Altisource takes losses as it realigns its business, reduces Ocwen ties
Altisource Portfolio Solutions recorded multimillion-dollar net losses in the fourth quarter and the full year for 2018, due to the reduction of the Ocwen Financial servicing portfolio and other repositioning activities.
The Luxembourg-based company took an $11.5 million net loss for the fourth quarter and a $5.4 million net loss for the full year. In comparison, it generated $286.4 million in net income for the fourth quarter and $308.9 million in net income for the full year in 2017.
"From a financial perspective, we substantially exceeded the midpoint of our adjusted pretax income and adjusted earnings per share financial scenarios, and generated strong adjusted operating cash. On the sales front, we are winning business and expanding relationships with some of the largest financial institutions in the United States. Operationally, we began to exit certain businesses and established Project Catalyst, to streamline the organization, focus on our larger opportunities, and help us achieve our longer-term financial objectives," William Shepro, Altisource's CEO, said in the company's earnings release.
Altisource's $805.5 million in service revenue during 2018 was 10% lower than in 2017, due in part to the Ocwen portfolio reduction, which is part of a renegotiation of the two companies' business relationship.
Altisource has agreed to "reasonably cooperate" with Ocwen to move loans and data off Altisource's servicing platform, according to an 8-K filing by Ocwen.
In return, Ocwen will make "reasonable" payments for the work; and shoulder half the costs related to incentivizing and retaining employees, up to $2.3 million. Ocwen will continue to pay for certain Altisource services on some of its servicing and subservicing portfolios.
Ocwen could sell its mortgage servicing rights, including the right to designate vendors. But the deal struck between the two companies "specifically includes a reservation of each party's rights to assert damage claims against the other party regarding such transactions."
Ocwen would consider such claims "without merit," according to the 8-K filing.
Although reductions in businesses lines like the Ocwen servicing portfolio have detracted from Altisource's revenue, there has been growth in other areas like the Owners.com's real estate sales platform.
Overall, real estate-related service revenue at the company has risen as mortgage-related service revenue has declined. Almost $158.7 milllion of service revenue came from the mortgage market in the fourth quarter of 2018, representing a reduction of almost 33% from the same period in 2017. In contrast, real estate-related service revenue was up by nearly 69% at $37.5 million.
Altisource is a spinoff of Ocwen Financial that was founded by Ocwen's former chairman William Erbey, but later became a standalone company.
As a standalone company, Altisource has worked to expand its customer base to reduce its dependence on Ocwen for revenue.