Clayton Holdings: Due diligence for a transparent securitization process

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For more than 25 years, Clayton Holdings has been the go-to provider of residential and commercial real estate advisory services, analysis and support services for financial institutions, investors and government entities. Clayton has provided due diligence on more than 12 million loans since 1989, and on 75% of new private-label deals since 2014.

“Clayton is the longest standing due diligence firm in the industry, with a due diligence workforce of hundreds of underwriters and team leads,” said Jeff Tennyson, chief operating officer of Clayton. “We offer unparalleled breadth and depth and are uniquely positioned to bring impartial, effective solutions to current market challenges and provide the most robust experience to our clients.”

With the broad range of regulatory reforms being implemented since the financial crisis, investors need transparency into the securitization process more than ever.

“All securitization participants will be playing by a new set of rules and must adapt their policies, procedures and systems in order to execute on transactions successfully,” Tennyson said. “With our extensive database, we help our clients benchmark, track and trend loan portfolio and operational performance, and provide greater insight into regional and national mortgage trends.”

Clayton helps clients with technologies that include:

InCyt: A dynamic analysis and reporting platform that allows loan-level mortgage analysis at the click of a button, helping to pinpoint risk; providing insight into trends and relationships among various data points; and identifying potential performance issues.

eCLAS: Enhanced Clayton Loan Analysis System, offering clients multiple review scopes, and the ability to customize specific areas of the report. The eCLAS open architecture allows easy integration with clients and third-party vendors, and each client can manage its own ongoing loan reviews using exclusive, safeguarded client portals.

CRM and Appian technologies: CRM offers extensive loan-level database and capabilities for robust analysis and benchmarking. Appian additionally offers each client the ability to customize project workflow, providing transparency on task flow and deadline control.

“From front-end risk quantification to dynamic performance monitoring, our tools assist in evaluating mortgage loans to allow for clearer and more confident decision making,” said Tennyson.

Clayton combines its significant experience in credit risk management and loan surveillance with its deep regulatory knowledge to give customers best-in-class solutions. Clayton provides expertise in all aspects of compliance guidelines, including TILA-RESPA, ATR/QM, FACTA, HMDA and the new NRSRO rules, and was selected by Weiner Brodsky Kider to provide loan review expertise in their CFPB examination readiness program.

“Our subject-matter experts have held significant positions in the banking, residential, and commercial real estate industries and bring years of lending and operating experience to Clayton,” said Joe D’Urso, president of Clayton.

The company’s internal controls include organizational design, written policies and procedures and operating practices that protect people and assets. This integration of key activities helps identify irregularities and reduce risk to a reasonable level as quickly as possible.

“Our clients appreciate that Clayton delivers categorical honesty and independence, providing them with an objective look into their files, policies and business,” D’Urso said. “We conduct our business with uncompromising integrity and our employees are committed to upholding solid principles of corporate governance.”

In anticipation of the return of non-agency securitization, Clayton has invested significantly in resources and infrastructure to ensure its service offerings satisfy all the new regulations, while preparing clients for what’s still to come. Clayton offers an experienced management team for overall securitization offerings and a state-of-the-art platform for pre-securitization due diligence and reps and warranty repurchase reviews.

Clayton also provides upgraded post-securitization portfolio surveillance capabilities, including vertical risk retention, expanded data availability, repurchase focus, waterfall cash flow modeling, and Reg AB compliance reporting.

Similarly, Clayton has also been extremely active in the development of the emerging single-family rental (SFR) securitization market.

“Over the past year and a half, we’ve seen SFR securitizations go from zero to 15 deals, backed by the cash flows of 57,000 properties, valued at $11.3 billion. And we’ve been an important piece of that, performing all of the valuation and basic property-level diligence on all 15 securitizations,” said D’Urso. “Given the challenges multi-borrower deals present, there will be a need for a party in the deal to aggregate the information, absorb it, manipulate it and then report out to the trustee, the servicer and, ultimately, the bondholders. Clayton is already working with rating agencies and issuers to fill this role.”

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