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Clayton Holdings Receives Industry’s First Ranking From Morningstar As RMBS Deal Agent And Representation And Warranty Reviewer

Fri May 13, 2016

SHELTON, Conn., May 13, 2016 — Clayton Holdings LLC, a leading provider of loan due diligence, surveillance, REO management, consulting, valuation, title and settlement services to the mortgage industry, announced today that Morningstar Credit Ratings, LLC has ranked the company as both a Residential Mortgage Backed Securities (RMBS) Deal Agent and as a Residential Representation and Warranty Reviewer. In both categories, Clayton was ranked MOR RV2 with a forecast of “Stable.”

This is the first time that any rating agency has ranked a company in either category. The concept of a deal agent is relatively new and is still evolving, but most observers expect that it will include functions of servicer surveillance and portfolio oversight in addition to the loan review responsibilities of the representation and warranty reviewer contained in recent private label securities. “The need for an independent third party to protect investors’ interests is viewed as vital to the re-emergence of the private-label securitization market,” Morningstar noted. “This view is shared by the U.S. Treasury Department and the Structured Finance Industry Group (SFIG), two entities that have supported and promulgated the development of the deal agent concept via SFIG’s RMBS 3.0 initiative.”

Morningstar chose to issue two separate ratings; one for deal agent and one for representation and warranty reviewer.  The role of representation and warranty reviewer is designed to provide an independent third party review of certain loans based upon trigger events defined within the transaction documents. Clayton was most recently hired to perform this service for Angel Oak Mortgage Trust 2015-1.

In assigning its rankings, Morningstar noted that, “Clayton is uniquely positioned to fulfill the roles of a deal agent and a representation and warranty reviewer. The full suite of mortgage industry services offered by Clayton and its subsidiaries positions the company well to fulfill the anticipated role of the deal agent and representation and warranty reviewer as well as any customized requirements that may be mandated by industry stakeholders.”

The release observed that, “Clayton has reviewed more than 12 million loans consisting of many varied loan types, encompassing conforming and non-conforming loans. Since 1997, the company’s surveillance and file review team has performed independent evaluations of residential mortgage-backed securitizations, asset-specific reviews, and servicer performance assessments and maintains a database of 7.6 million mortgage loans for trending and performance analysis. Since 2012, Clayton has performed more than 300,000 loan reviews for mortgage industry stakeholders, often related to external regulator mandates as well as more than 200 mortgage servicing-related operational reviews.”

The agency said its “assigned rankings reflect Morningstar’s assessment of Clayton’s operational infrastructure and client-driven performance results in its respective lines of business. The ‘Stable’ forecast for both rankings reflects solid vendor performance for Clayton’s client base deriving from a tenured management team, a highly flexible technology environment, a pervasive enterprise-wide risk-management infrastructure, and a focus on client-driven performance results.”

Commenting on the rankings, Clayton’s Jeff Tennyson said: “We are extremely pleased with Morningstar’s assessment of Clayton’s core capabilities. Deal monitoring, portfolio surveillance, servicer oversight and file reviews are existing core competencies of Clayton.  We are excited to be recognized by Morningstar for the utility in these newly evolved functions of deal agent and representation and warranty reviewer and hope that Clayton’s demonstrated preparedness serves as a further catalyst to reinvigorate the private-label securitization market.”

About Clayton Holdings LLC
Clayton Holdings LLC, a subsidiary of Radian Group Inc. (NYSE: RDN), provides risk-based analytics, residential loan due diligence, consulting, surveillance and staffing solutions. The company’s subsidiaries include: Green River Capital, customized REO asset management and single-family rental services; Red Bell Real Estate, advanced AVMs, BPOs and technology to acquire and track performance of loan portfolios and NPLs; ValuAmerica, national title and appraisal management company and vendor management technology provider; and Clayton Euro Risk, global services. For more information, call 877.291.5301 or visitwww.clayton.com.