"We're looking to grow at a faster pace," says Mortgage Builder's Keven Smith without confirming or denying any deal.
"We're looking to grow at a faster pace," says Mortgage Builder's Keven Smith without confirming or denying any deal.

Mortgage Builder Software, a loan origination and servicing technology developer, is considering offers for the company, and Altisource Portfolio Solutions (ASPS) has emerged as the leading contender to buy it, industry participants familiar with the matter say.

It's unclear when a potential acquisition would close or how much Altisource would pay. But some Mortgage Builder employees have been notified of the pending deal with Altisource, a provider of technology, outsourcing and fulfillment services to the mortgage and real estate industries headquartered in Luxembourg.

Word of the possible deal comes at a trying time for smaller tech providers. With large public companies now backing many LOS vendors and the costs of developing technology updates rising to meet new regulatory compliance requirements, smaller, privately-held firms are under pressure to deliver mature technology and maintain market share.

Mortgage Builder President and CEO Keven Smith would not confirm or deny any deal with Altisource, but acknowledged that he's open to outside investment in the company.

"Privately held has worked for us up till now, and now I think we're looking to grow at a faster pace…We're not looking to sell out and have a competitor buy us and liquidate our customer base," he says. "So if people want to come along and talk, I'm always willing to talk to them, as long as it's somebody who's looking to invest and grow the business."

Altisource representatives did not immediately respond to requests for comment at close of business Friday.

Mortgage Builder, based in Southfield, Mich., has about 65 employees and roughly 125 to 150 lender clients, typically small to midsize mortgage bankers and financial institutions. While smaller than some rival vendors, Mortgage Builder boasts an established technology suite and loyal customer following, says Scott Cooley, a mortgage technology consultant who created one of the industry's first LOS's, Contour, in 1982.

"If you can get a company that's up and running and operational with a solid client base and effective product, you benefit from all the R&D and can pour a lot of money into sales and look to capture market share from the entrenched incumbents like Ellie Mae," says Cooley.

When Altisource was spun off from nonbank mortgage servicer Ocwen Financial Corp. in August 2009, it was primarily a provider of default servicing and REO asset management. It has since expanded its footprint into mortgage originations and may see Mortgage Builder as a venue to sell more of its origination services, adds Cooley. (Those services include an appraisal management company, underwriting fulfillment, settlement services and quality control reviews.)

"The LOS has a strong relationship with its customers, and the strategic reasoning for a company like Altisource would be related to capturing the customer base and relationship," he says. "Having an LOS gives you an ability to go after customers and help direct business and earn income beyond just your revenues from the LOS. If you can find a way to make $50 to $100 per transaction on the loans going through your system, it can be very profitable."

In addition to its core outsourcing and technology business, Altisource owns the Lenders One Mortgage Cooperative, which it acquired in February 2010. Mortgage Builder has long been the only LOS vendor with a preferred vendor relationship with Lenders One.

Mortgage Builder's origination technology suite includes its Architect loan origination system; Blueprint, a private-labeled version of Axacore's electronic document management system; Surveyance, an originator portal and mobile device module; and LoanXEngine, a customer relationship management and product and pricing engine it acquired in October 2012.

For servicers, Mortgage Builder offers the Colonnade servicing system of record. The platform was formerly known as G/Serv when it was owned by GCC Servicing Systems.

Mortgage Builder acquired GCC Servicing Systems in June 2012, but before that, the two companies shared a history dating back to 1977, when Glenn Liebowitz founded Glenn Computer Corp. as a mortgage servicing services bureau. Mortgage Builder was spun off as its own company in 1998 and GCC Servicing Systems was created as a unit of Glenn Computer Corp. in 2003. During the time the two companies were separate, both were headquartered in Glenn Computer Corp.’s three-story building in Southfield, Mich.

Altisource acquired default servicing technology developer Equator in August 2013, a deal that's valued at $70 million and up to an additional $80 million in contingency incentives.

In May, Altisource announced the launch of Altisource Labs, a venture capital unit to invest and incubate enterprise software, analytics and other corporate technology. It's unclear whether acquiring Mortgage Builder would fall under the auspices of Altisource Labs.

At the time of the Mortgage Builder/GCC deal, Liebowitz retained a minority stake in the combined company and Smith described himself as the "primary owner." In recent years, a series of acquisitions and investment activity has injected significant amounts of capital into LOS developers and raised the competitive stakes among vendors:

— CoreLogic already held a 38% interest in Dorado when it acquired the remaining stake in the company for $32 million in March 2011.

— Lender Processing Services acquired PCLender for $9.8 million in March 2011 and LendingSpace in July 2012 — though now, Black Knight Financial Services, the new company that combines LPS and Fidelity National Financial's ServiceLink business, is looking to offload PCLender, possibly by selling it back to its founder.

— Following its $45 million initial public offering in April 2011, Ellie Mae bought Del Mar DataTrac for $25.2 million in August of that year.

— Canadian financial services technology firm Davis and Henderson has made a strong push into the U.S. mortgage market by acquiring Mortgagebot for $232 million in March 2011, Avista Solutions for $40 million in May 2012, and Harland Financial Solutions for $1.2 billion in August 2013.

— After Accenture's attempts to acquire ISGN were unsuccessful, the business process outsourcing company acquired mortgage fulfillment firm Zenta in August 2011 and LOS vendor Mortgage Cadence in August 2013. Mortgage Cadence had received a multimillion dollar investment from private equity firm Monitor Clipper Partners in August 2010 and acquired Prime Alliance Solutions, a credit union service organization that specialized in mortgage technology, in June 2012.

"You start looking at the privately-held companies in our space and there are not too many of them left," says a mortgage technology executive and former Mortgage Builder employee, who spoke on condition of anonymity due to the sensitivity of the topic. "And if you look at the longevity of those companies, there aren't too many that have been around a long time."

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