ASPS - Altisource

[ItsAValueTrap]

In the last quarter they bought back $129.1M in stock.  If they buy at the same rate in the current quarter, then they should do another early shareholder meeting to refresh the buyback authorization.  It doesn't look like they're doing that, which might suggest that the buyback has slowed down.

 

Don't you think it's prudent they reinvest cash into growing out their 3rd party revenue? Giving up another source of revenue to appease regulators might trip their debt covenants since the leverage ratio to cash flow goes up? I remember reading that being above a certain level a significant portion of cash flows must go to paying down the debt.

 

During Oct and Nov 2013, ASPS was paying $148/149 for shares.  http://www.sec.gov/Archives/edgar/data/1462418/000110465914009378/a13-24850_110k.htm

 

It seems that at the time of their earnings call, they were optimistic about the future.  Maybe they were hoping that they could settle and then close the Wells Fargo deal and other deals.  They probably did want to refresh the share repurchase authorization and to buy back more shares.

 

Then Lawsky started hazing the company.  He went after the company for a computer error that mostly didn't matter.  So maybe now they aren't going to go crazy with the buybacks because Lawsky will cockblock Ocwen from buying more MSRs.

 

2- Regarding "appeasement"

Shutting down the force-placed insurance business will cost Altisource as much money as what Ocwen paid to the CFPB.  And that's just for 5 quarters.  In the long run, I think Ocwen will be hurting because they won't be collecting kickbacks.

 

Ocwen will pay at least $100M to the NY DFS.  Combined, Ocwen and Altisource will pay well over $160M.  This "appeasement" is pretty darn expensive.

 

3a- Yes they should reinvest in their businesses first.

3b- Good point about their debt covenants.

[ItsAValueTrap]

I'm starting to think that the NY DFS is the reason why Altisource is exiting force-placed insurance.  It doesn't seem like the CFPB's style to pick on one company and to hurt them so badly.

 

It does seem like Lawsky's style to shakedown Ocwen/Altisource/Erbey in a way that might unintentionally hurt consumers.

 

What a ridiculous hazing.

[Fat Pitch]

I'm starting to think that the NY DFS is the reason why Altisource is exiting force-placed insurance.  It doesn't seem like the CFPB's style to pick on one company and to hurt them so badly.

 

It does seem like Lawsky's style to shakedown Ocwen/Altisource/Erbey in a way that might unintentionally hurt consumers.

 

What a ridiculous hazing.

 

I see Ocwen will be ramping up their origination efforts from their Lender One channel in the second half of next year. Erbey is targeting 2 billion per month. You think they will be allowed to retain the MSR or will Lawsky force them to sell it?

[yadayada]

Nothing about Lawsky leaving? I think odds are very low lawsky forces them to get rid of MSR's. It would be a v risky move on Lawsky's part. Push a player that is doing nothing wrong (the opposite really) against the wall like that, and it could get ugly for him. He does not have the facts on his side.

[ItsAValueTrap]

I'm starting to think that the NY DFS is the reason why Altisource is exiting force-placed insurance.  It doesn't seem like the CFPB's style to pick on one company and to hurt them so badly.

 

It does seem like Lawsky's style to shakedown Ocwen/Altisource/Erbey in a way that might unintentionally hurt consumers.

 

What a ridiculous hazing.

 

I see Ocwen will be ramping up their origination efforts from their Lender One channel in the second half of next year. Erbey is targeting 2 billion per month. You think they will be allowed to retain the MSR or will Lawsky force them to sell it?

 

I don't see why Ocwen would be forced to divest MSRs.  I don't see how it would benefit consumers.  Consumers benefit if:

A- There are fewer unnecessary transfers.

B- Servicers increase their servicing quality.  The CFPB metrics make sense in that regard.

Consumers and communities benefit the most when foreclosures are avoided.  Intelligent regulation would target that... and I think that the CFPB has done a good job there from the consumer's perspective.  No dual tracking, longer foreclosure timelines, single point of contact, etc. are helpful in keeping the rate of loan modifications higher.

 

I don't see how Lawsky will benefit... though arguably he is crazy.

 

2- I started looking into Lawsky's other regulatory crusades.

