10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2013

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-34354

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

(Exact name of Registrant as specified in its Charter)

Luxembourg	Not applicable
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

291, Route d’Arlon

L-1150 Luxembourg

Grand Duchy of Luxembourg

(Address of principal executive offices) (Zip Code)

+352 2469 7900

Registrant’s telephone number

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act):

Large accelerated filer x	Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No x

As of October 19, 2013, there were 22,857,130 outstanding shares of the registrant’s shares of beneficial interest (excluding 2,555,618 shares held as treasury stock).

Table of Contents

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

FORM 10-Q

			Page
PART I — Financial Information
	Item 1	Interim Condensed Consolidated Financial Statements
		Condensed Consolidated Balance Sheets	3
		Condensed Consolidated Statements of Operations	4
		Condensed Consolidated Statements of Equity	5
		Condensed Consolidated Statements of Cash Flows	6
		Notes to Condensed Consolidated Financial Statements	7
	Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
	Item 3	Quantitative and Qualitative Disclosures about Market Risk	40
	Item 4	Controls and Procedures	41
PART II — Other Information
	Item 1	Legal Proceedings	42
	Item 1A	Risk Factors	42
	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	42
	Item 6	Exhibits	43
SIGNATURES			44

PART I.  FINANCIAL INFORMATION

Item 1.  Interim Condensed Consolidated Financial Statements (Unaudited)

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

	September 30,			December 31,
	2013			2012
ASSETS
Current assets:
Cash and cash equivalents	$	212,585		$	105,502
Accounts receivable, net	83,851			88,955
Prepaid expenses and other current assets	13,760			7,618
Deferred tax assets, net	1,775			1,775
Total current assets	311,971			203,850
Premises and equipment, net	59,464			50,399
Deferred tax assets, net	4,073			4,073
Intangible assets, net	242,088			56,586
Goodwill	14,915			14,915
Investment in Correspondent One	—			12,729
Loan to Ocwen	—			75,000
Other assets	15,243			11,674
Total assets	$	647,754		$	429,226
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	66,848		$	58,976
Current portion of long-term debt	4,000			2,000
Current portion of capital lease obligations	—			233
Other current liabilities	9,371			10,423
Total current liabilities	80,219			71,632
Long-term debt, less current portion	392,708			196,027
Other non-current liabilities	1,296			1,738
Commitments and contingencies (Note 17)
Equity:
Common stock ($1.00 par value; 100,000 shares authorized; 25,413 issued and 22,866 outstanding as of September 30, 2013; 25,413 issued and 23,427 outstanding as of December 31, 2012)	25,413			25,413
Additional paid-in-capital	88,949			86,873
Retained earnings	209,783			124,127
Treasury stock, at cost (2,547 shares as of September 30, 2013 and 1,986 shares as of December 31, 2012)	(151,861		)	(77,954		)
Altisource equity	172,284			158,459
Non-controlling interests	1,247			1,370
Total equity	173,531			159,829
Total liabilities and equity	$	647,754		$	429,226

See accompanying notes to condensed consolidated financial statements.

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

	Three months ended						Nine months ended
	September 30,						September 30,
	2013			2012			2013			2012
Revenue	$	210,835		$	143,988		$	545,772		$	427,259
Cost of revenue	134,261			94,287			348,195			278,785
Gross profit	76,574			49,701			197,577			148,474
Selling, general and administrative expenses	31,519			18,452			80,027			54,485
Income from operations	45,055			31,249			117,550			93,989
Other income (expense), net:
Interest expense	(6,188		)	(10		)	(14,302		)	(39		)
Other income (expense), net	(253		)	(257		)	529			(900		)
Total other income (expense), net	(6,441		)	(267		)	(13,773		)	(939		)
Income before income taxes and non-controlling interests	38,614			30,982			103,777			93,050
Income tax provision	(1,659		)	(2,898		)	(6,227		)	(8,493		)
Net income	36,955			28,084			97,550			84,557
Net income attributable to non-controlling interests	(947		)	(1,060		)	(3,093		)	(4,223		)
Net income attributable to Altisource	$	36,008		$	27,024		$	94,457		$	80,334
Earnings per share:
Basic	$	1.56		$	1.16		$	4.07		$	3.44
Diluted	$	1.42		$	1.08		$	3.77		$	3.23
Weighted average shares outstanding
Basic	23,025			23,338			23,185			23,347
Diluted	25,333			25,016			25,070			24,895
Transactions with related parties included above
Revenue	$	143,557		$	86,558		$	354,889		$	257,491
Selling, general and administrative expenses	720			621			2,133			1,801
Other income	—			—			773			—

See accompanying notes to condensed consolidated financial statements.

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ALTISOURCE PORTFOLIO SOLUTIONS S.A.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(in thousands)

	Altisource Equity
	Common stock			Additional paid-in capital		Retained earnings			Treasury stock, at cost			Non- controlling interests			Total
Balance, December 31, 2011	25,413	$	25,413	$	83,229	$	126,161		$	(72,048	)	$	3,188		$	165,943
Net income	—	—		—		80,334			—			4,223			84,557
Contributions from non-controlling interest holders	—	—		—		—			—			27			27
Distributions to non-controlling interest holders	—	—		—		—			—			(6,008		)	(6,008		)
Share-based compensation expense	—	—		2,038		—			—			—			2,038
Exercise of stock options	—	—		—		(5,759		)	8,378			—			2,619
Repurchase of shares	—	—		—		—			(16,781		)	—			(16,781		)
Balance, September 30, 2012	25,413	$	25,413	$	85,267	$	200,736		$	(80,451	)	$	1,430		$	232,395
Balance, December 31, 2012	25,413	$	25,413	$	86,873	$	124,127		$	(77,954	)	$	1,370		$	159,829
Net income	—	—		—		94,457			—			3,093			97,550
Contributions from non-controlling interest holders	—	—		—		—			—			18			18
Distributions to non-controlling interest holders	—	—		—		—			—			(3,234		)	(3,234		)
Share-based compensation expense	—	—		2,076		—			—			—			2,076
Exercise of stock options	—	—		—		(8,801		)	13,511			—			4,710
Repurchase of shares	—	—		—		—			(87,418		)	—			(87,418		)
Balance, September 30, 2013	25,413	$	25,413	$	88,949	$	209,783		$	(151,861	)	$	1,247		$	173,531

See accompanying notes to condensed consolidated financial statements.

5

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Nine months ended
	September 30,
	2013			2012
Cash flows from operating activities:
Net income	$	97,550		$	84,557
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	13,791			9,038
Amortization of intangible assets	18,857			3,833
Share-based compensation expense	2,076			2,038
Equity in losses of affiliates	176			872
Bad debt expense	1,338			1,170
Amortization of debt discount	184			—
Amortization of debt issuance costs	702			—
Loss on sale or disposal of fixed assets	1,178			401
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable	3,762			(11,662		)
Prepaid expenses and other current assets	(6,142		)	(4,058		)
Other assets	(1,871		)	809
Accounts payable and accrued expenses	4,574			10,405
Other current and non-current liabilities	(1,535		)	(266		)
Net cash provided by operating activities	134,640			97,137
Cash flows from investing activities:
Additions to premises and equipment	(20,528		)	(24,199		)
Acquisition of businesses, net of cash acquired	(204,567		)	—
Investment in equity affiliate	(50		)	—
Proceeds from sale of equity affiliate	12,648			—
Proceeds from loan to Ocwen	75,000			—
Net cash used in investing activities	(137,497		)	(24,199		)
Cash flows from financing activities:
Proceeds from issuance of long-term debt	201,000			—
Repayment of long-term debt	(2,503		)	—
Debt issuance costs	(2,400		)	—
Principal payments on capital lease obligations	(233		)	(491		)
Proceeds from stock option exercises	4,710			2,619
Purchase of treasury stock	(87,418		)	(16,781		)
Contributions from non-controlling interests	18			27
Distributions to non-controlling interests	(3,234		)	(6,008		)
Net cash provided by (used in) financing activities	109,940			(20,634		)
Increase in cash and cash equivalents	107,083			52,304
Cash and cash equivalents at the beginning of the period	105,502			32,125
Cash and cash equivalents at the end of the period	$	212,585		$	84,429
Supplemental cash flow information
Interest paid	$	13,592		$	39
Income taxes paid, net	2,360			2,252
Non-cash investing and financing activities
Amortization of tax-deductible goodwill	$	—		$	2,524
Premises and equipment purchased on account	1,947			5,992

See accompanying notes to condensed consolidated financial statements.

