including the
     creation of escrow accounts to hold fees relating to pending
     mortgage applications, the transfer to other lenders of the
     outstanding mortgage applications and unfunded mortgage loans held
     by the subsidiaries, and the provision of regular information to the
     state regulators regarding the subsidiaries' activities in the
     applicable state, including the status of all outstanding mortgage
     applications and unfunded mortgage loans in that state.  NCFC stated
     that certain of the March 14-15 Orders also seek to revoke the licenses
     of one or more of NCFC's subsidiaries or assess administrative
     penalties. NCFC stated that the March 14-15 Orders generally become
     permanent if not promptly appealed by the applicable subsidiaries.

     Additionally, pursuant to the March 19th 8-K, NCFC stated that in
     connection with a civil action filed against NCFC, NCMC and Home123
     (collectively, the "Defendants") in an Ohio state court
     (the "Complaint") by the Attorney General of Ohio and the Ohio
     Division of Commerce, Division of Financial Institutions on March
     14, 2007, that Ohio state court issued a temporary restraining order,
     which was subsequently modified by the court on March 16, 2007,
     against the Defendants (as modified, the "TRO").  NCFC stated that
     the Complaint and the TRO contain allegations that the Defendants
     have engaged in violations of applicable state law, including, among
     others, failure to fund mortgage loans after closing.  NCFC stated
     that the TRO restrains the Defendants from taking certain actions,
     including, among others, (i) engaging in violations of state law,
     (ii) soliciting applicants and taking new applications for mortgage
     loans in Ohio and (iii) initiating, prosecuting or enforcing
     foreclosure actions in Ohio.  NCFC stated that the TRO also
     requires the Defendants to confer with the Ohio Attorney General
     and Division of Commerce by March 22, 2007 regarding the treatment
     of Ohio loans that are more than 60 days delinquent and are held for
     sale.  NCFC stated that the restraints imposed by the TRO could
     further harm NCFC's business.

     Pursuant to a Form 8-K filed on March 20, 2007 (the "March 20th
     8-K"), NCFC stated that as disclosed above, NCFC has received cease
     and desist orders from several states and entered into a consent
     agreement with one state (the "Previous Orders and Consent
     Agreement").  NCFC stated that on March 16, 2007, NCFC received
     additional cease and desist orders from the State of California (the
     "California Orders") and certain of NCFC's subsidiaries entered
     into consent agreements with the State of Florida's Office of
     Financial Regulation and the State of Washington's Department of
     Financial Institutions, respectively, each dated March 16, 2007
     (the "March 16 Agreements" and together with the California Orders,
     the "March 16 Orders and Consent Agreements").

     Pursuant to the March 20th 8-K, NCFC stated that consistent with the
     Previous Orders and Consent Agreement, the March 16 Orders and
     Consent Agreements contain allegations that certain of NCFC's
     subsidiaries have engaged in violations of state law, including,
     among others, failure to fund mortgage loans after closing.  NCFC
     stated that consistent with the Previous Orders and Consent
     Agreement, the March 16 Orders and Consent Agreements seek to restrain
     NCFC's subsidiaries from taking certain actions, including, among
     others, engaging in alleged violations of state law and taking new
     applications for mortgage loans in the relevant jurisdiction.  NCFC
     stated that the March 16 Orders and Consent Agreements also seek to
     cause the subsidiaries to affirmatively take certain actions,
     including the creation of escrow accounts to hold fees relating to
     pending mortgage applications, the transfer to other lenders of
     the outstanding mortgage applications and unfunded mortgage loans held
     by the subsidiaries, and the provision of regular information to the
     state regulators regarding the subsidiaries' activities in the
     applicable state, including the status of all outstanding mortgage
     applications and unfunded mortgage loans in that state.  NCFC stated
     that the California Orders become permanent if not promptly appealed
     by the applicable subsidiaries.

