ASPS - Altisource

[jay21]

Overall, I think that Ocwen, as the master servicer, generally controls the cards. To me the risk is more to ASPS if its contracts with Ocwen end up being rebid or reset to market rates. However, I do worry that in a highly regulated industry dragging out this spat is going to destroy a lot of value. You can't tell me that someone in a boardroom at Bank of America isn't saying, lets look at Nationstar for this next bulk servicing deal.

 

Except Nationstar has had a similar problem: http://www.insurancejournal.com/news/national/2014/08/04/336633.htm  and is also spinning out an entity similar to ASPS.

 

Also, wouldn't price be the determining factor for any bulk servicing deal?  It doesn't look like BoA or WF is drawing any heat from OCN's problems.

 

What was the resolution to Lawsky's 8 questions on Hubzu?  Did ASPS ever publish answers?

 

I wonder why I haven't heard much since April.

I think this answers your question

Finally, Ocwen and Altisource state in their public filings that rates charged under agreements with related companies are market rate,2 but Ocwen has not been able to provide the Monitor with any analysis to support this assertion.

 

It does not.  Lawsky sent a very similar letter to ASPS regarding Hubzu back in April: http://www.housingwire.com/ext/resources/files/Editorial/Lawsky-Letter-to-Ocwen-RE-Altisource-Hubzu.pdf

 

I have not seen a written response from ASPS and have not heard anything about the issue since.  My sense is that the issue was resolved satisfactorily.  Also, find it odd this letter is no longer on the DFS website.

 

It's very tough to get an accurate picture of what is happening.  From an incentives stand point, you have Erbey with a substantial portion of his net worth in his entities that he knows are being scrutinized by regulators.  And you have a relatively minor politician/regulator issuing press releases with an incomplete understanding of facts. 

[Liberty]

http://glennchan.wordpress.com/2014/08/07/altisource-recap/

[Evolveus]

Good Erbey interview from late 2013.  Sorry if this is a repost...http://youtu.be/Z34XVKjue_M

[yadayada]

It is interesting how the first Ocwen letter has disappeared from his website. It seems he is just trying to save face here. He already has this overzealous reputation, if it turns out he went after a innocent party then that will damage his credibility. So he has to find flaws here.

[Liberty]

http://glennchan.wordpress.com/2014/08/09/what-ocwen-and-altisource-do/

[yadayada]

what's up with all the investigations all of a sudden in Ocwen? Half of these press releases even get the facts wrong.

 

http://www.marketwatch.com/story/ocwen-investigation-initiated-by-former-louisiana-attorney-general-kahn-swick-foti-llc-investigates-ocwen-financial-corp-following-disclosure-of-department-of-financial-services-investigation-and-2014-08-10?reflink=MW_news_stmp

 

Fees this year have been 30 million... Not 65. Is it really productive to let a whole bunch of different law firms do the same investigation at once?

[ItsAValueTrap]

what's up with all the investigations all of a sudden in Ocwen? Half of these press releases even get the facts wrong.

 

http://www.marketwatch.com/story/ocwen-investigation-initiated-by-former-louisiana-attorney-general-kahn-swick-foti-llc-investigates-ocwen-financial-corp-following-disclosure-of-department-of-financial-services-investigation-and-2014-08-10?reflink=MW_news_stmp

 

Fees this year have been 30 million... Not 65. Is it really productive to let a whole bunch of different law firms do the same investigation at once?

 

Those are just ambulance chasing lawyers.  Big drop in share price + disclosure of news that management may have known about previously = ambulance chasing lawyer time.

[rayfinkle]

Several insider purchases in the last few days

[buylowersellhigh]

SEC subpoenas OCN over business dealings:

 

http://online.wsj.com/articles/ocwen-financial-received-sec-subpoena-in-june-related-to-business-dealings-1408384844

[whistlerbumps]

Different question that I am struggling with on ASPS.  Does anyone have any thoughts on the future for ASPS cash flows is OCN is unable to acquire more portfolios?  It seems to me like ASPS revenue would go into a continual decline as delinquent non-GSE loans run-off leading to a material decline in default related revenue.  Given that Hubzu and Originations have not shown the ability to generate enough revenue to offset this decline, I am worried that ASPS future cash flows will be much lower than 2014.  Has anyone else looked into this issue?