6

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

Notes to Condensed Consolidated Financial Statements

NOTE 1 — ORGANIZATION AND BASIS OF PRESENTATION

Description of Business

Altisource Portfolio Solutions S.A., together with its subsidiaries (which may be referred to as “Altisource,” the “Company,” “we,” “us” or “our”), is a premier marketplace and transaction solutions provider for the real estate, mortgage and consumer debt industries offering both distribution and content. We leverage proprietary business process, vendor and electronic payment management software and behavioral science based analytics to improve outcomes for marketplace participants.

We are incorporated under the laws of Luxembourg and are publicly traded on the NASDAQ Global Select market under the symbol “ASPS.”

We conduct our operations through three reporting segments: Mortgage Services, Financial Services and Technology Services.  In addition, we report our corporate related expenditures and eliminations as a separate segment (see Note 18 for a description of our business segments).

Basis of Presentation

The unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Securities and Exchange Commission (“SEC”) Regulation S-X.  Accordingly, these financial statements do not include all of the information and notes required by GAAP for complete consolidated financial statements.  In the opinion of management, the interim data includes all normal recurring adjustments considered necessary to fairly state the results for the interim periods presented.  The preparation of interim condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of our interim condensed consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from these estimates.  All significant intercompany and inter-segment transactions and accounts have been eliminated in consolidation.

The Mortgage Partnership of America, L.L.C. (“MPA”), a wholly-owned subsidiary of Altisource®, is the manager of a national alliance of community mortgage bankers, correspondent lenders and suppliers of mortgage products and services that is referred to as the Lenders One® Mortgage Cooperative (“Lenders One”).  The management agreement between MPA and Lenders One, pursuant to which MPA is the management company of Lenders One, represents a variable interest in a variable interest entity.  MPA is the primary beneficiary of Lenders One as it has the power to direct the activities that most significantly impact Lenders One’s economic performance and the obligation to absorb losses or the right to receive benefits from Lenders One.  As a result, Lenders One is presented in the accompanying interim condensed consolidated financial statements on a consolidated basis with the interests of the members reflected as non-controlling interests.  As of September 30, 2013, Lenders One had total assets of $3.8 million and liabilities of $2.5 million.  As of December 31, 2012, Lenders One had total assets of $2.3 million and liabilities of $1.0 million.

These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in our Form 10-K for the year ended December 31, 2012, filed with the SEC on February 13, 2013, which contains a summary of our significant accounting policies.  Certain footnote detail in the Form 10-K is omitted from the information included herein.

Fair Value of Financial Instruments

Our financial instruments primarily include cash and cash equivalents, restricted cash and long-term debt.  Cash and cash equivalents and restricted cash are carried at amounts that approximate their fair value due to the short-term nature of these instruments.  The fair value was determined by level 1 of the three level hierarchy established by the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement, using quoted prices in active markets for identical assets. The carrying amount of the long-term debt approximates fair value due to the variable interest rate. The fair value was determined by level 2 of the three level hierarchy in ASC Topic 820 using inputs other than quoted prices that are observable, either directly or indirectly.

7

NOTE 2 — TRANSACTIONS WITH RELATED PARTIES

Ocwen®

Ocwen Financial Corporation, together with its subsidiaries (“Ocwen”), is our largest customer.  Our Chairman is also the Chairman of Ocwen.  Ocwen is contractually obligated to purchase certain mortgage services and technology services from us through August 2025 under the terms of a master services agreement and amendments to the master services agreement (collectively, the “Service Agreements”).  In connection with our acquisition from Ocwen of the fee-based businesses of Homeward Residential, Inc. (“Homeward”) that closed on March 29, 2013 and the acquisition from Ocwen related to the fee-based businesses of Residential Capital, LLC (“ResCap”) that closed on April 12, 2013 (see Note 3), our Service Agreements with Ocwen were amended to extend the term from 2020 to 2025.  Further, as part of the amendments, we are the exclusive provider of services to Ocwen with respect to the Homeward and ResCap servicing portfolios, and Ocwen agreed not to establish similar fee-based businesses that would directly or indirectly compete with Altisource’s services with respect to the Homeward and ResCap businesses.  We settle amounts with Ocwen on a daily, weekly or monthly basis depending upon the nature of the service and when the service is provided.

Related party revenue consists of revenue earned directly from Ocwen and revenue earned from the loans serviced by Ocwen when Ocwen designates us as the service provider.  We earn additional revenue on the portfolios serviced by Ocwen that are not considered related party revenue when a party other than Ocwen selects the service provider.  Related party revenue as a percentage of segment and consolidated revenue was as follows:

	Three months ended September 30,				Nine months ended September 30,
	2013		2012		2013		2012
Mortgage Services	73	%	68	%	71	%	69	%
Financial Services	37	%	<1	%	25	%	<1	%
Technology Services	53	%	39	%	53	%	40	%
Consolidated revenue	68	%	60	%	65	%	60	%

We record revenue we earn from Ocwen under 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 fees Ocwen pays to other service providers and fees charged by our competitors.

Support Services

We have support services agreements with Ocwen.  These services provided and received pursuant to the above agreements include such areas as human resources, vendor management, corporate services, operational effectiveness, quality assurance, quantitative analytics and treasury.  Payment for the services provided or received is 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, 2013 and 2012, we billed Ocwen $1.8 million and $2.0 million, respectively ($0.6 million for the third quarter of 2013 and 2012), and Ocwen billed us $2.1 million and $1.8 million, respectively ($0.7 million and $0.6 million for the third quarter of 2013 and 2012, respectively), for services provided under these agreements.  These amounts are reflected as a component of selling, general and administrative expenses in the condensed consolidated statements of operations.

Unsecured Term Loan

On December 27, 2012, we entered into a senior unsecured term loan agreement with Ocwen under which we loaned $75.0 million to Ocwen.  Payments of interest were due quarterly at a rate per annum equal to the Eurodollar Rate (as defined in the agreement) plus 6.75%, provided that the Eurodollar Rate shall at no time be less than 1.50%.  On February 15, 2013, Ocwen repaid the outstanding principal amount of $75.0 million, plus all accrued and unpaid interest and the term loan was terminated.  Interest income related to this loan was $0.8 million for the nine months ended September 30, 2013 (no comparative amounts for 2012).

Transactions Related to Fee-Based Businesses

On January 31, 2013, we entered into non-binding letters of intent with Ocwen to acquire certain fee-based businesses associated with Ocwen’s acquisitions of the Homeward and the ResCap servicing portfolios.  Ocwen acquired the Homeward servicing portfolio on December 27, 2012 and the ResCap servicing portfolio on February 15, 2013.  Altisource acquired the Homeward

8

fee-based businesses from Ocwen on March 29, 2013 (see Note 3).  Altisource entered into an agreement with Ocwen on April 12, 2013 to establish additional terms related to our services in connection with the ResCap fee-based businesses (see Note 3).

Correspondent One® and HLSS™

In July 2011, we acquired an equity interest in Correspondent One S.A. (“Correspondent One”) (see Note 8).  Correspondent One purchased closed conforming and government guaranteed residential mortgages from approved mortgage bankers.  On March 31, 2013, we sold our 49% interest in Correspondent One to Ocwen for $12.6 million. Under a support services agreement, we provided Correspondent One certain finance, human resources, legal support, facilities, technology, vendor management and risk management services.  For the nine months ended September 30, 2013 and 2012, we billed Correspondent One less than $0.1 million and $0.2 million, respectively (none for the third quarter of 2013 and $0.1 million for the third quarter of 2012).  We also provided certain origination related services to Correspondent One.  We earned revenue of $0.1 million and $0.2 million for the nine months ended September 30, 2013 and 2012, respectively, for these services (none for the third quarter of 2013 and $0.2 million for the third quarter of 2012).

Home Loan Servicing Solutions, Ltd. (“HLSS”) is a publicly traded company whose primary objective is the acquisition of mortgage servicing rights and advances. In connection with the February 2012 HLSS initial public offering and subsequent thereto, HLSS acquired mortgage servicing related assets from Ocwen.  Our Chairman is also the Chairman of HLSS.  Under a support services agreement, we provide HLSS certain finance, human resources and legal support services.  For the nine months ended September 30, 2013 and 2012, we billed HLSS $0.5 million and $0.4 million, respectively ($0.2 million for the third quarter of 2013 and 2012).