     In addition, NCFC stated that on March 16, 2007, Home123 received a
     suspension  order (the "Suspension Order") from the State of New York
     Banking Department.  NCFC stated that the Suspension Order contains
     allegations similar to those included in the March 13 Order and
     further provides that Home123's mortgage banking license in the State
     of New York has been suspended for a period not exceeding 30 days,
     pending investigation.

     Pursuant to a Form 8-K filed on March 22, 2007 (the "March 22nd 8-K"),
     NCFC stated that on March 20, 2007, certain of NCFC's subsidiaries
     entered into a consent agreement with the State of Maine's Office
     of Consumer Credit Regulation (the "March 20 Consent Agreement").
     NCFC stated that consistent with the Previous Orders and Consent
     Agreements, the March 20 Consent Agreement contains allegations
     that certain of NCFC's subsidiaries have engaged in violations of
     state law, including, among others, failure to fund mortgage loans
     after closing.  NCFC stated that consistent with the Previous Orders
     and Consent Agreements, the March 20 Consent Agreement seeks to
     restrain NCFC's subsidiaries from taking certain actions, including,
     among others, engaging in alleged violations of state law and taking
     new applications for mortgage loans in the relevant jurisdiction.
     NCFC stated that the March 20 Consent Agreement also seeks to cause
     the subsidiaries to affirmatively take certain actions, including the
     creation of escrow accounts to hold fees relating to pending mortgage
     applications, the transfer to other lenders of the outstanding
     mortgage applications and unfunded mortgage loans held by the
     subsidiaries, and the provision of regular information to the state
     regulators regarding the subsidiaries' activities in the applicable
     state, including the status of all outstanding mortgage applications
     and unfunded mortgage loans in that state.

     Pursuant to a Form 8-K filed on March 28, 2007 (the "March 28th
     8-K"), NCFC stated that on March 27, 2007, NCFC signed consent
     agreements with the State of Idaho's Department of Finance, the State
     of Iowa's Superintendent of Banking, the State of Michigan's Office
     of Financial and Insurance Services and the State of Wyoming's
     Banking Commissioner (the "Additional Consent Agreements").  NCFC
     stated that although NCFC has signed the Additional Consent Agreements
     and expects to comply with their terms, NCFC has not yet received
     counterpart signatures from the respective states and accordingly such
     Additional Consent Agreements may not be binding on the respective
     states.  NCFC stated that consistent with the Previous Orders and
     Consent Agreements, the Additional Consent Agreements contain
     allegations that certain of NCFC's subsidiaries have engaged in
     violations of state law, including, among others, failure to fund
     mortgage loans after closing.  NCFC stated that consistent with the
     Previous Orders and Consent Agreements, the Additional Consent
     Agreements restrain NCFC's subsidiaries from taking certain actions,
     including, among others, engaging in alleged violations of state law
     and taking new applications for mortgage loans in the relevant
     jurisdiction.  NCFC stated that The Additional Consent Agreements also
     compel the subsidiaries to affirmatively take certain actions,
     including the creation of escrow accounts to hold any up front
     fees collected in connection with pending mortgage applications,
     the transfer to other lenders of the outstanding mortgage applications
     and unfunded mortgage loans held by the subsidiaries, and the provision
     of regular information to the state regulators regarding the
     subsidiaries' activities in the applicable state, including the
     status of all outstanding mortgage applications and unfunded mortgage
     loans in that state.

     Pursuant to a Form 8-K filed on March 30, 2007 (the "March 30th
     8-K"), NCFC stated that as disclosed above, on March 14, 2007, the
     Attorney General of Ohio and the Ohio Department of Commerce, Division
     of Financial Institutions (together, the "State") filed a lawsuit
     against NCFC and certain of its subsidiaries (collectively with NCFC,
     the "Defendants") in Ohio state court (the "Ohio Complaint").  NCFC
     stated that the Ohio Complaint alleges that NCFC has engaged in
     violations of applicable state law, including, among others,
     failure to fund mortgage loans after closing.  NCFC stated that
     on March 14, 2007, the court granted the State's motion to enter a
     temporary restraining order, which was subsequently modified by the court
     on March 16, 2007, against the Defendants (as modified, the "TRO").
     NCFC stated that the TRO restrained the Defendants from taking certain
     actions, including, among others, (i) engaging in violations of state
     law, (ii) soliciting applicants and taking new applications for
     mortgage loans in Ohio and (iii) initiating, prosecuting or enforcing
     foreclosure actions in Ohio.  NCFC stated that the TRO required the
     parties to confer with respect to restrictions regarding foreclosure
     action and the sale, transfer or assignment of loans more than 60
     days delinquent.

     In addition, pursuant to the March 30th 8-K, NCFC stated that on
     March 26, 2007, the Defendants filed a Motion for Dissolution of
     Modified Temporary Restraining Order and Motion for an Emergency
     Hearing, and Opposition to a Preliminary Injunction.  NCFC stated
     that on March 28, 2007, the Defendants and the State reached agreement
     on a Stipulated Preliminary Injunction effective for 90 days, which
     was entered by the court. NCFC stated that the Stipulated
     Preliminary Injunction replaces the TRO and provides for a stay of
     the litigation for 90 days. NCFC stated that the Stipulated
     Preliminary Injunction restrains the Defendants from taking certain
     actions, including, among others, engaging in alleged violations of
     state law and taking new applications for mortgage loans.  NCFC stated
     that the Stipulated Preliminary Injunction also compels the Defendants
     to take certain actions, including the transfer to other lenders of
     any outstanding mortgage applications and unfunded mortgage loans,
     the placement in escrow of any upfront fees collected in connection
     with pending mortgage applications, and the provision of regular
     information to the State regarding NCFC's activities in Ohio,
     including the status of all outstanding mortgage applications and
     unfunded mortgage loans.  NCFC stated that the Stipulated
     Preliminary Injunction also requires the Defendants to submit certain
     categories of loans (and related information) as to which it intends
     to foreclose to the State for the State to review.  NCFC stated that
     the State may object for cause to NCFC proceeding with a particular
     foreclosure and if NCFC is unable to convince the State to permit it
     to proceed, the foreclosure will not proceed for the duration of the
     Stipulated Preliminary Injunction.  NCFC stated that the Stipulated
     Preliminary Injunction also provides for the State to review and
     object for cause to the Defendants selling, transferring or
     assigning certain categories of loans that are more than 60 days
     delinquent.

     In addition, pursuant to the March 30th 8-K, NCFC stated that in the
     event that the State or the Defendants believe the other is not acting
     in good faith, the Stipulated Preliminary Injunction provides that
     the complaining party should notify the other of such concern and if
     the concern is not resolved, then either party may notify the other
     of their intent to file a motion with the court to terminate the
     Stipulated Preliminary Injunction and request to reschedule the
     previously canceled preliminary injunction hearing.  NCFC stated
     that the Stipulated Preliminary Injunction provides that in such
     event neither party will object to the scheduling of a prompt
     preliminary injunction hearing or the termination of the Stipulated
     Preliminary Injunction at such a preliminary injunction hearing.

