Tuesday 5 February 2008

Subprime investigator finds an informant

The Insurance Insider's coverage of Advisen's survey results yesterday (story here) included a mention to a story I hadn't seen:
Clayton Holdings, which provided due diligence to banks on some of the home
loans they turned into bonds, has agreed to co-operate with Andrew Cuomo in
exchange for immunity from prosecution.
Clayton describes itself on its website as "an information and analytics company serving lenders, loan buyers & bond issuers, servicers and fixed income investors in mortgage-related loans and other debt instruments".
According to an article in Advisen "Sources say one key issue AG Cuomo is looking at is underwriting "exceptions" granted by project managers working for Clayton on Wall Street accounts." Despite a share price drop of 87% since the beginning of the subprime crisis (see chart below), we are not aware of any lawsuits against Clayton.


The majority of subprime cases as tracked in Advisen's large loss database deal with not adequately disclosing and/or misrepresenting the nature of loans and CDOs. Evidence that firms knowingly did so would be a major boost to plaintiffs in subprime cases and increase the potential exposure for the D&O industry. This will certainly be tracked in the news including Advisen Front Page News.

No comments: