Clayton Holdings Reports 58% Increase in Net Income to $7.9 Million and Record Revenue of $239.2 Million for 2006.

SHELTON, Conn. -- Clayton Holdings, Inc. (NASDAQ:CLAY), a provider of information-based analytics, consulting and outsourced services for capital markets firms, lending institutions, fixed income investors and loan servicers, today announced net income of $3.5 million on revenues of $61.2 million for the quarter ended December 31, 2006 and net income of $7.9 million on revenues of $239.2 million for the year ended December 31, 2006.

Clayton's results for the quarter and year ended December 31, 2006 include:

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"2006, our first year as a public company, ended on a strong note," said Frank Filipps, Chairman and Chief Executive Officer of Clayton. "For the quarter and the full year, Clayton registered significant growth in revenues and profits and improvement in margins; this in a year when total originations declined by 14% and MBS issuance declined by 4%. Driving this performance were our ongoing efforts to migrate due diligence business to our centralized underwriting platform, accompanied by tighter operational and expense controls. Our results also benefited from the excellent growth in our non-due diligence businesses - surveillance, conduit, staffing, special servicing and consulting - which registered year-over-year revenue growth of 55% and accounted for 45% of fourth quarter revenues."

Other Fourth Quarter Highlights

-Centralized due diligence accounted for approximately 40% of due diligence revenues in the quarter, up from 20% in the fourth quarter of 2005. Due diligence services were performed on approximately 244,000 loans in the fourth quarter of 2006, as compared to 227,000 loans in the fourth quarter of 2005. For the full year, due diligence services were performed on 945,000 loans compared to 932,000 loans in 2005. Please refer to the supplementary information on the following pages for further detail.

-As of December 31, 2006, Clayton Fixed Income Services, the Company's credit risk management and surveillance business, was monitoring $419 billion in assets primarily for investment banks and for institutional investors in mortgage-related securities. This represents an increase of $110 billion, or 35.6%, since December 31, 2005.

-Gross margin improved to 40.0% in the fourth quarter of 2006, as compared to 37.4% in the third quarter of 2006. This was the result of a positive shift in Clayton's mix of business, increased use of centralized underwriting services and improved productivity during the quarter.

-Cash flow from operations for the fourth quarter of 2006 was approximately $14.8 million as compared to approximately $1.4 million in the fourth quarter of 2005.

-Early repayment of $15 million on the Company's term loan facility in December 2006. An additional $5 million was repaid in February 2007.

Management will hold a conference call today at 10:00 a.m. Eastern time. A live webcast of the conference call will be available online at http://www.clayton.com. Web participants are encouraged to go to Clayton's website at least 15 minutes prior to the start of the call to register, download and install any necessary audio software. Listening to the webcast requires speakers and RealPlayer[TM] software, downloadable without charge at http://www.real.com. Those without Web access can access the call by phone and should plan to dial in approximately 10 minutes prior to the call. The dial-in numbers are [phone] for domestic callers and [phone] for international callers. The participant passcode for both is 46739720.

A recording of the conference call will remain available until May 7, 2007, on Clayton's website and via telephonic replay. The replay dial-in number is [phone] for domestic callers and [phone] for international callers. The participant passcode for both is 12730792.

About Clayton Holdings, Inc.

Clayton Holdings, Inc., headquartered in Shelton, Connecticut, is an information and analytics company serving leading capital markets firms, lending institutions, fixed income investors and loan servicers with a full suite of information-based analytics, specialty consulting and outsourced services. Clayton's services include due diligence analytics, conduit support services, professional staffing, compliance products and services, credit risk management and surveillance and specialized loan servicing services. Additional information is available at www.clayton.com.

Safe Harbor Statement

Certain items in this press release may constitute forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and beliefs and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Clayton can give no assurance that expectations will be attained. Factors that could cause actual results to differ materially from Clayton's expectations include, but are not limited to, adverse changes in the mortgage-backed securities market, the mortgage lending industry or the housing market; the level of competition for its services; the loss of one or more of its largest clients; Clayton's ability to maintain its professional reputation; management's ability to execute Clayton's business strategy; Clayton's ability to recruit and retain additional qualified independent loan review specialists; and other risks detailed in Clayton's Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission on May 15, 2006, and other reports filed with the Securities and Exchange Commission. Such forward-looking statements speak only as of the date of this press release. Clayton expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in Clayton's expectations with regard thereto or change in events, conditions, or circumstances on which any such statement is based.

Reconciliation of Non-GAAP Measures

This earnings release contains non-GAAP financial measures. For purposes of Regulation G, a non-GAAP financial measure is a numerical measure of a registrant's historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of income, balance sheet or statement of cash flows of the issuer; or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. In this regard, GAAP refers to generally accepted accounting principles in the United States. Pursuant to the requirements of Regulation G, the Company has provided a reconciliation of the adjusted (non-GAAP) financial measures to the most directly comparable GAAP financial measures.

Adjusted net income and adjusted earnings per share are discussed in this earnings release because management uses this information in evaluating the results of the continuing operations of the business and believes that this information provides the users of the financial statements a valuable insight into the operating results. Additionally, management believes that it is in the best interest of its investors to provide financial information that will facilitate comparison of both historical and future results and allows greater transparency to supplemental information used by management in its financial and operational decision making. Management encourages investors to review the reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures that are provided within the financial information attached to this release.

Clayton is providing its current quarter GAAP results as well as financial results that have been adjusted for the impact of acquisition-related amortization and a loss from extinguishment of debt. The Company believes that these non-GAAP measures supplement its consolidated GAAP financial statements as they provide a consistent basis for comparison between reporting periods that are not influenced by certain non-cash or non-recurring items and are, therefore, useful to investors in helping them to better understand the Company's operating results.

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