Non-Prime Securitization News

Clayton Holdings LLC, a provider of loan due diligence, surveillance, REO management, and consulting services to the mortgage industry, announced today that it was selected by Angel Oak Capital Advisors, LLC to be the representation and warranty reviewer for a $150.4 million private-label securitization of non-prime whole loans.

The transaction, which was closed last month, is comprised of 555 non-prime whole loans originated by two of Angel Oak Capital’s affiliate companies: Angel Oak Mortgage Solutions and Angel Oak Home Loans. In this role, 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.

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“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.

“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, executive vice president 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.”

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Angel Oak Capital Advisors is an investment management firm focused on providing fixed income investment solutions for its clients. Angel Oak Capital Advisors seeks to deliver attractive risk-adjusted returns through a combination of stable current income and price appreciation. As of 12/31/15, Angel Oak Capital has approximately $6 billion in assets under management across its mutual funds, private funds and separately managed accounts.