Ladies and gentlemen, thank you for standing by, and welcome to the Altisource Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. . Please be advised that today's conference is being recorded. . I would now like to turn the conference over to your speaker today, Michelle Esterman, Chief Financial Officer. Thank you. Please go ahead.

Thank you, operator. We first want to remind you that the earnings release, Form 10-Q and quarterly slides are available on our website at www.altisource.com. These provide additional information investors may find useful.

Thanks, Michelle. Good morning, and thank you for joining today's call. This morning, I will discuss the progress we are making in our core origination and default businesses and provide an update on our investment in Pointillist. While the last 1.5 years presented a challenging operating environment for Altisource, I am very excited about the future for our origination and default businesses. Beginning with our origination business on Slide 3. I'm pleased with the second quarter performance and, more importantly, with our long-term prospects. This business generated $14.5 million in revenue in the second quarter, representing 16% growth compared to the same period in 2020, outpacing the estimated 13% growth in the overall origination market. More importantly, we believe our attractive origination business model should support rapid growth. Slides 4 through 6 highlight our business model and growth opportunities. Beginning with Slide 4, Altisource is the manager of the 241-member Lenders One Mortgage Cooperative. As the manager, we offer a suite of solutions designed to help the members improve their profitability and compete against larger and better capitalized mortgage companies. We also provide the members with data and market intelligence to drive better business decisions and improve profitability. We estimate that the Lenders One members collectively originated approximately 15% of residential mortgages in 2020. This is roughly the same volume of the top 3 lenders combined.

. Your first question comes from the line of Mike Grondahl with Northland Securities.

Bill, when you were saying some high-level comments about Lenders One, were you then saying that you're looking at all options for Lenders One? I couldn't quite tell. My head was a little bit stuck on Pointillist at that point. But were those comments in reference to Lenders One or Pointillist?

So we made -- so first of all, good morning, Mike. Nice to talk to you. We made comments both about Lenders One and Pointillist. So with respect to Lenders One, we are talking about our whole origination business, where we believe we can create significant shareholder value, given the progress we're making and the opportunities we have in front of us. And when we look at the market and compare ourselves to some of the other firms that have recently executed capital market transactions, we believe it makes sense for us to explore ways to improve shareholder value for us. And so we listed a variety of options in my prepared remarks that we're considering or evaluating.

Got it. And that pertains to the origination business? Is that the right way to think about it?

That's correct.

Okay, great. And then...

And then, Mike, on Pointillist, Pointillist is also making really good progress. Its revenue has grown 3x from the end of the year. We're not disclosing the actual revenue amount for competitive reasons but it's making very significant progress. And it, too, at some point, plans to look to raise growth capital to continue and to help accelerate Pointillist's growth.

Got it. Do you think that's 2021 or is it more likely 2022? How do you handicap that?

So I would say, Mike, with respect to the origination business, we're working with the Board to explore ways we can increase shareholder value. It's hard to -- any time you go through this analysis and process, it's very difficult to handicap when it's going to happen, but we'd like to think we'd have more clarity by the end of this year, certainly. And on Pointillist...

Got it. And then -- yes, Pointillist?

It's still to be determined. We're making really good progress. And it'd be hard for me to tell whether something will happen this year or sometime next year but I think it's within the next 6 to 12 months.

Got it, okay. And then just on the default business, once the CFPB's kind of moratorium is lifted at year-end, how long does it take to kind of see that ramp up?

I was just going to say last question. Any rough guess what percent of delinquencies will qualify for the August start? Is that 10%, 20% of foreclosures? What -- how big of the pool is that?

Yes. Mike, don't hold me to this but when I look at the industry statistics, I think there's a couple hundred, maybe 200,000 to 400,000, 500,000 industry-wide foreclosures that may fall into that category. But I'm going from memory here, but I think that's a ballpark number.

. Your next question comes from the line of Raj Sharma with B. Riley.

My question, Bill, to you was just to follow on to the last speaker. Just on the Lenders One, so you're saying there are possibilities. It could be an external investment. Are you thinking it could be a spin-off or it could be a joint venture? It's -- you are not contemplating selling the business entirely? You're contemplating a joint venture or an investment by a third party?

