Standard & Poor's this week reaffirmed Clayton Holdings as a third party due diligence provider for RMBS after the rating agency completed its annual review of the company.
The third party due diligence provider has been approved by S&P since 2009, when the ratings agency first began evaluating due diligence providers under its new criteria.
“We are pleased that S&P has again recognized our due diligence capabilities,” explained Paul Bossidy, Clayton's chief executive officer. “S&P’s ongoing re-evaluation process sends an important message to the marketplace: Going forward, only the most qualified, independent firms will review the collateral backing non-agency securities.”
The due diligence provider said it had invested significantly in its resources and infrastructure to ensure that its service offering satisfy all the new regulations and ratings requirements. "Clayton is committed to playing a meaningful role in the evolution and execution of the new market standards, updating our processes, systems and reporting packages, and reflecting that information back to our clients," the company said in a e-mailed response to ASR. "Undoubtedly, it’s going to take time to sort out the new rules and provide the market with a clear path forward, but private label securitization will come back. "
The new, more stringent ratings requirements for independent third party firms is one example of how the bar has been set higher for the securitization market. These firms must meet requirements in order to be approved and/or have their results used by rating agencies in the ratings process. Rating agencies may require a completed questionnaire and/or conduct an on-site review to assess the staffing, infrastructure and capabilities of the company.
"Regulations now require an issuer or independent third party to perform a review of the assets underlying an ABS in a registered transaction," said the firm. "However, rating agencies have indicated that they expect the TPR to be performed by an independent due diligence firm. Due diligence results can directly impact the rating agency’s credit view of the securitized pool."