Fresh Approach Teams With Old Footprint

Having the right product when the market needs it is key for many mortgage companies. Executives of Altisource Portfolio Solutions say it also is time to innovate outdated business strategies.

Richard Powers, SVP of real estate services, says Altisource is doing just that when combining technology with resources operated "under the Ocwen flag."

He argues that the recent partnership with such a large specialty servicer bank has brought together the best of both worlds: A longstanding footprint in the market and a fresh approach to what is a growing problem, real estate-owned properties and REO disposition.

Industry data, including the Clear Capital January 2010 report, show that while the national REO saturation rate declined 0.7 percentage points to 24.8% compared to December 2009, increased REO activity in 2010 "will test investor appetite for distressed sales."

An interesting trend, according to Clear Capital, is that a recovery of home prices has generally been more notable in the regions with the highest level of REO saturation as higher levels of REO saturation experienced on the West 35.4% and in the Midwest 28.4%.

And these market developments are affecting the business strategy of companies like Altisource.

"The underlying fundamentals are quite strong. The default management business historically has been sort of a quieter space compared to the origination side of the business, but in the past few years it has changed," Mr. Powers says.

"I come from that quiet, origination side where the focus is on customer experience. Now the customer for us is the seller of the REO and the buyer of our asset so we have built a platform that allows us to effectively sell the REO."

At the same time, he adds, Altisource Portfolio Solutions is trying "to fundamentally change the way this business is conducted."

At the MBA conference in San Diego, Altisource announced the expansion of its full-service asset management that includes a new focus and fresh approach not only for REO management and disposition, but also property preservation and closing business. REO managers will not have to use different service providers.

Whenever one reviews the inventory situation, inventory remains quite robust.

"The supply is ample, the demand is quite strong. We just have to be diligent to our approach to the market."

And being diligent and successful in the 2010 marketplace, at least for Altisource Portfolio Solutions, means focusing on two types of resources that complement each other.

First, using an online REO marketing, offer processing and contract management platform, it differs from the traditional model where third-party brokers are the primary conduit by which these foreclosed properties are sold.

Plus, there is a very large vendor network that allows an efficient use of that management expertise to a platform user's advantage.

In a traditional sale parties involved are a listing broker representing the seller, when the offer comes in, there is need for document exchanges before an offer is presented.

Thanks to the new technology every offer is submitted online from either in-house local real estate brokers, or out of the network, or third-party participating brokers based in other states.

"The point is that, regardless of what broker network is being utilized, every offer comes through is submitted online so that there is complete transparency," he says.

"Every offers gets exposure and is properly evaluated so that you don't have a seller accept an offer prematurely, or makes a decision based on incomplete information."

Data transparency, one goal the company says it has already achieved throughout its processes, helps minimize fraud risk or unintentional mistakes.

Also to minimize property valuation mistakes Altisource Portfolio Solutions tries to diversify data sources by using a combination of a broker price opinion, with backend valuation analytics during an acceptance offer.

While there are bits and pieces that together help create a more accurate valuation and underlie the Altisource Portfolio Solutions approach to the market, Mr. Powers says, but the principle is simple, it is based on considering the needs of buyers and sellers and transparency of information.

Another example would be an automated model designed to facilitate offer acceptance and counteroffers.

It takes into account a variety of factors that help set up the listing price and offer processing, since a full cash offering tends to be more closely scrutinized, as opposed to a buyer looking for FHA financing.

The company proprietary model helps obtain more accurate evaluations.

Buyer demand is split between "a very active investor market, and at the lower price points, first-time home buyers will remain very active until the tax incentive deadline expires."

While some market data suggest that investors are becoming more actively involved, as least in the REO market, according to Altisource Portfolio Solutions, about 45% of all buyers are investors.

"Non-investor buyers of all sorts are running ahead of what the investor component is, at 55%," he said.

But one should keep in mind that besides first-time buyers, many active buyers today are actually buying their second or third residence.

Beyond investor activity, he says, "any time you have inventory getting cleared, it's a good sign. It shows investors are seeing value in the market ... so that in itself is a positive development."

The executive is cautiously optimistic.

According to Mr. Powers, it is clear that since the inventory clearing process will continue to take time, any sales, however small in quantity are bound to help the market get to a healthier place.

"Any sale is preferable to inventory that is not moving.

"The market is in a much better place than it was even just one year ago." he said.

Rob Hicks, first vice president of industry relations for the field services and asset management group at Lender Processing Services, says community relations is a key area in dealing with REO volume. Vacant property statutes are being proposed by many local governments across the country. "Field service companies are well positioned to enact with code enforcement officials."

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