 

[yadayada]

I think the odds are very low that Ocwen actually is a trouble and cannot buy new MSR's or generate UPB otherwhise in the long term. If that is actually the case, they can sell their services to another company. And downside should be limited.

[yadayada]

Are they buying bck any stock right now? Seems like they borrowed a lot of money already? Would it be illegal to do this now since they have more information on this whole regulator debacle? Seems that with 2-400m$ they could nicely enhance shareholder value now.

[buylowersellhigh]

My guess, from the stock's strength since mid to high 80's, is that the company has been buying....

 

 

[krazeenyc]

Here comes Lawsky again.

 

https://finance.yahoo.com/news/ny-regulator-says-ocwen-backdated-160000507.html

[yadayada]

I  added like  literally fking 2 minutes before this happened.

 

I don't think this is new. If you look at complaints online about the banks you see similar things. Like people paying BAC for their mortgage and then having payments constantly sent back, and finally being evicted. Those sort of things. I think Lawsky is just saving face here. If you stalk a company like this long enough, you will find something bad. He can probably fine them for this, costs for OCN go up a bit, and within a year he will move on. He is basicly hurting consumers with his behavior.

 

would be seriously retarded if ocn has to move their MSR's away now. That would really hurt a lot of people. Those things are basicly locked in. Worst case, they get a fine and can't buy new MSR's. But right now it is trading at like 7x FCF. Seems like their housing auction platform can support current valuation alone.

[rayfinkle]

I  added like  literally fking 2 minutes before this happened.

 

I don't think this is new. If you look at complaints online about the banks you see similar things. Like people paying BAC for their mortgage and then having payments constantly sent back, and finally being evicted. Those sort of things. I think Lawsky is just saving face here. If you stalk a company like this long enough, you will find something bad. He can probably fine them for this, costs for OCN go up a bit, and within a year he will move on. He is basicly hurting consumers with his behavior.

 

would be seriously retarded if ocn has to move their MSR's away now. That would really hurt a lot of people. Those things are basicly locked in. Worst case, they get a fine and can't buy new MSR's. But right now it is trading at like 7x FCF. Seems like their housing auction platform can support current valuation alone.

 

so imagine a world where ocn "poof" disappears. Then ASPS' service revenue related to OCN MSR's goes out to auction? In case where new mgr buys them, they presumably choose the low cost/high quality platform (or, worst case, but very likely, use their internal platform even if objectively worse/more costly?)

[yadayada]

not sure about that. Part of their income also comes from non mortgage stuff. And earnings are depressed this year due to one time costs of loading up all the MSR's on OCN. So taking out some armageddon scenario next year they will earning between 250-400m$. If they used the full 400m$ of borrowing to buy back at 95$, then the market cap would be 1275m$ now. Without that you get a debt free company for under 10x earnings, and it seems hubzu could carry most of the valuation already within a few years.

 

But for OCN to dissapear, where would loans go? Back to banks? How do you load up a 500bn$ portfolio to another institution without lot's of friction. It would make zero sense. Other servicers dont have the capacity, and banks actually don't want these things and do worse with them. It would be completely irrational. I think the armageddon scenario here is a fine and no new MSR's. But in that case there is no downside for ASPS at current price.

 

So next year if OCN does not dissapear and also does not load up new loans ever, ASPS earnings will still rise.

 

I mean im just speculating here, if you disagree with any of these points I would love to hear. But you could potentially buy a growth high ROIC company for 3-8x next years earnings right now.. Seems  you really need some horrible things to happen here to lose. And if this is no big deal then this will be a multibagger.

[orion]

Ocwen Addresses Letter From New York Department of Financial Services

http://shareholders.ocwen.com/releasedetail.cfm?ReleaseID=877318

[wbr]

But for OCN to dissapear, where would loans go?