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

Residential and AAMC

Altisource Residential Corporation (“Residential”) and Altisource Asset Management Corporation (“AAMC”) were established, capitalized and their equity was distributed to our shareholders on December 21, 2012 and are each separate publicly traded companies (the “Separation of the Residential Asset Businesses”).   Residential is focused on acquiring and managing single family rental properties by acquiring portfolios of sub-performing and non-performing residential mortgage loans throughout the United States.  AAMC is an asset management company providing portfolio management and corporate governance services to Residential. Our Chairman is also the Chairman of each of Residential and AAMC.

For purposes of governing certain ongoing relationships between Altisource, Residential and AAMC after the Separation of the Residential Asset Businesses, and to provide for an orderly transition, we entered into certain agreements with Residential and AAMC.  We have agreements to provide Residential with renovation management, lease management and property management services. In addition, we have agreements with Residential and AAMC to provide support services such as finance, human resources, legal support, facilities, technology, vendor management and risk management.  Further, we have separate agreements for certain services related to income tax matters, trademark licenses and technology products and services.  For the nine months ended September 30, 2013, we billed Residential $0.4 million, and we billed AAMC $0.9 million ($0.2 million for Residential and $0.7 million for AAMC for the third quarter of 2013 and no comparative amounts in 2012), under these agreements.

NOTE 3 — ACQUISITIONS

Homeward Fee-Based Businesses

On March 29, 2013, we acquired certain fee-based businesses associated with Ocwen’s acquisition of Homeward.  As part of the acquisition, Ocwen agreed not to develop similar fee-based businesses that would directly or indirectly compete with services provided by Altisource relative to the Homeward servicing portfolio.  Additionally, the terms of the Service Agreements were amended to extend the term from 2020 to 2025 (see Note 2).  We paid $75.8 million, after a working capital and net income adjustment of $11.1 million, for the Homeward fee-based businesses.  From the acquisition date through September 30, 2013, we recorded service revenue of $74.3 million and we estimate pre-tax income is $14.2 million related to these businesses.

Since the acquisition date, management adjusted the preliminary purchase price allocation and assigned associated asset lives based upon information that has become available. In addition to the working capital adjustment, we also reduced premises and equipment by $1.2 million based on a post-acquisition detailed analysis of software licenses received.  The purchase price allocation and assessment of asset lives will continue to be revised as additional information about the fair value of assets and liabilities becomes available. Such assessment must be completed within 12 months from the acquisition date.

9

The preliminary adjusted allocation of the purchase price is estimated as follows:

(in thousands)
Premises and equipment	$	1,559
Customer relationship	75,609
	77,168
Accounts payable and accrued expenses	(1,351		)
Purchase price	$	75,817

	Estimated life (in years)
Premises and equipment	3 - 5
Customer relationship	7

ResCap Fee-Based Businesses

On April 12, 2013, we entered into an agreement with Ocwen to establish additional terms related to the existing servicing arrangements between Altisource and Ocwen in connection with certain mortgage servicing platform assets of ResCap (the “ResCap Business”).  The Service Agreements provide that (i) Altisource will be the exclusive provider, except as prohibited by applicable law, to Ocwen of certain services related to the ResCap Business, (ii) Ocwen will not establish similar fee-based businesses that would directly or indirectly compete with Altisource’s services as they relate to the ResCap Business and (iii) Ocwen will market and promote the utilization of Altisource’s services to their various third party relationships.  Additionally, the parties agreed to use commercially reasonable best efforts to ensure that the loans associated with the ResCap Business are boarded onto Altisource’s mortgage servicing platform.  We paid $128.8 million ($80.0 million on April 12, 2013 and $48.8 million on May 10, 2013) for the ResCap fee-based businesses. From the acquisition date through September 30, 2013, we recorded service revenue of $28.6 million and we estimate pre-tax income is $10.9 million related to these businesses.

We acquired no tangible assets and assumed no liabilities in connection with the acquisition.  However, certain employees as well as practices and processes developed to support the ResCap servicing portfolio were components of the transaction.  We accounted for this transaction as a business combination in accordance with ASC Topic 805, Business Combinations.

Management prepared a preliminary purchase price allocation and assigned associated asset lives based upon available information at the time of the agreement and through the date of filing.  This preliminary allocation and assessment of asset lives will be revised as additional information about the fair value of assets and liabilities becomes available. Such assessment must be completed within 12 months from the acquisition date. The agreement consideration of $128.8 million was fully allocated to the customer relationship intangible asset with an estimated average useful life of 7 years.

The following tables present the unaudited pro forma condensed consolidated results of operations as if the Homeward and ResCap Business transactions had occurred at the beginning of the earliest period presented.

	Nine months ended September 30, 2013
(in thousands, except per share amounts)	As reported		Pro forma
Revenue	$	545,772	$	579,263
Net income attributable to Altisource	94,457		101,413
Earnings per share — diluted	3.77		4.05

10

	Nine months ended September 30, 2012
(in thousands, except per share amounts)	As reported		Pro forma
Revenue	$	427,259	$	536,647
Net income attributable to Altisource	80,334		103,313
Earnings per share — diluted	3.23		4.15

	Three months ended September 30, 2012
(in thousands, except per share amounts)	As reported		Pro forma
Revenue	$	143,988	$	180,451
Net income attributable to Altisource	27,024		34,665
Earnings per share — diluted	1.08		1.39

The unaudited pro forma information presents the combined operating results of Altisource and the Homeward and ResCap Business transactions.  The Homeward and ResCap Business operating results were derived from their historical financial statements for the most comparable periods available.  The results prior to the acquisition dates have been adjusted to include the pro forma impact of the adjustment of amortization of the acquired intangible assets based on the preliminary purchase price allocations, the adjustment of interest expense reflecting the portion of our $200 million senior secured term loan, increased to $400 million on May 7, 2013, used in the Homeward and ResCap Business transactions and to reflect the impact of income taxes on the pro forma adjustments utilizing Altisource’s effective income tax rate in each period presented.

The unaudited pro forma results are presented for illustrative purposes only and do not reflect additional revenue opportunities, the realization of any potential cost savings and any related integration costs.  Certain revenue opportunities and cost savings may result from the transactions and the conversion to the Altisource model; however, there can be no assurance that these revenue opportunities and cost savings will be achieved.  These pro forma results do not purport to be indicative of the results that would have actually been obtained if the transactions occurred as of the beginning of each of the periods presented, nor is the pro forma data intended to be a projection of results that may be obtained in the future.

Equator Acquisition

On August 19, 2013, we entered into a Purchase and Sale Agreement (the “Purchase Agreement”) pursuant to which we agreed to purchase all of the outstanding limited liability company interests of Equator, LLC, a California limited-liability company (“Equator”).  The aggregate consideration payable under the Purchase Agreement is up to $150.0 million comprised of (i) $70.0 million in initial consideration and (ii) up to an additional $80.0 million in potential additional consideration, the payment of which is dependent upon the Equator business meeting targeted levels of profitability (as described in the Purchase Agreement) for three consecutive 12-month periods following closing.  Each 12-month period has targeted levels of profitability and potential additional consideration will be paid based on each 12-month period. We may, at our discretion, pay up to 20% of the initial consideration and up to 20% of each payment of any additional consideration in shares of our restricted stock, with the balance to be paid in cash.  The closing is subject to the satisfaction of customary closing terms and conditions, including, without limitation, clearance under the Hart-Scott-Rodino (“HSR”) Act. The purchase price is subject to certain adjustments based on targeted amounts of current assets and current liabilities of Equator at closing, to be settled within 90 days of the closing date.

We initially filed the HSR application with the Federal Trade Commission (the “FTC”) in the third quarter and initially expected to receive approval and close the acquisition in the third quarter of 2013.  With the recent disruption of the United States government and shutdown of nonessential services, approval from the FTC has been delayed. To ensure that the HSR waiting period did not expire during the United States government disruption, and following discussions with the staff of the FTC, we voluntarily withdrew our initial application and re-filed it early in the fourth quarter of 2013.  We believe, although there can be no assurance, the transaction will close in the fourth quarter of 2013.

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NOTE 4 — ACCOUNTS RECEIVABLE, NET

Accounts receivable, net consists of the following:

	September 30,			December 31,
(in thousands)	2013			2012
Billed
Non-related parties	$	27,392		$	25,950
Ocwen	11,146			19,817
Correspondent One	—			27
HLSS	71			163
AAMC	595			14
Residential	71			—
Other receivables	234			353
	39,509			46,324
Unbilled
Non-related parties	40,010			39,496
Ocwen	8,940			6,377
Correspondent One	—			32
	88,459			92,229
Allowance for doubtful accounts	(4,608		)	(3,274		)
Total	$	83,851		$	88,955

Unbilled fees consist primarily of asset management and default management services for which we recognize revenues over the service delivery period but bill following completion of the service.

