Clayton Posts $91.7 Million Loss on Underwriting, Due Diligence Decline

Clayton Holdings, Inc. said Thursday that it lost $91.7 million during the fourth quarter, as revenues in a key segment of the firm’s business fell more than 85 percent amid continuing problems in the mortgage market. The company absorbed a $92.8 million charge to reflect the impairment of goodwill and other assets tied to its transaction management business, which includes due diligence and underwriting; it had warned of the impairment charge in early December. Revenues, predictably, took a turn for the worse during the fourth quarter, falling to $24.7 million. That’s 58 percent off of the revenue total from one year earlier; much of the drop was driven by an associated decline in revenue contribution from Clayton’s transaction management business, which saw revenue drop to $4.9 million compared to $33.2 million in the fourth quarter of 2006. Despite the loss, the loan survelliance business saw revenue increase slightly during the quarter to $10.4 million, compared to $10.3 million in 2006. Some investors and lenders have turned to Clayton’s surveillance services during the downturn as confidence in the rating agencies has eroded, sources suggested to HW, driving a 29 percent increase in survellience-based revenue during 2007. The surveillance business monitored $454 billion in MBS assets at the end of last year, the company said. “The new issuance market for nonconforming securities remained virtually shut down in the fourth quarter and our volumes were negatively impacted,” said Frank Filipps, Clayton CEO. “However, our strong cash generation enabled us to repay $25 million of debt and renegotiate our bank credit facility, giving us greater flexibility to weather this market.” The company has been moving to position itself as a resource for servicers during the downturn, as the need to work with troubled borrowers in loss mitigation and default management outstrips available resources at many servicing shops. It announced a partnership with Experian in early February to provide services tied to ‘streamlined loan modifications’ under the joint Treasury/ASF “rate-freeze” program. For more information, visit

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