 

This is the key. Regulators can't have it both ways. They want banks to comply with capital requirements which forces them to unload MSRs, so the mortage servicing industry is essential. OCN is the biggest player, it would take years to shut it down and in the meantime the mortgages still need to be serviced.

 

Not to mention that we are far from anything like that. Lawsky is essentially a barking dog and even if he were to start biting (it's been quite some time and nothing has happend...just letters) his authority is limited to the state of NY which is 5% of OCNs business. Also I would question why it's always Lawsky throwing around shit. You would think that if there were real, serious problems that other authorities would have raised concerns as well. That has not happened yet.

 

And concerning ASPS' dependence on OCN: It's steadily improving. If you look at their moves it is clear that they are a technology company focusing on an industry which has historically underinvested improving operations by using technology. I think this positions them to grow in new areas even if OCNs growth slows/stagnates (or worse).

[ItsAValueTrap]

Lawsky is essentially a barking dog and even if he were to start biting (it's been quite some time and nothing has happend...just letters) his authority is limited to the state of NY which is 5% of OCNs business.

 

A lot of mortgages were packaged into securitizations.  The crappy securitizations tended to be highly diversified in geography, which means that most of them will have mortgages in New York.  And Ocwen is most interested in crappy securitizations with very high delinquency rates.  This makes it very difficult for Ocwen to avoid New York.

[yadayada]

Lawsky is essentially a barking dog and even if he were to start biting (it's been quite some time and nothing has happend...just letters) his authority is limited to the state of NY which is 5% of OCNs business.

 

A lot of mortgages were packaged into securitizations.  The crappy securitizations tended to be highly diversified in geography, which means that most of them will have mortgages in New York.  And Ocwen is most interested in crappy securitizations with very high delinquency rates.  This makes it very difficult for Ocwen to avoid New York.

 

but so far in H1 this year they did 114m$ in earnings. So that is 230m$ annualized, posibly even more then that. that is about a 7.5x multiple. Next year they will earn more regardless of what happens, so they will be earning almost a quarter of their market cap in the next 15 months. Im just trying to find reasons to not load up on this thing now :) . Valuation makes zero sense.

 

I wonder what happen to Hubzu though if OCN is gone. Seems most of Hubzu's revenue comes from ocwen now?

[wbr]

A lot of mortgages were packaged into securitizations.  The crappy securitizations tended to be highly diversified in geography, which means that most of them will have mortgages in New York.  And Ocwen is most interested in crappy securitizations with very high delinquency rates.  This makes it very difficult for Ocwen to avoid New York.

 

Thank you for correcting me. That makes things a bit more complicated.

 

I wonder what happen to Hubzu though if OCN is gone. Seems most of Hubzu's revenue comes from ocwen now?

 

At these levels it's a free call option. If they can make it work with 3rd parties and eventually spin it off it might fetch quite a good valuation.

[portfolio14]

I think Basel III has a long phase-in period up to 2018? So, time is on Lawsky's side. It looks like it's a matter who is going to blink first.

 

(long ASPS)

[yadayada]

The proposal requires that the LCR be at least equal to or greater than 1.0 and includes a multiyear transition period that would require: 80% compliance starting 1 January 2015, 90% compliance starting 1 January 2016, and 100% compliance starting 1 January 2017.[14]

 

From wikipedia. I think they still need partial compliance before 2018.

[portfolio14]

Thanks. I'm pretty sure I read that before but forgot.

 

The "hard" thing now is to decide between adding OCN or ASPS. I like ASPS' business better. But it looks like OCN is a more "leveraged" play.  ;)

 

The proposal requires that the LCR be at least equal to or greater than 1.0 and includes a multiyear transition period that would require: 80% compliance starting 1 January 2015, 90% compliance starting 1 January 2016, and 100% compliance starting 1 January 2017.[14]

 

From wikipedia. I think they still need partial compliance before 2018.