NOTE 5 — PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following:

	September 30,		December 31,
(in thousands)	2013		2012
Maintenance agreements, current portion	$	4,350	$	3,636
Income taxes receivable	4,256		1,814
Prepaid expenses	4,646		1,640
Other current assets	508		528
Total	$	13,760	$	7,618

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NOTE 6 — PREMISES AND EQUIPMENT, NET

Premises and equipment, net, which includes amounts recorded under capital leases, consists of the following:

	September 30,			December 31,
(in thousands)	2013			2012
Computer hardware and software	$	81,897		$	68,329
Office equipment and other	21,849			15,592
Furniture and fixtures	6,414			5,344
Leasehold improvements	14,863			12,982
	125,023			102,247
Less: Accumulated depreciation and amortization	(65,559		)	(51,848		)
Total	$	59,464		$	50,399

Depreciation and amortization expense, inclusive of capital leases, amounted to $13.8 million and $9.0 million for the nine months ended September 30, 2013 and 2012, respectively ($4.5 million and $3.8 million for the third quarter of 2013 and 2012, respectively), and is included in cost of revenue for operating assets and in selling, general and administrative expenses for non-operating assets in the accompanying condensed consolidated statements of operations.

NOTE 7 — GOODWILL AND INTANGIBLE ASSETS, NET

Goodwill

There were no changes in goodwill during the nine months ended September 30, 2013. The following is a summary of goodwill by segment:

	Mortgage		Financial		Technology
(in thousands)	Services		Services		Services		Total
Balance, September 30, 2013 and December 31, 2012	$	10,919	$	2,378	$	1,618	$	14,915

Intangible Assets, Net

Intangible assets, net consist of the following:

	Weighted average estimated	Gross carrying amount				Accumulated amortization						Net book value
(dollars in thousands)	useful life (years)	September 30, 2013		December 31, 2012		September 30, 2013			December 31, 2012			September 30, 2013		December 31, 2012
Definite lived intangible assets
Trademarks	16	$	10,614	$	10,614	$	(4,414	)	$	(4,060	)	$	6,200	$	6,554
Customer-related intangible assets	9	242,725		38,366		(35,520		)	(18,567		)	207,205		19,799
Operating agreement	20	35,000		35,000		(6,417		)	(5,104		)	28,583		29,896
Non-compete agreement	4	1,300		1,300		(1,200		)	(963		)	100		337
Total		$	289,639	$	85,280	$	(47,551	)	$	(28,694	)	$	242,088	$	56,586

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Amortization expense for definite lived intangible assets was $18.9 million and $3.8 million for the nine months ended September 30, 2013 and 2012, respectively ($8.6 million and $1.2 million for the third quarter of 2013 and 2012, respectively). Expected annual definite lived intangible asset amortization for 2013 through 2017 is $27.6 million, $46.9 million, $40.4 million, $32.5 million and $26.0 million, respectively, for assets recorded as of September 30, 2013, including preliminary amounts associated with the Homeward and ResCap fee-based business transactions (see Note 3).

NOTE 8 — INVESTMENT IN EQUITY AFFILIATES

Correspondent One purchased closed conforming and government guaranteed residential mortgages from approved mortgage bankers.  Prior to the sale of our interest in Correspondent One to Ocwen on March 31, 2013 (see Note 2), we had significant influence over the general operations of Correspondent One consistent with our 49% ownership level, and therefore, accounted for our investment under the equity method. On March 31, 2013, we sold our 49% interest in Correspondent One to Ocwen for $12.6 million.

Our net loss on this investment was $0.1 million and $0.9 million for the nine months ended September 30, 2013 and 2012, respectively (none for the third quarter of 2013 and $0.3 million net loss for the third quarter of 2012).

NOTE 9 — OTHER ASSETS

Other assets consist of the following:

	September 30,		December 31,
(in thousands)	2013		2012
Security deposits, net	$	7,105	$	5,019
Debt issuance costs, net	6,143		4,260
Maintenance agreements, non-current portion	1,743		1,614
Restricted cash	158		158
Other	94		623
Total	$	15,243	$	11,674

NOTE 10 — ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accounts payable and accrued expenses consist of the following:

	September 30,		December 31,
(in thousands)	2013		2012
Accounts payable	$	7,818	$	5,079
Accrued expenses - general	16,903		16,528
Accrued salaries and benefits	23,222		19,613
Income taxes payable	14,774		8,750
Payable to Ocwen	4,131		8,865
Payable to AAMC	—		141
Total	$	66,848	$	58,976

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Other current liabilities consist of the following:

	September 30,		December 31,
(in thousands)	2013		2012
Deferred revenue	$	1,512	$	2,482
Facility closure cost accrual, current portion	141		138
Book overdrafts	4,601		5,229
Other	3,117		2,574
Total	$	9,371	$	10,423

NOTE 11 — LONG-TERM DEBT

Long-term debt consists of the following:

	September 30,			December 31,
(in thousands)	2013			2012
Senior secured term loan	$	397,497		$	200,000
Less: Unamortized discount, net	(789		)	(1,973		)
Net long-term debt	396,708			198,027
Less: Current portion	(4,000		)	(2,000		)
Long-term debt, less current portion	$	392,708		$	196,027

On November 27, 2012, we entered into a senior secured term loan agreement with Bank of America, N.A., as administrative agent, and certain lenders, pursuant to which we borrowed $200 million.  The senior secured term loan was issued with a 1.0% original issue discount ($2.0 million), resulting in net proceeds of $198.0 million (the “Initial Proceeds”), with the Company and certain wholly-owned subsidiaries acting as guarantors (collectively, the “Guarantors”).

On May 7, 2013, we amended the senior secured term loan agreement to increase the principal amount of the senior secured term loan by $200 million (the “Incremental Term Loan”), which was issued with a $1.0 million original issue premium, resulting in gross proceeds to the Company of $201.0 million.

The Initial Proceeds and the Incremental Term Loan must be repaid in equal consecutive quarterly principal installments of 0.25% of the initial principal amounts, with the balance due at maturity. The aggregate amount of each quarterly scheduled principal installment of the term loans is equal to approximately $1.0 million.  All amounts outstanding under the senior secured term loan agreement will become due on the earlier of (i) November 27, 2019, being the seventh anniversary of the closing date of the senior secured term loan agreement or (ii) the date on which the loans are declared to be due and owed by the administrative agent at the request (or with the consent) of the lenders upon the occurrence of any event of default under the senior secured term loan agreement.

The Incremental Term Loan was used to fund a portion of the Company’s previously announced transaction with Ocwen related to the ResCap servicing portfolio (see Note 3), with the remainder to be used for stock repurchases and for general corporate purposes, including potential acquisitions. Additionally, the Incremental Term Loan was used to pay certain fees, commissions and expenses in connection with the Incremental Term Loan.  The Company paid legal fees and other costs associated with the Incremental Term Loan of $2.4 million, which were recorded as debt issuance costs in other assets in the accompanying condensed consolidated balance sheets.

Additionally, the Incremental Term Loan modified the senior secured term loan agreement to, among other changes, provide for an additional $200 million incremental term loan facility accordion and increase the maximum amount of Restricted Payments (as defined in the senior secured term loan) that may be made by us, including increasing the amount of Company share repurchases permitted.

All of the term loans outstanding bear interest at rates based upon, at our option, the Adjusted Eurodollar Rate or the Base Rate (each as defined in the senior secured term loan agreement). Eurodollar Rate loans bear interest at a rate per annum equal to the sum of (i) the greater of (x) the Adjusted Eurodollar Rate for the applicable interest period and (y) 1.25% plus (ii) a 4.50% margin. Base Rate loans bear interest at a rate per annum equal to the sum of (i) the greater of (x) the Base Rate and (y) 2.25% plus (ii) a 3.50% margin. The interest rate at September 30, 2013 was 5.75%.

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Payments under the senior secured term loan agreement are guaranteed by the Guarantors and are secured by a pledge of all equity interests of certain subsidiaries, as well as a lien on substantially all of the assets of Altisource Solutions S.à r.l., a wholly-owned subsidiary of Altisource, and the Guarantors, subject to certain exceptions.

