Clayton’s New Tool Assesses Servicing Values and Risks

New regulation is building up lender and investor demand for accurate assessments of the value and loan default risks involved in a mortgage servicing rights sale.

Clayton Holdings LLC is responding to the growing volume of MSR transactions generated by recent regulatory changes with the Clayton MSR Transaction Service, designed to identify and understand “the risk in MSR trades.”

It is equally critical for buyers and for sellers, says executive vice president of Clayton Holdings, Tom Donatacci, “to efficiently identify the value and risks in the MSR deals that are coming to market.”

Clayton market-tested MSR Transaction Services through a number of banks and investors, including private equity and hedge fund buyers, and special servicers to identify risks inherent in acquiring MSRs. The Shelton, Conn.-based provider of risk analytics, underwriting and real estate surveillance services reports the number of such transactions is increasing in frequency due to new regulatory demands that include capital requirements.

The Clayton MSR Transaction Services tool enables users to confirm “originators, servicers and their third-party vendors” are in compliance with industry policies, guidelines, regulations, standards and best practices.

It addresses concerns about liability from previous servicer errors by performing escrow and advance fee reconciliation, compensatory fee exposure assessments and ARM audits.

Reviews of lien search reports, payment and collection history help users identify “underlying collateral and borrower risk.”

Also, to ensure “a seamless MSR transfer,” Clayton said, the new tool evaluates and selects “an appropriate subservicer” based on a set of critical data points.

Clayton’s loan file reviewers have been providing consulting, loan review and surveillance services to banks and investors for more than 20 years, says Donatacci, so the new service is expected to benefit from their expertise.

For example, upon request, Clayton provides “more extensive assessments” that include a full review of credit, compliance and valuations.