Altisource Portfolio Solutions, a provider of default servicing technology and other services to the mortgage banking industry, is cutting more than 800 jobs both domestically and overseas mainly due to shrinking revenue at its biggest client, mortgage servicer Ocwen Financial, which has seen a slew of regulatory actions and lawsuits during the past two years.
In a conference call with investors on Jan. 16, Michelle Esterman, chief financial officer for Altisource, said the layoffs are in response to significant declines in revenue at Ocwen, which has been Altisource's biggest customer since it spun off in 2009. The significant ‘road blocks’ that Ocwen faces have, in turn, impacted Altisource's performance and future outlook, she said.
As such, Altisource has developed an action plan for reducing its expenses that includes ‘eliminating non-revenue-generating businesses, reducing vendor fees and eliminating staff to reduce costs,’ Esterman said.
‘We have a very specific plan for expense reductions, including the recent elimination of over 800 individual employee positions and hundreds of contractors across our geographical footprint,’ she said, adding that if the plan had been complete at the beginning of the fourth quarter, expenses ‘would have been approximately $20 million lower.’
‘We expect to substantially complete the implementation of our plan during the first quarter of 2015, and we will be a leaner organization, more focused on a smaller number of high-impact initiatives,’ Esterman said, later adding that because Ocwen ‘is not likely to grow that much in the near-term,’ Altisource is ‘re-aligning’ its expenses ‘for this new reality.’
In November, Altisource announced that it is discontinuing its lender-placed insurance (LPI) business, due to uncertainties with industry-wide litigation and the regulatory environment.
Altisource officials said although the company had developed an LPI program that is ‘unique in its benefits to consumers and investors,’ it will be discontinuing the line of business to focus on other solutions for the real estate and mortgage banking industries.
Altisource has recently launched several new lines of business that it hopes will help offset the recent declines in revenue. During the conference call last week, Bill Shepro, CEO of Altisource, said the company was optimistic about its new business initiatives, which include ‘expanding our innovative online real estate marketplace â�¦ growing our origination services and technologies â�¦ attracting new clients to our comprehensive default related businesses â�¦’ and ‘â�¦ growing our property management and renovation services business.’
‘While the growth we anticipated to experience through Ocwen has been muted, we have tremendous opportunities in front of us from our growth initiatives,’ Shepro said, adding that ‘Ocwen remains a very important component of our business,’ as its ‘existing non-GSE portfolio should provide a long runway of earnings for Altisource.’
The company estimates that Ocwen's non-GSE portfolio will generate service revenue of about $2.1 billion over the next five years.
‘We have been focused on diversifying our revenue sources and expanding our business to appeal to a broader customer set for several quarters, including the launch of new products and multiple strategic acquisitions that position us for the future,’ Altisource officials said in a statement on Wednesday. ‘After a comprehensive process to evaluate the most effective way to pursue continued expansion in light of changing market conditions, we have made the difficult but necessary decision to re-align our employee base with the growth opportunities in front of Altisource. We are optimistic about new market opportunities, and the difficult actions we are taking now will better position Altisource to execute against our growth strategy over the long term.’