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Clayton Expects Growth in Servicing Side of Business

Clayton Holdings, a provider of analytics, consulting and outsourced services for the capital markets, lenders and loan servicers, earned net income of $3.1 million on revenue of $61 million during the third quarter as the company continued to expand its revenue sources.

The company said its revenue increased 12.8% from the year-earlier period, while its gross profit was up 14.1%.

However, earnings per share fell 48% to $0.14 in the third quarter. The number of shares outstanding increased from 12.4 million at Sept. 30, 2005 to $21.3 million at Sept. 30, 2006.

Frank Filipps, chairman and CEO of Clayton Holdings, called the results "strong," saying they demonstrate that efforts to build and diversify the company's revenue base are yielding results. He noted that revenue was up 13% while mortgage securitization volume in the third quarter was down 14% from the year-earlier period.

"This growth was fueled by year-over-year increases in surveillance, conduit support and special servicing revenue, and our improved margins reflect our continued focus on productivity and expense control," Mr. Filipps said in the company's earnings release.

In a conference call with investors and analysts, Mr. Filipps said the special servicing business has grown by 33% from a year earlier.

Clayton said that it performed due diligence and conduit support services on 263,000 loans in the third quarter of 2006, up from 234,000 in the third quarter of last year.

Clatyon's credit risk management and surveillance business monitored $387 billion in assets, primarily for investment banks and for institutional investors in mortgage-related securities at Sept. 30. That was an increase of 54.5% from one year earlier.

Despite a decline in mortgage origination volume in the third quarter, Mr. Filipps said the outlook remains positive for growth, with a higher percentage of nonprime mortgages being securitized than in the past.

"No doubt the market was a bit weaker in the third quarter but we do see positive longer-term trends," Mr. Filipps said.

Keith Johnson, president of Clayton Holdings, said that a number of current Clayton clients have approached the company about outsourcing special servicing.

"We are evaluating a significant expansion in this area," he said on the conference call, adding that a slowing housing market could drive up delinquencies and demand for special servicing. (c) 2006 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com http://www.sourcemedia.com

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