     Pursuant to a Form 8-K filed on April 6, 2007 (the "April 6th 8-K"),
     NCFC stated that on April 2, 2007, NCFC announced that it and several
     of its subsidiaries, including New Century TRS Holdings, Inc.,
     NCMC, NC Capital Corporation, Home123 Corporation, New Century
     Credit Corporation, NC Asset Holding, L.P., NC Residual III
     Corporation, NC Residual IV Corporation, New Century R.E.O.
     Corp., New Century R.E.O. II Corp., New Century R.E.O. III
     Corp., New Century Mortgage Ventures, LLC, NC Deltex, LLC
     and NCoral, L.P. (collectively, the "Debtors") filed voluntary
     petitions (the "Bankruptcy Filings") under chapter 11 of the
     United States Bankruptcy Code (the "Bankruptcy Code") in the
     United States Bankruptcy Court for the District of Delaware
     (the "Bankruptcy Court").  NCFC stated that these bankruptcy cases
     (the "Bankruptcy Cases") are being jointly administered in the
     Bankruptcy Court under the caption "In re New Century TRS Holdings,
     Inc., et al., Case No. 07-10416" before the Honorable Kevin J.
     Carey, United States Bankruptcy Judge. NCFC stated that the
     Debtors will continue to operate their business as "debtors-in-
     possession" under the jurisdiction of the Bankruptcy Court and
     in accordance with the applicable provisions of the Bankruptcy
     Code and orders of the Bankruptcy Court.

     Pursuant to a Form 8-K filed on April 16, 2007 (the "April
     16th 8-K"), NCFC stated that the Commonwealth of Massachusetts
     Office of the Attorney General issued a Civil Investigation
     Demand to NCFC, which requests certain documents relating to
     NCFC's loan origination business practices in connection with
     an investigation conducted pursuant to the Attorney General's
     authority to enforce consumer protection statutes.

     Pursuant to a Form 8-K filed on July 5, 2007 (the "July
     5th 8-K"), NCFC stated that on June 21, 2007 the staff of the
     Pacific Regional Office of the Securities Exchange Commission
     (the "Commission") orally advised NCFC's outside counsel that
     the Commission had issued a formal order of investigation with
     respect to its investigation of NCFC.

     In addition, pursuant to the July 5th 8-K, NCFC stated that on
     June 29, 2007, NCFC was served with a complaint for declaratory
     judgment and other equitable relief (the "Complaint") that was
     filed on June 20, 2007, in the United States Bankruptcy Court
     for the District of Delaware (the "Bankruptcy Court") against
     NCFC, certain of its subsidiaries and certain of its directors.
     NCFC stated that the Complaint seeks a declaratory judgment on
     behalf of a purported class consisting of beneficiaries
     (the "Beneficiaries") of the New Century Financial Corporation
     Deferred Compensation Plan and the New Century Financial
     Corporation Supplemental Executive Retirement/Savings Plan
     (collectively, the "Plans") that, among other things, the
     Beneficiaries are a class, that the Plans' assets are held in
     trust for the exclusive benefit of the Beneficiaries, that the
     Plans' assets are not the property of NCFC's or any of its
     subsidiaries' bankruptcy estates, and that the Plans'
     assets be distributed to the Beneficiaries.

     In addition, pursuant to a Form 8-K filed on December 14, 2007
     (the "December 14th 8-K"), NCFC stated that the Bankruptcy Court
     entered an order establishing August 31, 2007, as the last date
     (the "Claim Bar Date") for all persons and entities holding or
     wishing to assert bankruptcy claims against NCFC and certain of
     its debtor-in-possession subsidiaries (collectively with NCFC,
     the "Debtors") to file a proof of claim form. According to the December
     14th 8-K, NCFC stated that through the Claim Bar Date, the dollar
     amount of claims filed against the Debtors exceeded $32 billion.
     NCFC stated that the Debtors are in the preliminary stages of their
     review of these claims and based on their preliminary review believe
     that certain of these claims will be subject to objection as being
     duplicative, overstated, based upon contingencies that have not
     occurred, or because they otherwise do not state a valid claim.
     NCFC stated that the foregoing amount does not include claims that
     were filed without a specified dollar amount, referred to as
     unliquidated claims, and claims that were filed after the claim bar date.


     Item 1119 of Regulation AB, Affiliations and Certain Relationships and
     Related Transactions.

     The information regarding this Item has been previously filed in
     a 424(b)(5) filed on February 28, 2007 (Commission File
     No. 333-130694-21).

