Seeking Alpha released information on Altisource the other day and it helps define why the vast majority of the mortgage field services industry is teetering on the verge of collapse.
Altisource (NASDAQ:ASPS) reported total revenues of US$508M in the first 9 months of 2019, a drop of -18% yoy. Revenues in Q3 were down -31% to US$141M. The majority of the revenue decline in Q3 will be permanent and was driven by the drop in other service revenue following the sale of the Financial Services business, the discontinuation of the BRS business and the termination of information technology infrastructure management services following Ocwen’s (NYSE:OCN) transition to another servicing platform. As a result, other services revenue dropped from an average of around US$41M per quarter in the first 9 months of last year to just US$3.8M in Q3 this year. This will also lead to a large yoy drop in revenues in Q4. Early Stage Business revenues will also drop to close to zero as Altisource is winding down the Owners.com business which generated revenues of US$5.9M in the first 9 months of 2019.
Field Services and Mortgage and Real Estate Solutions showed declines of respectively -9% and -11% in Q3 (-6% and -15% 9m19). The decline was driven by a reduction in the size of the Ocwen services portfolio and number of delinquent loans. The trend in average number of delinquent loans serviced by Ocwen has been downwards, although stabilized somewhat in recent quarters. Hubzu inventory has also been on a downward trend.
One factor that temporarily affected revenues was the impact of Ocwen’s transition to another servicing system on default related referral volume and REO inventory conversion rates. The Company estimates that revenue was approximately US$7.8M lower in the third quarter of 2019 because of lower REO inventory conversion rates related to Ocwen’s transition to a new servicing system. We expect Marketplace revenues to pick up again by US$8M vs. Q3 as the impact of Ocwen’s transition to another servicing system fades. Assuming flat qoq numbers for Field Services and Mortgage and Real Estate Solutions would result in a total revenue for Q4 in line with Q3 and total revenues for 2019 of US$649M of which US$622M in service revenues. This would be in line with lower end of the company’s potential 2019 scenarios.
If anyone believes that the Industry is going to be getting any better, I strongly suggest they start digging into the real numbers available. If a firm is solely dependent upon REO assets, the reality is that they have all but dried up. Minimal assets means that National Association of Mortgage Field Services (NAMFS) members must pull more profit and assess even more chargebacks to simply break even.