Citing a desire to decrease its reliance on a single servicer and diversify its risk, Altisource Residential Corporation (RESI) revealed plans to significantly decrease its commitment to Ocwen Financial (OCN) in 2015.
RESI announced the plans in a call with investors, which finally took place Wednesday morning after being delayed last month because the company was working to “modify” its asset management agreement with Altisource Asset Management Corporation (AAMC).
RESI and AAMC announced a new asset management agreement after market close Tuesday. The companies both said that the now-modified asset management agreement will result in “substantial management fee savings” for the companies.
During Wednesday's investor call to discuss 2014's results and the company's plans for 2015, RESI CEO Ashish Pandey said that the company plans to transfer more servicing away from Ocwen, which until recently was the main servicer of RESI’s portfolio of loans.
According to information provided to investors, as of the end of 2014, RESI held $2.936 billion in unpaid principal balance. Of that, 64% (or $1.866 billion) is currently being serviced by Ocwen.
RESI already made a big move to distance itself from Ocwen, when it announced recently that agreed to transfer more than $1 billion worth of mortgage servicing (or 36% of its portfolio) from Ocwen to Fay Servicing and BSI Financial Services.
Pandey said that the RESI plans to decrease its “overall exposure” to Ocwen by conducting additional servicing transfers until Ocwen services 40% of RESI’s loans.
With Ocwen currently servicing $1.866 billion of RESI’s portfolio, the drop from Ocwen’s current share of 64% of RESI’s portfolio to RESI’s target of 40% would mean that approximately $691.6 million more of RESI’s servicing is set to be transferred away from Ocwen.
Pandey cautioned that RESI’s experience with Ocwen as a servicer has been a positive one. “I would like to emphasize that Ocwen servicing performance has been good on our loans,” he told investors.
Pandey added that there are many reasons for transferring servicing away from Ocwen.
“The reasons for servicing transfers is primarily to diversify our risk, develop a strong performance history with multiple servicers, expand investor base for our non-performing loan securitizations, and be agile enough to respond to situations that would warrant quick transitions to a different servicer due to servicer-specific issues,” Pandey said.
Pandey said that the company does not expect the impending servicing transfers to have any material impact on the company’s servicing expenses.
During the call, RESI’s executives also discussed their current portfolio of rental homes, which has grown to 835 loans as of Feb. 28, 2015.
According to Pandey, RESI has five company’s “focus areas” for 2015, including continuing the growth of RESI’s rental portfolio.
Pandey also said that RESI plans to position for a single-family rental securitization at some point in 2015.
Pandey said the company’s other focus areas are optimizing REO renovation and disposition processes, optimizing NPL funding through further securitizations, and continuing servicer diversification.