     Item 1122 of Regulation AB, Compliance with Applicable Servicing Criteria.

     See Exhibit 33 and 34.

     Item 1123 of Regulation AB, Servicer Compliance Statement.

     See Exhibit 35.

                                     PART IV

     ITEM 15. Exhibits, Financial Statement Schedules.

     (a) List the following documents filed as a part of the report:

        (1) Not Applicable.

        (2) Not Applicable.

        (3)

        Exhibit 4 was filed as part of the Registrant's Current Report on
        Form 8-K filed on March 15, 2007 (Commission File No. 333-130694-21)
        and is incorporated by reference herein.

        Exhibit 4 Pooling and Servicing Agreement, dated as of February 1,
        2007, by and among Morgan Stanley ABS Capital I Inc., as depositor,
        Saxon Mortgage Services, Inc., as a servicer, Countrywide Home Loans
        Servicing LP, as a servicer, Wells Fargo Bank, National Association,
        as custodian, NC Capital Corporation, as responsible party, and
        Deutsche Bank National Trust Company, as trustee.

        Exhibit 31 Rule 13a-14(d)/15d-14(d) Certification.

        Exhibit 33.1 Saxon Mortgage Services, Inc.'s Annual Report on
        Assessment of Compliance for Year End December 31, 2007.

        Exhibit 33.2 First American Corporation's Annual Report on
        Assessment of Compliance for Year End December 31, 2007.

        Exhibit 33.3 Southwest Business Corporation's Annual Report on
        Assessment of Compliance for Year End December 31, 2007.

        Exhibit 33.4 FIS Tax Services' Annual Report on Assessment of
        Compliance for Year End December 31, 2007.

        Exhibit 33.5 Countrywide Home Loans Servicing LP's Annual Report on
        Assessment of Compliance for Year End December 31, 2007.

        Exhibit 33.6 Deutsche Bank National Trust Company's Annual Report
        on Assessment of Compliance for Year End December 31, 2007.

        Exhibit 33.7 Wells Fargo Bank, National Association's as custodian
        Annual Report on Assessment of Compliance for Year End
        December 31, 2007.

        Exhibit 34.1 Attestation Report on Assessment of Compliance with
        Servicing Criteria for Saxon Mortgage Services, Inc.'s (Exhibit
        33.1) for Year End December 31, 2007.

        Exhibit 34.2 Attestation Report on Assessment of Compliance with
        Servicing Criteria for First American Corporation's Report
       (Exhibit 33.2) for Year End December 31, 2007.

        Exhibit 34.3 Attestation Report on Assessment of Compliance with
        Servicing Criteria for Southwest Business Corporation's Report
       (Exhibit 33.3) for Year End December 31, 2007.

        Exhibit 34.4 Attestation Report on Assessment of Compliance with
        Servicing Criteria for FIS Tax Services' Report (Exhibit 33.4) for
        Year End December 31, 2007.

        Exhibit 34.5 Attestation Report on Assessment of Compliance with
        Servicing Criteria for Countrywide Home Loans Servicing LP's (Exhibit
        33.5) for Year End December 31, 2007.

        Exhibit 34.6 Attestation Report on Assessment of Compliance with
        Servicing Criteria for Deutsche Bank National Trust Company's Report
       (Exhibit 33.6) for Year End December 31, 2007.

        Exhibit 34.7 Attestation Report on Assessment of Compliance with
        Servicing Criteria for Wells Fargo Bank, National Association's as
        custodian (Exhibit 33.7) for Year End December 31, 2007.

        Exhibit 35.1 Saxon Mortgage Services, Inc.'s Annual Statement of
        Compliance for Year End December 31, 2007.

        Exhibit 35.2 Countrywide Home Loans Servicing LP's Annual Statement
        of Compliance for Year End December 31, 2007.

     (b) See (a) above.

     (c) Not Applicable.






