The Altisource Asset Management Company stock has fallen by over 25% in the last six trading days. Not long ago a (Hitler) video was posted on YouTube and articles were circulating on the internet referencing that video. The general sense one got from these articles was that it may be a good idea to short AAMC stock and those who did must be pleased with themselves.
However, AAMC's woes run much deeper than their "sweetheart deals" with Residential (RESI). They depend on Ocwen and Altisource (ASPS) for too many things. I have provided evidence to suggest that Ocwen and Altisource function in a manner that benefits them at the cost of investors. It is impossible, then, that AAMC and RESI benefit using the same staff and approach.
The relationships which were meant to benefit AAMC will now begin to haunt them. ASPS will take AAMC and RESI down along with Ocwen. Hiring Shrek or any other fairytale character may not help much. Buddha taught that the intent is most important and AAMC-RESI set out with the intention of evicting people from their homes.
Ocwen are a menace to society. They push borrowers towards foreclosure by adding additional costs and not appropriately dealing with loss mitigation requests. Altisource provide to Ocwen malfunctioning software and an inefficient mechanism to deal with short sale requests. They are both deliberately designed in a manner that they increase foreclosures. The foreclosed properties are sold through Altisource who also earn listing commissions, Buyer's Premium, title and escrow fees, web tech fees, property preservation fees and more. This helps people like William Erbey and Ronald Faris make more money.
The investors however don't benefit from all this. Altisource sell properties at low prices due to a business-illiterate Asset Management team and remotely-located in-house real estate agents. As if that was not enough they are ably assisted by PPI (who damage properties more than preserving them), Asset/Title Resolution (who hope issues get resolved by themselves), HOA Coordination (who cannot identify HOAs) and Premium Title (who have been certified the worst escrow/title ever by at least 80% of the homebuyers who had the misfortune of dealing with them). It is a deliberately flawed system that benefits many individually but not investors, not homeowners, not homebuyers (unless you take into account companies like California Kingdom Builders who are provided "attractive" deals).
With increased regulatory scrutiny on Ocwen, it will be challenging for AAMC-RESI to get properties foreclosed. Altisource's high quality global workforce will make it challenging for them to successfully complete alternatives like deed-in-lieu. Altisource will hinder information gathering and delay resolutions. With Premium Title in the picture, it can get worse.
Ocwen stock is at its 52 week low. They missed earnings estimates. They blamed increased regulatory scrutiny for lower earnings.
AAMC-RESI obtain funds from institutions like Credit Suisse who are being investigated for money laundering. I have already mentioned that the flow of funds to and out of Ocwen subsidiaries (like Blue Valley Apartments, RESS etc.) must be investigated. Real estate transactions are an attractive option for money laundering and channelizing "unearned" fees.
Investors should avoid Ocwen-Altisource and look for better opportunities elsewhere in the market. The going will be very tough for all these companies. Sooner or later government agencies will act against these companies.
(The author has never traded in OCN, HLSS, ASPS, RESI and AAMC shares.)
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