Altisource Portfolio Solutions SA has entered into non-binding letters of intent with Ocwen Financial Corporation to acquire certain fee-based businesses related to Ocwen's recently acquired Homeward Residential Holdings Inc. mortgage servicing and origination business platform and Ocwen's anticipated purchase of the mortgage servicing platform from Residential Capital LLC for a combined purchase price of $218.6 million.
"These fee-based business acquisitions are strategically valuable to Altisource, helping us maintain our business model with Ocwen, expanding our footprint and providing significant revenue and earnings growth to Altisource," said William B. Shepro, chief executive officer of Altisource. "We believe the combined purchase price will provide a projected unlevered pre-tax return to Altisource of approximately 20 percent."
The letter of intent for the Homeward Residential Fee-Based Businesses contemplates that Altisource will acquire from Ocwen all of the capital stock of Beltline Road Insurance Agency Inc., Power Default Services Inc., Power REO Management Services Inc. and Power Valuation Services Inc., the Mortgage Asset Recovery Special Services Division of Stratus Asset Management Group LLC and certain designated intellectual property and information technology assets related to Homeward Residential Holdings Inc. platform.
"By selling these non-core assets, Ocwen is able to achieve a greater projected return on the Homeward and ResCap servicing acquisitions and to continue to focus primarily on growing our core residential and commercial servicing businesses," said Ronald M. Faris, chief executive officer of Ocwen. "Having an outlet for disposition of peripheral mortgage-related assets significantly enhances Ocwen's competitive positioning for future servicing platform acquisitions that include non-core operations."
The letter of intent for the ResCap Fee-Based Businesses contemplates that Altisource will acquire from Ocwen certain fee-based businesses related to default management and charge-off services, designated intellectual property and information technology assets related to Ocwen's anticipated purchase of Residential Capital LLC's mortgage servicing platform.
In connection with the proposed transactions, Altisource and Ocwen will execute a five-year extension until 2025 of certain existing services agreements. Additionally, Ocwen will not develop similar fee-based services that would directly or indirectly compete with the services provided by Altisource to the Homeward Residential Holdings Inc. and Residential Capital LLC servicing portfolios. The proposed purchase price is subject to working capital and other adjustments, and consummation of the transactions is subject to a number of contingencies that are customary for a transaction of this nature, including various third party and regulatory consents and approvals. The purchase of the ResCap Fee-Based Businesses is also subject to Ocwen's closing of the underlying acquisition of the mortgage servicing platform from Residential Capital LLC, which is expected later in February 2013.