At September 30, 2013, debt issuance costs were $6.1 million, net of $0.8 million of accumulated amortization.  At December 31, 2012, debt issuance costs were $4.3 million, net of $0.1 million of accumulated amortization. Debt issuance costs are included in other assets in the accompanying condensed consolidated balance sheets.

NOTE 12 — EQUITY AND SHARE-BASED COMPENSATION

Stock Repurchase Plan

In May 2012, our shareholders approved a stock repurchase program, which replaced the previous stock repurchase program. Under the program, we are authorized to purchase up to 3.5 million shares of our common stock in the open market in addition to amounts previously purchased under the prior program. From authorization of the previous program in May 2010 through September 30, 2013, we have purchased approximately 3.4 million shares of our common stock in the open market at an average price of $53.94 per share.  We purchased 0.8 million shares of common stock (at an average price of $103.45 per share) and 0.3 million shares of common stock (at an average price of $63.25 per share) during the nine months ended September 30, 2013 and 2012, respectively (0.3 million shares at an average price of $134.86 per share for the third quarter of 2013 and no comparative amounts in the third quarter of 2012). Approximately 2.7 million shares of common stock remain available for repurchase under the program.  Luxembourg law limits share repurchases to approximately the balance of Altisource Portfolio Solutions S.A. (unconsolidated parent company) retained earnings less shares repurchased.  As of September 30, 2013, approximately $38 million was available to repurchase our common stock under Luxembourg law.  Our $200 million senior secured term loan, increased to $400 million on May 7, 2013, also limits the amount we can spend on share repurchases in any year and may prevent repurchases in certain circumstances.  As of September 30, 2013, approximately $107 million was available to repurchase our common stock under our senior secured term loan.

Share-Based Compensation

We issue share-based awards in the form of stock options and certain other equity-based awards for certain employees and officers. We recorded share-based compensation expense of $2.1 million and $2.0 million for the nine months ended September 30, 2013 and 2012, respectively ($0.6 million and $1.1 million for the third quarter of 2013 and 2012, respectively). The amount for the nine months ended September 30, 2012 includes the reversal of $0.8 million of share-based compensation expense related to the departure of an executive officer in March 2012.

Outstanding share-based compensation currently consists primarily of stock option grants that are a combination of service-based and market-based options.

Service-based Options.  These options are granted at fair value on the date of grant. The options generally vest over four years with equal annual cliff-vesting and expire on the earlier of 10 years after the date of grant or following termination of service. A total of 0.8 million service-based awards were outstanding at September 30, 2013.

Market-based Options.  These option grants have two components each of which vest only upon the achievement of certain criteria. The first component, which we refer to internally as “ordinary performance” grants, consists of two-thirds of the market-based grant and begins to vest if the stock price is at least double the exercise price, as long as the stock price realizes a compounded annual gain of at least 20% over the exercise price. The remaining third of the market-based options, which we refer to internally as “extraordinary performance” grants, begins to vest if the stock price is at least triple the exercise price, as long as the stock price realizes a compounded annual gain of at least 25% over the exercise price. The vesting schedule for all market-based awards is 25% upon achievement of the criteria and the remaining 75% in three equal annual installments. A total of 1.9 million market-based awards were outstanding at September 30, 2013.

The Company granted less than 0.1 million stock options (at a weighted average exercise price of $104.84 per share) and 0.3 million stock options (at a weighted average exercise price of $69.48 per share) during the nine months ended September 30, 2013 and 2012, respectively.

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The fair value of the service-based options was determined using the Black-Scholes option pricing model, and a lattice (binomial) model was used to determine the fair value of the market-based options, using the following assumptions as of the grant date:

	Nine months endedSeptember 30, 2013		Nine months endedSeptember 30, 2012
	Black-Scholes	Binomial	Black-Scholes	Binomial
Risk-free interest rate	1.02% — 1.81%	0.01% — 2.71%	0.87% — 1.17%	0.08% — 2.04%
Expected stock price volatility	36.35% — 36.76%	36.40% — 36.80%	34.22% — 34.65%	34.20% — 34.60%
Expected dividend yield	—	—	—	—
Expected option life (in years)	6.25	—	6.25	—
Contractual life (in years)	—	14	—	14
Fair value	$31.33 — $49.14	$16.12 — $41.72	$19.25 — $29.80	$9.98 — $22.76

The following table summarizes the weighted average fair value of stock options granted, the total intrinsic value of stock options exercised and the fair value of options vested:

	Nine months ended September 30,
(in thousands, except per share amounts)	2013		2012
Weighted average fair value at grant date per share	$	32.59	$	20.77
Intrinsic value of options exercised	24,587		11,535
Fair value of options vested	1,867		1,491

Share-based compensation expense is recorded net of estimated forfeiture rates ranging from 1% to 10%.

As of September 30, 2013, estimated unrecognized compensation costs related to share-based payments amounted to $3.0 million, which we expect to recognize over a weighted average remaining requisite service period of approximately 2.9 years.

The following table summarizes the activity related to our stock options:

	Number of options		Weighted average exercise price		Weighted average contractual term (in years)	Aggregate intrinsic value (in thousands)
Outstanding at December 31, 2012	3,058,309		$	17.69	6.1	$	211,072
Granted	75,000		104.84
Exercised	(279,531	)	17.12
Forfeited	(117,248	)	59.49
Outstanding at September 30, 2013	2,736,530		18.34		5.4	332,955
Exercisable at September 30, 2013	2,216,347		11.99		4.9	283,735

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NOTE 13 — COST OF REVENUE

Cost of revenue principally includes payroll and employee benefits associated with personnel employed in customer service and operations roles, fees paid to external providers related to the provision of services, reimbursable expenses, technology and telecommunications expenses as well as depreciation and amortization of operating assets. The components of cost of revenue were as follows:

	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2013		2012		2013		2012
Compensation and benefits	$	39,600	$	28,840	$	108,923	$	84,314
Outside fees and services	56,611		31,084		137,851		91,494
Reimbursable expenses	29,496		24,326		73,061		77,846
Technology and telecommunications	5,459		6,900		18,010		17,890
Depreciation and amortization	3,095		3,137		10,350		7,241
Total	$	134,261	$	94,287	$	348,195	$	278,785

NOTE 14 — SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses include payroll for personnel employed in executive, finance, legal, human resources, vendor management, risk and operational effectiveness roles.  This category also includes occupancy costs, professional fees and depreciation and amortization on non-operating assets.  The components of selling, general and administrative expenses were as follows:

	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2013		2012		2013		2012
Compensation and benefits	$	6,802	$	5,212	$	18,868	$	15,995
Professional services	2,168		2,089		5,184		5,550
Occupancy related costs	7,438		6,641		21,971		19,308
Amortization of intangible assets	8,620		1,201		18,857		3,833
Depreciation and amortization	1,390		701		3,441		1,797
Other	5,101		2,608		11,706		8,002
Total	$	31,519	$	18,452	$	80,027	$	54,485

NOTE 15 — OTHER INCOME (EXPENSE), NET

Other income (expense), net consists of the following:

	Three months ended September 30,						Nine months ended September 30,
(in thousands)	2013			2012			2013			2012
Loss in equity affiliates	$	(54	)	$	(293	)	$	(176	)	$	(872	)
Interest income	14			49			881			75
Other, net	(213		)	(13		)	(176		)	(103		)
Total	$	(253	)	$	(257	)	$	529		$	(900	)

Loss in equity affiliates primarily represents our proportional share of the losses in Correspondent One (see Note 8), net of the gain on sale of Correspondent One (see Note 2).

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NOTE 16 — EARNINGS PER SHARE

Basic earnings per share (“EPS”) is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the assumed conversion of all dilutive securities using the treasury stock method.

Basic and diluted EPS are calculated as follows:

	Three months ended September 30,				Nine months ended September 30,
(in thousands, except per share data)	2013		2012		2013		2012
Net income attributable to Altisource	$	36,008	$	27,024	$	94,457	$	80,334
Weighted average common shares outstanding, basic	23,025		23,338		23,185		23,347
Dilutive effect of stock options	2,308		1,678		1,885		1,548
Weighted average common shares outstanding, diluted	25,333		25,016		25,070		24,895
Earnings per share
Basic	$	1.56	$	1.16	$	4.07	$	3.44
Diluted	$	1.42	$	1.08	$	3.77	$	3.23

For the nine months ended September 30, 2013 and 2012, less than 0.1 million options (less than 0.1 million for the third quarter of 2013 and 2012), that were anti-dilutive have been excluded from the computation of diluted EPS. These options were anti-dilutive because their exercise price was greater than the average market price of our common stock.  Also excluded from the computation of diluted EPS for the nine months ended September 30, 2013 and 2012 are 0.1 million and 0.3 million options, respectively (0.1 million and 0.2 million options for the third quarter of 2013 and 2012, respectively), granted for shares that are issuable upon the achievement of certain market and performance criteria related to our common stock price and an annualized rate of return to investors that have not been met.

