Mortgage origination services and technology at Lender Processing Services generated annual and quarterly revenue gains in the fourth quarter of 2010, including a 31.8% spike in settlement services revenue. But LPS said its Loan Facilitation Services segment operates in a sector likely to see marketwide potential revenue dive nearly 30% in 2011.
In supplemental materials to its 4Q10 financial statement, Jacksonville, Fla.-based LPS projected that the total revenue potential for LFS if it had every possible customer using its services—called core addressable market—will decrease to $4.6 billion in 2011, a drop of nearly 30% from $6.5 billion in 2010. A 10.9% increase in 2012 will recover some of the drop, but LPS projects the total available market revenue for those services will still only be $5.1 billion.
On a conference call with analysts, LPS CFO Thomas Schilling said despite the expected decline, LPS will look to gain market share to sustain the company’s performance.
“Given the current industry forecast expects the refi market to decline about 60% in 2011, our market share gains will be within a substantially smaller refi market,” he said.
LPS 4Q10 net earnings were $70.7 million, down 5.6% from 4Q09’s $74.9 million and down 10.1% from 3Q10’s $78.7 million. Consolidated revenue was $638.8 million in 4Q10, up 5% from $608.1 million in 4Q09 and up 2% from $626 million in 3Q09.
LPS posted annual net earnings of $302.3 million in 2010, up 9.6% from $276.7 million in 2009. Annual revenue was $2.5 billion, up 3.6% from nearly $2.4 billion in 2009. Ahead of releasing earnings after markets closed on Thursday, LPS announced a $0.10 per share quarterly dividend, payable on March 17.
The LPS technology and services businesses in mortgage servicing and default arenas closed out the year with quarterly declines. Default Services revenue declined 10% to $251.3 million in 4Q10, from $278.6 million in 4Q09.
New foreclosure filings increased in 4Q10, but Schilling said it’s not until foreclosure proceedings actually begin that LPS realizes revenue related to those operations. Proceedings declined 33% compared to 4Q09, he said.
“This is due to continued delays in the start of foreclosure proceedings caused by a variety of issues, including regulatory mandates, GSE directives, judicial actions and voluntary delays by the servicers,” Schilling said. While foreclosure starts are still indicative of future revenue potential, “the continued delays in foreclosure proceedings make the timing of future revenue difficult to predict.”
For all of 2010, only the default services segment experienced declined revenue, while technology and origination services increased.
Revenue in LPS’s combined origination and servicing technology division was $201.1 million, up 6.1% from $189.4 million in 4Q09 and up 2.1% from $196.9 million in 3Q09. For 2010, technology, data and analytics revenue was $762.6 million, up 7.8% from 2009.