 

His attempts at regulating Bitcoin are bizarre.  Most of the people associated with Bitcoin do not like him or hate him.  I don't think that this will further his political ambitions.  I have no idea why he got interested in Bitcoin and thought it would be a good idea to regulate it.

 

He went after RelayRides and got a court injunction to force them to temporarily shut down in New York.  He did the same for Lyft.  I'm not sure if he is politically savvy because these seem like dumb moves.  A lot of consumers are sick and tired of the Taxi cartel and would welcome Uber's competitors.

 

This might make him a dangerous regulator because he's crazy.  I guess it's not safe to assume that he will not harm consumers.

[yadayada]

But if he is crazy, he is leaving in a few months... So who cares?

[usdtor05]

Because it's NY and God only knows who is next. Don't assume he is the worst option.

[sys]

i'd start by assuming that lawsky is intelligent and rational and if his actions appear irrational to you it is probably because you have incorrect or incomplete information.

[ItsAValueTrap]

If you're the NY DFS what might you want to do?

 

1- Protect consumers.

2- Appear to protect consumers.

3- Extort corporations to make you look good for your future political career.

4- Extort corporations to help fill the state's budget deficits.

5- Go easy on corporations so they return the favour once you leave.  This is what the SEC staff does to investment banks and market makers.

 

Going after Bitcoin did none of those things.  Maybe Lawsky thought that it would make him look good.  Unfortunately he miscalculated.

 

He's crazy.

[yadayada]

He makes the impression of a leftist social justice warrior to me really. He thinks regulation is good and protects the people etc. He made that reddit ama, and really thought people would like him for it. So yeah he is either stupid, or he has these fairy tale ideologies. If he did it for his political career, why is he leaving for the private sector in 2015?

[jay21]

i'd start by assuming that lawsky is intelligent and rational and if his actions appear irrational to you it is probably because you have incorrect or incomplete information.

 

Yes, that's where you start, but not necessarily where you finish.

[rayfinkle]

i'd start by assuming that lawsky is intelligent and rational and if his actions appear irrational to you it is probably because you have incorrect or incomplete information.

 

Yes, that's where you start, but not necessarily where you finish.

 

A few months back I had the chance to talk to a high-level staffer that worked for Eliot Spitzer for several years. This guy was with Spitzer from "6am to midnight, every day." I asked him questions about his perception of Spitzer's motivations in various regulatory activities (e.g., AIG). The gist of his answers was as follows:

-Spitzer had a strong moral compass--not that it was "objectively right" or "objectively wrong," but that he was dogmatic about his view of right & wrong, and passionate about enforcing along these dimensions;

-He was hugely ambitious--he wanted public victories within the constraints of sticking to his moral compass

-He assessed people, companies, & their actions in black & white: you're either a good guy or a bad guy. If a bad guy, I may come after you

 

Of course this oversimplifies, but I thought it was instructive for how a very smart, driven person can act in a way that seems overzealous.

[Fat Pitch]

Has anyone here looked into Altisource Rental Homes portal? It appears they want to be the property manager with lots of technology.  I'm pretty sure RESI will be a major client as their rental business picks up, but does anyone know of any other clients?

 

I recall on a conference call that the revenue for managing a single family home will generate ~$1,400/yr with 50% margins. I'm sure they will offer other auxiliary services such as renovation, selling of the property and disposing of deadbeat tenants.

 

[ItsAValueTrap]

i'd start by assuming that lawsky is intelligent and rational and if his actions appear irrational to you it is probably because you have incorrect or incomplete information.

 

Yes, that's where you start, but not necessarily where you finish.

 

A few months back I had the chance to talk to a high-level staffer that worked for Eliot Spitzer for several years. This guy was with Spitzer from "6am to midnight, every day." I asked him questions about his perception of Spitzer's motivations in various regulatory activities (e.g., AIG). The gist of his answers was as follows:

-Spitzer had a strong moral compass--not that it was "objectively right" or "objectively wrong," but that he was dogmatic about his view of right & wrong, and passionate about enforcing along these dimensions;

-He was hugely ambitious--he wanted public victories within the constraints of sticking to his moral compass

-He assessed people, companies, & their actions in black & white: you're either a good guy or a bad guy. If a bad guy, I may come after you

 

Of course this oversimplifies, but I thought it was instructive for how a very smart, driven person can act in a way that seems overzealous.