NOTE 17 — COMMITMENTS AND CONTINGENCIES

Litigation

From time to time, we are involved in legal proceedings arising in the ordinary course of business.  We record a liability for litigation if an unfavorable outcome is probable and the amount of loss can be reasonably estimated, including expected insurance coverage.  For proceedings where a range of loss is determined, we record a best estimate of loss within the range.

When legal proceedings are material, we disclose the nature of the litigation, and to the extent possible, the estimate of loss or range of loss. In the opinion of management, after consultation with legal counsel and considering insurance coverage where applicable, the outcome of current legal proceedings, both individually and in the aggregate, will not have a material impact on our financial condition, results of operations or cash flows.

Escrow Balances

We hold customers’ assets in escrow at various financial institutions pending completion of certain real estate activities. These amounts are held in escrow for limited periods of time, generally consisting of a few days and are not included in the condensed consolidated balance sheets. Amounts held in escrow were $56.8 million and $47.2 million as of September 30, 2013 and December 31, 2012, respectively.

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NOTE 18 — SEGMENT REPORTING

Our business segments are based upon our organizational structure, which focuses primarily on the services offered, and are consistent with the internal reporting used by our Chief Executive Officer to evaluate operating performance and to assess the allocation of our resources.

We classify our businesses into three reportable segments. The Mortgage Services segment provides services that span the mortgage and real estate lifecycle and are typically outsourced by loan servicers, loan originators and investors in single family homes. The Financial Services segment provides collection and customer relationship management services primarily to debt originators and servicers (e.g., credit card, auto lending, retail credit and mortgage) and the utility and insurance industries. The Technology Services segment principally consists of our REALSuite software applications as well as our information technology infrastructure services. The REALSuite platform provides a fully integrated set of software applications and technologies that manage the end-to-end lifecycle for residential and commercial mortgage loan servicing including the automated management and payment of a distributed network of vendors. In addition, our Corporate Items and Eliminations segment includes eliminations of transactions between the reporting segments, interest expense and costs related to corporate support functions including executive, finance, legal, human resources, vendor management, risk and operational effectiveness.

Financial information for our segments is as follows:

	Three months ended September 30, 2013
								Corporate
	Mortgage			Financial		Technology		Items and			Consolidated
(in thousands)	Services			Services		Services		Eliminations			Altisource
Revenue	$	164,661		$	27,267	$	25,175	$	(6,268	)	$	210,835
Cost of revenue	106,412			14,998		18,569		(5,718		)	134,261
Gross profit	58,249			12,269		6,606		(550		)	76,574
Selling, general and administrative expenses	14,224			4,616		2,621		10,058			31,519
Income from operations	44,025			7,653		3,985		(10,608		)	45,055
Other income (expense), net	(41		)	—		—		(6,400		)	(6,441		)
Income before income taxes and non-controlling interests	$	43,984		$	7,653	$	3,985	$	(17,008	)	$	38,614

	Three months ended September 30, 2012
										Corporate
	Mortgage			Financial			Technology			Items and			Consolidated
(in thousands)	Services			Services			Services			Eliminations			Altisource
Revenue	$	115,882		$	15,394		$	19,076		$	(6,364	)	$	143,988
Cost of revenue	72,774			11,784			15,418			(5,689		)	94,287
Gross profit	43,108			3,610			3,658			(675		)	49,701
Selling, general and administrative expenses	6,155			3,116			1,851			7,330			18,452
Income from operations	36,953			494			1,807			(8,005		)	31,249
Other income (expense), net	(290		)	(6		)	(5		)	34			(267		)
Income before income taxes and non-controlling interests	$	36,663		$	488		$	1,802		$	(7,971	)	$	30,982

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	Nine months ended September 30, 2013
									Corporate
	Mortgage			Financial			Technology		Items and			Consolidated
(in thousands)	Services			Services			Services		Eliminations			Altisource
Revenue	$	426,319		$	66,675		$	70,189	$	(17,411	)	$	545,772
Cost of revenue	267,859			40,831			55,088		(15,583		)	348,195
Gross profit	158,460			25,844			15,101		(1,828		)	197,577
Selling, general and administrative expenses	32,272			11,000			7,514		29,241			80,027
Income from operations	126,188			14,844			7,587		(31,069		)	117,550
Other income (expense), net	(153		)	(8		)	3		(13,615		)	(13,773		)
Income before income taxes and non-controlling interests	$	126,035		$	14,836		$	7,590	$	(44,684	)	$	103,777

	Nine months ended September 30, 2012
										Corporate
	Mortgage			Financial			Technology			Items and			Consolidated
(in thousands)	Services			Services			Services			Eliminations			Altisource
Revenue	$	341,446		$	49,649		$	53,984		$	(17,820	)	$	427,259
Cost of revenue	218,969			35,780			40,098			(16,062		)	278,785
Gross profit	122,477			13,869			13,886			(1,758		)	148,474
Selling, general and administrative expenses	17,458			10,550			5,519			20,958			54,485
Income from operations	105,019			3,319			8,367			(22,716		)	93,989
Other income (expense), net	(857		)	(22		)	(22		)	(38		)	(939		)
Income before income taxes and non-controlling interests	$	104,162		$	3,297		$	8,345		$	(22,754	)	$	93,050

							Corporate
	Mortgage		Financial		Technology		Items and		Consolidated
(in thousands)	Services		Services		Services		Eliminations		Altisource
Total assets:
September 30, 2013	$	313,441	$	52,578	$	120,059	$	161,676	$	647,754
December 31, 2012	132,924		37,782		64,570		193,950		429,226

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s discussion and analysis of financial condition and results of operations (“MD&A”) is intended to provide a reader of our financial statements with a narrative from the perspective of management on our businesses, current developments, financial condition, results of operations and liquidity.  Our MD&A should be read in conjunction with our Form 10-K for the year ended December 31, 2012 filed with the Securities and Exchange Commission (“SEC”) on February 13, 2013.

FORWARD-LOOKING STATEMENTS

Certain statements in this Form 10-Q regarding anticipated financial outcomes, business and market conditions, outlook and other similar statements related to Altisource’s future financial and operational performance are “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements may be identified by the use of terminology such as “anticipate,” “intend,” “expect,” “may,” “could,” “should,” “would,” “plan,” “estimate,” “believe,” “predict,” “potential” or “continue” or the negative of these terms and other comparable terminology.  Forward-looking statements are not guarantees of future performance and involve a number of assumptions, risks and uncertainties that could cause actual results to differ materially. The following are examples of such items and are not intended to be all inclusive:

·assumptions related to the sources of liquidity and the adequacy of financial resources;

·assumptions about our ability to grow our business;

·assumptions about our ability to improve margins;

·expectations regarding collection rates and placements in our Financial Services segment;

·assumptions regarding the impact of seasonality;

·estimates regarding the calculation of our effective tax rate; and

·estimates regarding our reserves and valuations.

Important factors that could cause actual results to differ materially from those suggested by the forward-looking statements include, but are not limited to, the risks discussed in the “Risk Factors” section of our Form 10-K for the year ended December 31, 2012 and include the following:

·our ability to retain our existing customers, expand relationships and attract new customers;

·the level of loan delinquencies and charge-offs;

·the level of origination volume;

·technology failures;

·the trend toward outsourcing;

·our ability to raise debt;

·our ability to retain our directors, executive officers and key personnel; and

·our ability to comply with and burdens imposed by changes in governmental regulations, taxes and policies.

We caution you not to place undue reliance on these forward-looking statements as they reflect our view only as of the date of this report.  We are under no obligation (and expressly disclaim any obligation) to update or alter any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

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OVERVIEW

Our business

When we refer to “we,” “us,” “our,” “the Company” or “Altisource” we mean Altisource Portfolio Solutions S.A., a Luxembourg société anonyme, or public limited company, and its wholly-owned subsidiaries.

We, through our subsidiaries, are a premier marketplace and transaction solutions provider for the real estate, mortgage and consumer debt industries offering both distribution and content.  We leverage proprietary business process, vendor and electronic payment management software and behavioral science based analytics to improve outcomes for marketplace participants.

