TRANSACTIONS WITH RELATED PARTIES

9 Months Ended

Sep. 30, 2012

TRANSACTIONS WITH RELATED PARTIES

TRANSACTIONS WITH RELATED PARTIES

NOTE 2 — TRANSACTIONS WITH RELATED PARTIES

Ocwen®

Ocwen is our largest customer.  Ocwen and its wholly owned subsidiary, Ocwen Mortgage Servicing Inc. (“OMS”) are contractually obligated to purchase certain mortgage services and technology services from us under service agreements.  On October 1, 2012, the Ocwen agreement was extended by three years through 2020.  Separately, we signed a similar agreement on October 1, 2012 with OMS effective through 2020.  Ocwen and OMS are not restricted from redeveloping these services. We settle amounts with Ocwen on a daily, weekly or monthly basis depending upon the nature of the services and when the service is completed.

With respect to Ocwen, related party revenue consists of revenues earned directly from Ocwen and revenues earned from the loans serviced by Ocwen when Ocwen determines the service provider. We earn additional revenues on the loan portfolios serviced by Ocwen that are not considered related party revenues when a party other than Ocwen selects the service provider. As a percentage of each of our segment revenues and as a percentage of consolidated revenues, related party revenue was as follows:

	Three months ended September 30,				Nine months ended September 30,
	2012		2011		2012		2011
Mortgage Services	68	%	71	%	69	%	73	%
Technology Services	39	%	38	%	40	%	38	%
Financial Services	<1	%	<1	%	<1	%	<1	%
Consolidated revenue	60	%	58	%	60	%	57	%

We record revenues we earn from Ocwen under the various long-term servicing contracts at rates we believe to be market rates as they are consistent with one or more of the following: the fees we charge to other customers for comparable services; the rates Ocwen pays to other service providers; fees commensurate with market surveys prepared by unaffiliated firms; and prices charged by our competitors.

Support Services

On August 10, 2012, Altisource entered into a five-year Support Services Agreement with OMS (the “Support Services Agreement”), setting forth certain services Altisource and OMS will provide to each other which are similar to the services Altisource and Ocwen provided to each other pursuant to a Transition Services Agreement.  These services include such areas as human resources, vendor management, corporate services, six sigma, quality assurance, quantitative analytics, treasury, accounting, risk management, legal, strategic planning and compliance. Payment for the services provided is based on the fully-allocated cost of providing the service based on an estimate of the time and expense of providing the service. For the nine months ended September 30, 2012 and 2011, we billed Ocwen and OMS $2.0 million and $1.7 million, respectively ($0.6 million and $0.8 million for the third quarters of 2012 and 2011, respectively), and Ocwen and OMS billed us $1.8 million and $1.4 million, respectively ($0.6 million and $0.5 million for the third quarters of 2012 and 2011, respectively) for services provided under the Support Services Agreement and the Transition Services agreement. These amounts are reflected as components of selling, general and administrative expenses in the condensed consolidated statements of operations.

Correspondent One™ and HLSS™

In July 2011, we acquired an equity interest in Correspondent One S.A. (“Correspondent One” - see Note 7). We provide Correspondent One certain finance, human resources, legal support, facilities, technology, vendor management and risk management services. For the nine months ended September 30, 2012 and 2011, we billed Correspondent One $0.2 million and $0.1 million, respectively, under this agreement ($0.1 million for each of the third quarters of 2012 and 2011).

We also provide certain origination related services to Correspondent One.  We earned revenue of $0.2 million for the nine months ended September 30, 2012 ($0.2 million for the third quarter of 2012) from the provision of these services.

Home Loan Servicing Solutions, Ltd. (“HLSS”) is a public company whose primary objective is the acquisition of mortgage servicing rights and advances. In connection with the February 2012 HLSS initial public offering, HLSS acquired mortgage servicing related assets from Ocwen. Our Chairman is also the Chairman of HLSS. We provide HLSS certain finance, human resources and legal support services. For the nine months ended September 30, 2012, we billed HLSS $0.4 million under this agreement ($0.2 million for the third quarter).

These amounts are reflected as a component of selling, general and administrative expenses in the condensed consolidated statements of operations.