 

So what did the staffer think about Spitzer cheating on his wife?  What does it say about his moral compass?

[yadayada]

I love this picture:

http://blog.nj.com/fashiontoday/2008/03/large_clothes1.jpg

Fwiw, I know these types. Just look at Lawsky's pictures. He looks like a major bullhead. I had a roommate like that once. Everytime he would peel an avocado. So we told him to do it like this (because his way of doing it cost like several minutes:

But he kept doing it his inferior way lol. Because once these types get it in their head that something is the right way, they don't budge. Combine that with a strong sense of 'justice' (whatever the hell that may mean in his case) and you get someone like Lawsky. I don't think he is some calculating sociopath. He probably really thinks servicers are bad guys, and no matter what evidence against it he sees, he needs to be right. 

[jouni1]

Fwiw, I know these types. Just look at Lawsky's pictures. He looks like a major bullhead. I had a roommate like that once.

bullhead? like the fish?

[yadayada]

Fwiw, I know these types. Just look at Lawsky's pictures. He looks like a major bullhead. I had a roommate like that once.

bullhead? like the fish?

 

http://nl.urbandictionary.com/define.php?term=bullheaded

[merkhet]

Infidels never think of themselves as infidels.

[rayfinkle]

i'd start by assuming that lawsky is intelligent and rational and if his actions appear irrational to you it is probably because you have incorrect or incomplete information.

 

Yes, that's where you start, but not necessarily where you finish.

 

A few months back I had the chance to talk to a high-level staffer that worked for Eliot Spitzer for several years. This guy was with Spitzer from "6am to midnight, every day." I asked him questions about his perception of Spitzer's motivations in various regulatory activities (e.g., AIG). The gist of his answers was as follows:

-Spitzer had a strong moral compass--not that it was "objectively right" or "objectively wrong," but that he was dogmatic about his view of right & wrong, and passionate about enforcing along these dimensions;

-He was hugely ambitious--he wanted public victories within the constraints of sticking to his moral compass

-He assessed people, companies, & their actions in black & white: you're either a good guy or a bad guy. If a bad guy, I may come after you

 

Of course this oversimplifies, but I thought it was instructive for how a very smart, driven person can act in a way that seems overzealous.

 

The more I learn about the issue of force-placed insurance in particular I think that certain aspects of this are objectively despicable:

-Charging customers 3-10x private market insurance rates (sometimes amounting to tens of thousands of dollars and >10% of loan value)

-accelerating payments

-over-insuring vs. loan / property value

-kickbacks of course

 

If Erbey (or others) specifically structured deals that harmed homeowners as described above then that is egregious in the context of published regulatory guidance. Not to mention really unethical. Feels like a big economic impact from this sort of action is not out of bounds. Plus I can absolutely see how Lawky would be driven mad by this type of activity.

 

Another aspect of Lawsky's argument is that  ASPS is getting paid fees for doing little work. If the fees were market rate, then there's nothing wrong with this in itself, but he accuses them of paying higher rates relative to prior arrangement. The only way that this would make sense is if there's significant G&A savings for OCN baked in to working with ASPS.

 

I think the the related-party transaction point is secondary to the ethical issues from above...e.g., shareholders of OCN lose and ASPS shareholders gain, but this could be understood through research (e.g., Erbey owns more of ASPS).

 

 

 

 

[rayfinkle]

i'd start by assuming that lawsky is intelligent and rational and if his actions appear irrational to you it is probably because you have incorrect or incomplete information.

 

Yes, that's where you start, but not necessarily where you finish.

 

 

A few months back I had the chance to talk to a high-level staffer that worked for Eliot Spitzer for several years. This guy was with Spitzer from "6am to midnight, every day." I asked him questions about his perception of Spitzer's motivations in various regulatory activities (e.g., AIG). The gist of his answers was as follows:

-Spitzer had a strong moral compass--not that it was "objectively right" or "objectively wrong," but that he was dogmatic about his view of right & wrong, and passionate about enforcing along these dimensions;

-He was hugely ambitious--he wanted public victories within the constraints of sticking to his moral compass

-He assessed people, companies, & their actions in black & white: you're either a good guy or a bad guy. If a bad guy, I may come after you

 

Of course this oversimplifies, but I thought it was instructive for how a very smart, driven person can act in a way that seems overzealous.