                                      SIGNATURE

          Pursuant to the requirements of Section 13 or 15(d) of the
          Securities Exchange Act of 1934, the registrant has duly caused
          this report to be signed on its behalf by the undersigned,
          thereunto duly authorized.



                             By: Morgan Stanley ABS Capital I Inc.,
                                 as Depositor on behalf of the Registrant



                                      By:  /s/ Steven Shapiro
                                           Steven Shapiro
                                           Vice President
                                          (Senior Officer in Charge of
                                           Securitization of the Depositor)



     Date: March 28, 2008



     EXHIBIT INDEX

     Exhibit Document

        Exhibit 4 was filed as part of the Registrant's Current Report on
        Form 8-K filed on March 15, 2007 (Commission File No. 333-130694-21)
        and is incorporated by reference herein.

        Exhibit 4 Pooling and Servicing Agreement, dated as of February 1,
        2007, by and among Morgan Stanley ABS Capital I Inc., as depositor,
        Saxon Mortgage Services, Inc., as a servicer, Countrywide Home Loans
        Servicing LP, as a servicer, Wells Fargo Bank, National Association,
        as custodian, NC Capital Corporation, as responsible party, and
        Deutsche Bank National Trust Company, as trustee.

        Exhibit 31 Rule 13a-14(d)/15d-14(d) Certification.

        Exhibit 33.1 Saxon Mortgage Services, Inc.'s Annual Report on
        Assessment of Compliance for Year End December 31, 2007.

        Exhibit 33.2 First American Corporation's Annual Report on Assessment
        of Compliance for Year End December 31, 2007.

        Exhibit 33.3 Southwest Business Corporation's Annual Report on
        Assessment of Compliance for Year End December 31, 2007.

        Exhibit 33.4 FIS Tax Services' Annual Report on Assessment of
        Compliance for Year End December 31, 2007.

        Exhibit 33.5 Countrywide Home Loans Servicing LP's Annual Report
        on Assessment of Compliance for Year End December 31, 2007.

        Exhibit 33.6 Deutsche Bank National Trust Company's Annual Report
        on Assessment of Compliance for Year End December 31, 2007.

        Exhibit 33.7 Wells Fargo Bank, National Association's as
        custodian Annual Report on Assessment of Compliance for Year End
        December 31, 2007.

        Exhibit 34.1 Attestation Report on Assessment of Compliance with
        Servicing Criteria for Saxon Mortgage Services, Inc.'s (Exhibit
        33.1) for Year End December 31, 2007.

        Exhibit 34.2 Attestation Report on Assessment of Compliance with
        Servicing Criteria for First American Corporation's Report
        (Exhibit 33.2) for Year End December 31, 2007.

        Exhibit 34.3 Attestation Report on Assessment of Compliance with
        Servicing Criteria for Southwest Business Corporation's Report
        (Exhibit 33.3) for Year End December 31, 2007.

        Exhibit 34.4 Attestation Report on Assessment of Compliance with
        Servicing Criteria for FIS Tax Services' Report (Exhibit 33.4) for
        Year End December 31, 2007.

        Exhibit 34.5 Attestation Report on Assessment of Compliance
        with Servicing Criteria for Countrywide Home Loans Servicing
        LP's (Exhibit 33.5) for Year End December 31, 2007.

        Exhibit 34.6 Attestation Report on Assessment of Compliance
        with Servicing Criteria for Deutsche Bank National Trust
        Company's Report (Exhibit 33.6) for Year End December 31, 2007.

        Exhibit 34.7 Attestation Report on Assessment of Compliance with
        Servicing Criteria for Wells Fargo Bank, National Association's
        as custodian (Exhibit 33.7) for Year End December 31, 2007.

        Exhibit 35.1 Saxon Mortgage Services, Inc.'s Annual Statement
        of Compliance for Year End December 31, 2007.

        Exhibit 35.2 Countrywide Home Loans Servicing LP's Annual
        Statement of Compliance for Year End December 31, 2007.