We classify our business into the following three reportable segments:

Mortgage Services: Provides services that span the mortgage and real estate lifecycle and are typically outsourced by loan servicers, originators and investors in single family homes.  We provide these services primarily for loan portfolios serviced by Ocwen Financial Corporation and its subsidiaries (“Ocwen”).  We also have longstanding relationships with some of the leading capital markets firms, commercial banks, hedge funds, insurance companies and mortgage bankers.  Within the Mortgage Services segment, we provide the following services:

Asset management — Asset management services principally include property preservation, property inspection, real estate owned (“REO”) asset management, our consumer real estate portal and REO brokerage services.  We also provide property management, lease management and renovation management services for single family rental properties.

Closing and insurance services — Closing and insurance services principally include an array of title search, closing, title agency and insurance related services, including document preparation, pre-foreclosure and REO title searches, escrow and title insurance, program management and insurance brokerage services applicable to residential loan servicers.  We also provide closing and title agency services for loan originations.

Residential property valuation — Residential property valuation services principally include traditional appraisal products through our licensed appraisal management company and alternative valuation products primarily through our network of real estate professionals.  We generally provide these services for loan servicers, mortgage bankers and investors in single family homes.

Default management services — Default management services principally include foreclosure trustee services for loan servicers and non-legal processing and related services for and under the supervision of foreclosure, bankruptcy and eviction attorneys.

Origination management services — Origination management services principally include the operations of Mortgage Partnership of America, L.L.C. (“MPA”) and our contract underwriting and quality control businesses. MPA serves as the manager of Best Partners Mortgage Cooperative, Inc. (“BPMC”), which is referred to as the Lenders One Mortgage Cooperative (“Lenders One”), a national alliance of independent mortgage bankers that provides its members with education and training along with revenue enhancing, cost reducing and market share expanding opportunities.  We provide other origination related services in the residential property valuation and closing and insurance services businesses. In addition, some of the origination related reseller businesses, including the flood certification business, are included in the Technology Services REALSuite business.

Financial Services: Provides collection and customer relationship management services primarily to debt originators and servicers (e.g., credit card, auto lending, retail credit and mortgage) and the utility and insurance industries.  Within the Financial Services segment, we provide the following services:

Asset recovery management — Asset recovery management principally includes post-charge-off debt collection services on a contingency fee basis.

Customer relationship management — Customer relationship management principally includes customer care and early stage collection services as well as insurance and claims processing, call center services and analytical support.

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Technology Services: Comprises our REALSuite of software applications as well as our information technology (“IT”) infrastructure services.  We currently provide our IT infrastructure services to Ocwen, Home Loan Servicing Solutions (“HLSS”), Correspondent One S.A. (“Correspondent One”), Altisource Residential Corporation (“Residential”), Altisource Asset Management Corporation (“AAMC”) and our other segments.  The REALSuite platform provides a fully integrated set of software applications and technologies that manage the end-to-end lifecycle for residential and commercial mortgage loan servicing including the automated management and payment of a distributed network of vendors.  A brief description of the key REALSuite software products is below:

REALServicing® — An enterprise residential mortgage loan servicing product that offers an efficient and effective platform for loan servicing including default administration.  This technology solution features automated workflows, a dialogue engine and robust reporting capabilities.  The solution spans the loan servicing lifecycle from loan boarding to satisfaction including all collections, payment processing and reporting.  We also offer our REALSynergy® enterprise commercial loan servicing system.

REALTrans® — A patented electronic business-to-business exchange that automates and simplifies the ordering, tracking and fulfilling of vendor provided services principally related to mortgages.  This technology solution, whether web-based or integrated into a servicing system, connects multiple service providers through a single platform and forms an efficient method for managing a large scale network of vendors.

REALRemit® — A patented electronic invoicing and payment system that provides vendors with the ability to submit invoices electronically for payment and to have invoice payments deposited directly to their respective bank accounts.

REALDoc® — A correspondence management platform that extracts, stores and generates correspondence. It is capable of integrating with all commercially available servicing, origination and process management applications.

Corporate Items and Eliminations: Includes costs related to corporate support functions including executive, finance, legal, human resources, vendor management, risk and operational effectiveness and also includes eliminations of transactions between the reporting segments.  Corporate items and eliminations also include the cost of facilities until approximately 40% of the facilities are occupied by the business units, at which time costs would be allocated to the business units.

We classify revenue in three categories:  (i) service revenue, (ii) revenue from reimbursable expenses and (iii) non-controlling interests.  In evaluating our performance, we focus on service revenue. Service revenue consists of amounts attributable to our fee-based services. Reimbursable expenses and non-controlling interests are pass-through items for which we earn no margin.  Reimbursable expenses consist of amounts we incur on behalf of our customers in performing our fee-based services, but we pass such costs directly on to our customers without any additional markup.  Non-controlling interests represent the earnings of Lenders One, a consolidated entity not owned by Altisource, and are included in revenue and reduced from net income to arrive at net income attributable to Altisource.

Stock repurchase plan

In May 2012, our shareholders approved a stock repurchase program, which replaced the previous stock repurchase program. Under the program, we are authorized to purchase up to 3.5 million shares of our common stock in the open market in addition to amounts previously purchased under the prior program. From authorization of the previous program in May 2010 through September 30, 2013, we have purchased approximately 3.4 million shares of our common stock in the open market at an average price of $53.94 per share.  We purchased 0.8 million shares of common stock (at an average price of $103.45 per share) and 0.3 million shares of common stock (at an average price of $63.25 per share) during the nine months ended September 30, 2013 and 2012, respectively (0.3 million shares at an average price of $134.86 per share for the third quarter of 2013 and no comparative amounts in the third quarter of 2012). Approximately 2.7 million shares of common stock remain available for repurchase under the program.  Luxembourg law limits share repurchases to approximately the balance of Altisource Portfolio Solutions S.A. (unconsolidated parent company) retained earnings less shares repurchased.  As of September 30, 2013, approximately $38 million was available to repurchase our common stock under Luxembourg law.  Our $200 million senior secured term loan, increased to $400 million on May 7, 2013, also limits the amount we can spend on share repurchases in any year and may prevent repurchases in certain circumstances.  As of September 30, 2013, approximately $107 million was available to repurchase our common stock under our senior secured term loan.

Equator acquisition

On August 19, 2013, we entered into a Purchase and Sale Agreement (the “Purchase Agreement”) pursuant to which we agreed to purchase all of the outstanding limited liability company interests of Equator, LLC, a California limited-liability company (“Equator”).  The aggregate consideration payable under the Purchase Agreement is up to $150.0 million comprised of (i) $70.0 million in initial consideration and (ii) up to an additional $80.0 million in potential additional consideration, the payment of which is dependent upon the Equator business meeting targeted levels of profitability (as described in the Purchase Agreement) for three consecutive 12-month periods following closing.  Each 12-month period has targeted levels of profitability and potential

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additional consideration will be paid based on each 12-month period. We may, at our discretion, pay up to 20% of the initial consideration and up to 20% of each payment of any additional consideration in shares of our restricted stock, with the balance to be paid in cash.  The closing is subject to the satisfaction of customary closing terms and conditions, including, without limitation, clearance under the Hart-Scott-Rodino (“HSR”) Act. The purchase price is subject to certain adjustments based on targeted amounts of current assets and current liabilities of Equator at closing, to be settled within 90 days of the closing date.

We initially filed the HSR application with the Federal Trade Commission (the “FTC”) in the third quarter and initially expected to receive approval and close the acquisition in the third quarter of 2013.  With the recent disruption of the United States government and shutdown of nonessential services, approval from the FTC has been delayed. To ensure that the HSR waiting period did not expire during the United States government disruption, and following discussions with the staff of the FTC, we voluntarily withdrew our initial application and re-filed it early in the fourth quarter of 2013.  We believe, although there can be no assurance, the transaction will close in the fourth quarter of 2013.

Altisource’s Vision and Growth Initiatives

Since our separation from Ocwen, Altisource has evolved from a company providing a few services to a company providing a full suite of mortgage, real estate and consumer debt services.  Our relationship with Ocwen provided a foundation on which we built our business and remains an important priority for us.  Altisource’s vision, however, has evolved to become the premier provider of real estate and mortgage marketplaces offering both distribution and content.  Within these industries, we are facilitating transactions related to home sales, home rentals, home maintenance, mortgage origination and mortgage servicing.  The Equator acquisition, with its marketplace, and real estate and servicing transaction solutions, is in line with this vision and accelerates our evolution and growth.

