[1]Clayton Holdings LLC, [2] a provider of loan due diligence, surveillance, REO management, and consulting services to the mortgage industry, announced that it was selected by Angel Oak Capital Advisors, LLC [3]to be the representation and warranty reviewer for a $150.4 million private-label securitization of non-prime whole loans.
“We selected Clayton for this role based on the company’s extensive experience in loan reviews and private-label securitization,” said John Hsu, Head of Capital Markets at Angel Oak.
The companies closed the transaction last month, with 555 non-prime whole loans originated by two of Angel Oak Capital’s affiliate companies: Angel Oak Mortgage Solutions and Angel Oak Home Loans. Clayton will provide an independent review of certain loans based on triggers defined within the transaction documents.
In the event that a loan becomes seriously delinquent or is liquidated with a realized loss, Clayton will complete a set of tests designed to determine whether the loan complied with the representations and warranties made about the loans to the trust and whether any observed test failure represents a material breach. Following Clayton’s reporting of a material breach, the trustee could then request repurchase or other remedy from the representation provider.
“One of the headwinds that has slowed the return of non-prime private-label securitization has been a concern over whether the trustee adequately represents the interests of the investors over the life of the deal,” said Mark Hughes, EVP at Clayton. “By formally naming a representation and warranty reviewer, Angel Oak has proactively addressed this concern. Going forward, we expect this kind of function to be included in other non-prime securitizations.”