 

So what did the staffer think about Spitzer cheating on his wife?  What does it say about his moral compass?

 

re: spitzer cheating, here's the paraphrase-

 

-Obviously I'm surprised by this, I was with him 12-18 hours a day

-The guy has serious issues, and proved dishonest

-Everything I saw him do in a professional setting was as per prior comments

[sys]

i'd start by assuming that lawsky is intelligent and rational and if his actions appear irrational to you it is probably because you have incorrect or incomplete information.

 

Yes, that's where you start, but not necessarily where you finish.

 

it is where i would finish.

 

the probability of a high-achieving person being competent, intelligent and rational is much higher than the probability that i have enough of the relevant information available to me to accurately judge his actions.

[ItsAValueTrap]

i'd start by assuming that lawsky is intelligent and rational and if his actions appear irrational to you it is probably because you have incorrect or incomplete information.

 

Yes, that's where you start, but not necessarily where you finish.

 

A few months back I had the chance to talk to a high-level staffer that worked for Eliot Spitzer for several years. This guy was with Spitzer from "6am to midnight, every day." I asked him questions about his perception of Spitzer's motivations in various regulatory activities (e.g., AIG). The gist of his answers was as follows:

-Spitzer had a strong moral compass--not that it was "objectively right" or "objectively wrong," but that he was dogmatic about his view of right & wrong, and passionate about enforcing along these dimensions;

-He was hugely ambitious--he wanted public victories within the constraints of sticking to his moral compass

-He assessed people, companies, & their actions in black & white: you're either a good guy or a bad guy. If a bad guy, I may come after you

 

Of course this oversimplifies, but I thought it was instructive for how a very smart, driven person can act in a way that seems overzealous.

 

The more I learn about the issue of force-placed insurance in particular I think that certain aspects of this are objectively despicable:

-Charging customers 3-10x private market insurance rates (sometimes amounting to tens of thousands of dollars and >10% of loan value)

-accelerating payments

-over-insuring vs. loan / property value

-kickbacks of course

 

If Erbey (or others) specifically structured deals that harmed homeowners as described above then that is egregious in the context of published regulatory guidance. Not to mention really unethical. Feels like a big economic impact from this sort of action is not out of bounds. Plus I can absolutely see how Lawky would be driven mad by this type of activity.

 

Another aspect of Lawsky's argument is that  ASPS is getting paid fees for doing little work. If the fees were market rate, then there's nothing wrong with this in itself, but he accuses them of paying higher rates relative to prior arrangement. The only way that this would make sense is if there's significant G&A savings for OCN baked in to working with ASPS.

 

I think the the related-party transaction point is secondary to the ethical issues from above...e.g., shareholders of OCN lose and ASPS shareholders gain, but this could be understood through research (e.g., Erbey owns more of ASPS).

 

Take a look at the CFPB metrics and the compliance report.

 

http://files.consumerfinance.gov/f/201312_cfpb_consent-order_ocwen.pdf

https://www.jasmithmonitoring.com/omso/reports/compliance-in-progress/

 

Ocwen is probably charging "commercially reasonable" prices for force-placed insurance.  Kickbacks on insurance on Fannie mortgages stopped June 2014 for everybody.

[usdtor05]

By rational do you mean rational for what is best for him politically or rational for what is best for the consumers? They may not be the same thing.

 

I also think the idea of highly competent, smart people always being rational may be subject to discussion. There are lots of high achievers who do irrational things here and there when emotions get the best of them. 

[sys]

By rational do you mean rational for what is best for him politically or rational for what is best for the consumers? They may not be the same thing.

 

I also think the idea of highly competent, smart people always being rational may be subject to discussion. There are lots of high achievers who do irrational things here and there when emotions get the best of them.

 

rational meaning only that he is doing what he thinks makes sense.  that could mean what he thinks would be best for ny consumers, it could mean what would be best for him personally.  i wouldn't presume to guess his motivations.

 

i agree that intelligent people can do irrational things.  usually, however; there are reasons which explain those actions.

[doc75]

i agree that intelligent people can do irrational things.  usually, however; there are reasons which explain those actions.

 

There's a big difference between (1) having "reasons" for doing something  and (2) being reasonable (ie. rational).  Obviously there are "reasons" for every conscious action anyone takes.