So what we said, I'll just -- we said it could include a potential divestiture, joint venture, third-party investment in or other strategic transaction as well as retaining and investing in the business. So it could be -- so we're looking to basically increase shareholder value, Raj. And when we take a look at some of these other companies and we included their names on one of our slides -- Michelle, do you remember what slide number that was?

Yes. It's Slide 7, Bill.

Seven, I think. It's on Slide 7. There's a company called Farmers Business Network. It essentially does exactly what we do with the Lenders One members for members of the farming community, basically helps farmers sell their crop for more money and reduce the cost to produce crops. Well, we do the same thing for the mortgage industry. We have a platform to help mortgage lenders sell their loans for more money and reduce the cost to manufacture a loan. That company was valued a year or 2 ago -- I think it was $1.7 billion or $1.8 billion. It's unclear how much revenue. There's some press releases out there that looks like it was less than $200 million of revenue at the time they raised capital. And so when you look at those types of comps out there for businesses that are very similar, different industry but very similar to what we're doing, leveraging technology, a great distribution network and a suite of solutions to support that distribution network, those companies are very highly valued. And so we want to explore ways to increase shareholder value, which could take any of those forms that I just described.

Right, okay. So stay tuned on that. And then your comment that your default business could grow to $230 million to $352 million, I think it's one of the slides. Is that just the field services business you're talking about? You're not including the marketplace or the professional services in that number?

It includes all of...

Yes. Go ahead, Michelle, please.

It includes all of the default, which would include Hubzu marketplace, field services, title valuation.

But not the professional services. That's just field services plus marketplace?

Raj, it would include field services, marketplace, foreclosure, trustee, our default valuation and default title. But just to be clear, that number is based on sort of our customer base today, including Ocwen and NRZ on the marketplace side and our other customers. That number does not make an assumption around new sales. That's basically -- and Michelle, correct me if I'm wrong, but my recollection is the way we establish that was based on our existing customer base. If we went back to pre-pandemic delinquency levels or where delinquency levels were, we established the goalpost between pre-pandemic delinquency levels and where delinquency levels were in the second quarter of this year.

That's right.

And so there's an opportunity to grow from there with new customers.

Right. On the foreclosures and what CFPB allows you to do starting today, so pre-pandemic, you're saying that the number of pre-pandemic greater than 120 days are around 200,000 to 400,000 mortgages?

Roughly. That's my recollection.

Right, which -- so how does that compare to your current volume that you're processing?

Well, that's industry-wide, not just our customers. That's industry-wide. So it's very hard to predict, Raj, just because we don't know how servicers are going to restart either pending foreclosures or start new foreclosures for those pre-pandemic delinquent loans. So it's to be seen. We certainly expect that there will be an uptick or anticipate there'll be an uptick starting this quarter, but it's hard to tell. And then, of course, it takes time to work through the system if it's a new foreclosure. If it's a pending foreclosure, depending on where it was in the process when the foreclosure was put on moratorium, that will determine when those loans go to foreclosure sale and ultimately REO.

Got it. And then I think 1 other question on Ocwen. Your 1,900-or-so loans -- how do we think of the approximate sort of revenue you get on the loans that you're going to service?

Sure. So when you -- so a certain percentage of those loans -- so those are first chance foreclosure auctions on an FHA portfolio. And so a certain percentage of those loans will reinstate before they get to foreclosure sale. And then what remains, typically, you see more than 50% sell at the first chance auction. And then typically, 50% or more, sell at the second -- of what remains sell at the second chance auction. And what we're seeing now, I think -- we've had -- we had the referrals delivered to us a few weeks ago. I think we've probably already had 5 or 10 have actually gone to foreclosure auction so far, probably generating just under $50,000 of revenue. But you typically earn anywhere from -- I think it's 3% if it's a marketing-only state is the typical auction fee allowed. And if it's an REO, if it's a state where we cry the auction, you can earn 5% of the proceeds -- up to 5%.

3% to 5%. Okay.

I show no further questions at this time. I would now like to turn the call -- the conference back to Bill.

Great. Thanks, operator. Thanks for joining the call. We appreciate your continued interest in Altisource. Thank you.

Thank you for participating. You may disconnect at this time.