Sources: LPS Enters REO Auction Business
[Update 1 adds LPS' announcement.] Lender Processing Services, Inc. (LPS) is set to enter the burgeoning REO auction business, numerous sources confirmed to HousingWire on Friday afternoon. The Jacksonville-based provider of technology and services to the mortgage and real estate industries on Monday officially announced the acquisition of Chicago-based Rising Tide Auctions. The auction company was originally formed as a partnership between NRC Realty Advisors, LLC, a Chicago-based auction company, and a group of REO industry experts. Rumors about the potential acquisition had been circulating throughout the week. The purchase was finalized Friday afternoon, sources said. Terms of the acquisition were not disclosed. The company operates the nation's largest third-party REO outsourcer, according to proprietary data compiled by REO Insider, a sister publication to HousingWire. Rising Tide Auctions is led by industry veteran Evan Gladstone, a founder at NRC; Gladstone is set to join LPS to run the auction business, along with other executives from Rising Tide, sources said. A review of the Rising Tide website, which as of Friday afternoon was no longer available, showed that industry legal veterans Berry Laws and Gerald Shapiro were also part of the executive team at Rising Tide. Laws is a partner at the Kansas City-based law firm of Martin, Leigh, Laws & Fritzlen; Shapiro is co-founder of LOGS Network, a national network of law firms providing legal representation to mortgage lenders and servicers. Representatives at each firm said they could not comment on the transaction, but noted that each executive's involvement was personal in nature. "We've been hearing ideas about this sort of vertical integration in REO for some time," said one servicing executive at a large bank, under condition of anonymity. "Auction is a volume business, after all. If you've got the volume, it makes sense to do something like this." Other executives told HW that the move by LPS wasn't likely to be indicative of a larger industry trend. "We sure as heck aren't looking at owning our own auction platform, because the technology requirements here can be large, and operating overhead can be prohibitive," said another executive at a California-based servicing platform, who asked not to be identified. "But for the right firms, it can make sense." LPS is certainly entering a crowded field, which includes major competitors Williams & Williams -- whose web site says the firm auctions more than $1 billion in real estate annually -- and Texas-based Hudson & Marshall, which has long been a fixture in the bank-owned auction business. California-based REDC is also a major player in the REO auction market, having auctioned off $3.8 billion in residential real estate in 2008; other firms with presence in the REO market include California-based auctioneers Kennedy Wilson, and Great American Home Auctions. A number of other firms, including California-based LFC, operate online-only auction platforms for real estate and distressed mortgage notes. But it's likely that this type of high volume, and particularly the promise of more volume to come in the years ahead, is drawing more competitors into the auction space. As HW reported on October 19, analysts at Royal Bank of Scotland recently estimated that as many as 2.7m properties are 90 days or more delinquent and/or in the process of foreclosure. Paul Jackson is the publisher of HousingWire.com and HousingWire Magazine.