We like these markets because they are all large.  During the twelve months ended July 31, 2013, the National Association of Realtors reported that 5.4 million homes were sold in the United States.  Additionally, according to the U.S. Census Bureau, there are 21.3 million one to four family rental homes and 76.1 million owner-occupied homes in the United States.  In the mortgage market, based on information from the Mortgage Bankers Association, we estimate 7 million loans will be originated in 2013, and there are 48.6 million loans outstanding according to Moody’s CreditForecast.com.

We believe there are significant growth opportunities for Altisource in the real estate and mortgage markets, leveraging our distribution and transaction solutions.  Our strategic growth initiatives are:

Real estate market:

·deploying Hubzu® to other institutions and the non-distressed home sales market

·providing property management, lease management and renovation management services to the single family rental market

·supporting Ocwen’s growth

Mortgage market:

·growing our origination related services by providing services to the members of Lenders One and Ocwen’s origination platform

·maintaining and growing our services provided to Ocwen as it continues to grow its residential loan servicing portfolio

Distribution and transaction solutions:

·developing our next generation technologies

·growing our customer relationship management business

·expanding our mortgage charge-off collections practice

Hubzu — With over 23 thousand homes sold in the last twelve months and over $60 million of service revenue generated from these sales, Hubzu has established a solid footing as an on-line marketplace to sell real estate.  However, with over 5 million homes sold in the U.S. during the same time period, there is significant room for growth.  We have two primary areas of focus: (1) generate more revenue per home sale transaction on Hubzu and (2) drive more real estate listings to Hubzu.

To generate greater average revenue per home sale transaction, we are focused on selling more homes through auction.  We earn more revenue on homes sold through auction compared to our traditional on-line sales process.  During the quarter, we made several key enhancements to our auction format and design.  As a result, we expect the percentage of properties going under contract through auction to increase.

To drive more listings to Hubzu, we are developing and growing relationships with servicers, asset managers and real estate agents.  With respect to servicers and asset managers, we are focused on selling their REO and short sales on Hubzu.  In addition to Ocwen, we signed agreements with two companies and are in contract negotiations or advanced sales stages with five others.  We also launched the direct-to-broker program in July to allow agents to sell their listings on Hubzu.  We are receiving very good

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feedback and are actively working to make the agent and homebuyer experience better.  As of the end of the quarter, over 15% of homes for sale on Hubzu are non-distressed.

Property management, lease management and renovation management services — We have a 15-year agreement through 2027 to act as the exclusive provider of property management, lease management and renovation management services to Residential.  As Residential grows through the acquisition of non-performing loans and as rental rates increase, Altisource’s revenue and earnings grow.

Residential is focused on acquiring and managing single family rental properties by acquiring portfolios of sub-performing and non-performing residential mortgage loans throughout the Unites States.  Residential anticipates that there are three outcomes for the pools of loans it purchases:  (1) approximately 15% of the loans will be refinanced through Ocwen’s origination arm, (2) approximately 35% of the loans will be resolved and the underlying real estate assets sold and (3) approximately half of the loans will be resolved and the underlying real estate assets will be converted to rentals.  Altisource earns revenue in all three scenarios.  We anticipate that we will provide origination related services, such as title and escrow, to Ocwen.  Second, for real estate assets that are sold, these homes will be sold on Hubzu.  Finally, for real estate assets that are converted to rentals, we earn fees for providing the renovation management, leasing management and property management services.  Prior to loan resolution, the loans are serviced by Ocwen on REALServicing, providing Altisource default related revenue and REALServicing fees.  Given Residential’s recent $350 million secondary offering and its acquisition pipeline of non-performing loans, we believe Residential and our growth prospects are very good.

Services provided to Ocwen — We believe Ocwen’s servicing portfolio growth will continue to provide a meaningful contribution to our revenue.

With respect to Ocwen’s servicing portfolio growth, the Mortgage Services segment is fully staffed to support the anticipated increase in the number of loans on REALServicing through 2014.  The growth is expected based on Ocwen’s acquisitions of the Homeward Residential, Inc. (“Homeward”), Residential Capital, LLC (“ResCap”), Ally Financial Inc. (“Ally”) and OneWest Bank FSB (“OneWest”) servicing rights and the loans in these portfolios that have not yet boarded to REALServicing.

Mortgage origination related services - We have begun to provide services to Ocwen’s origination platform and continue to be focused on expanding origination related services to the Lenders One members and their over 12% share of the year-to-date 2013 residential loan origination market.  During the third quarter of 2013, our origination related service revenue decreased 14% compared to the second quarter of 2013, but fared better than the estimated overall origination market decline of 25% during this same period.  Even though our decline was approximately 45% less than the market, we can do better.

There have been two impediments to our origination related growth.  First, during the strong refinance market experienced over the past few years, lenders have been more focused on originating loans than on reducing their costs.  With increasing interest rates and refinance volumes declining, we believe lenders will become more focused on costs.  Second, lenders want technology that makes it easy to order, receive and pay for services through their loan origination platforms.  While we have the framework of the next generation vendor and payment management technology to do this, we have first deployed our technology resources on the development of our next generation REALFoundation and REALServicing technologies.  Once these technologies are appropriately staffed and the development cadence is in place, we expect to deploy a team to complete the development and implementation of the origination related technology for the Lenders One members.  We believe the shifting market conditions and the completion of our technology will support the growth of our originations related revenue.

Distribution and transaction solutions - During the third quarter, we continued to work on the development of our next generation technologies and hired information technology professionals to support these development efforts.  We also expanded both the mortgage charge-off collections practice and the customer relationship management business contributing to the 18% increase in Financial Services’ revenue in the third quarter compared to the second quarter of 2013 and the 34% increase in Financial Services’ pre-tax income for the same period.   We believe that we have turned the corner in the Financial Services business and remain optimistic about its growth prospects.

Factors affecting comparability

The following additional items may impact the comparability of our results:

·The average number of loans serviced by Ocwen on REALServicing totaled 1.0 million for the nine months ended September 30, 2013 compared to 0.7 million for the nine months ended September 30, 2012 (1.2 million for the third quarter of 2013 and 0.8 million for the third quarter of 2012).  The average number of delinquent non-Government-Sponsored Enterprise (“non-GSE”) loans serviced by Ocwen on REALServicing totaled 276 thousand for the nine months ended September 30, 2013 compared

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to 207 thousand for the nine months ended September 30, 2012 (303 thousand for the third quarter of 2013 and 215 thousand for the third quarter of 2012);

·In November 2012, we borrowed $200 million under a senior secured term loan agreement and increased it to $400 million on May 7, 2013.  Interest expense, including amortization of debt issuance costs and debt discount, totaled $14.3 million for the nine months ended September 30, 2013 and $6.2 million in the third quarter of 2013 (no comparative amounts in 2012);

·We repurchased 0.8 million shares of our common stock under our stock repurchase program during the nine months ended September 30, 2013 compared to 0.3 million shares during the nine months ended September 30, 2012 (0.3 million shares during the third quarter of 2013 and none during the third quarter of 2012); and

·In connection with our 2013 fee-based business transactions with Ocwen related to Homeward and ResCap, we recorded customer relationship intangible assets of $204.4 million. Intangible asset amortization expense relating to these transactions totaled $15.3 million for the nine months ended September 30, 2013 ($7.4 million for the third quarter of 2013; there were no comparative amounts in 2012).

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CONSOLIDATED RESULTS OF OPERATIONS

Summary Consolidated Results

The following is a discussion of our consolidated results of operations for the periods indicated.

The following table sets forth information regarding our results of operations:

	Three months ended September 30,								Nine months ended September 30,
							% Increase								% Increase
(dollars in thousands, except per share data)	2013			2012			(decrease)		2013			2012			(decrease)
Service revenue
Mortgage Services	$	134,317		$	90,607		48		$	350,581		$	259,926		35
Financial Services	27,168			15,283			78		66,259			49,100			35
Technology Services	25,175			19,076			32		70,189			53,984			30
Eliminations	(6,268		)	(6,364		)	2		(17,411		)	(17,820		)	2
	180,392			118,602			52		469,618			345,190			36
Reimbursable expenses	29,496			24,326			21		73,061			77,846			(6	)
Non-controlling interests	947			1,060			(11	)	3,093			4,223			(27	)
Total revenue	210,835			143,988			46		545,772			427,259			28
Cost of revenue	134,261			94,287			42		348,195			278,785			25
Gross profit	76,574			49,701			54		197,577			148,474			33
Selling, general and administrative expenses	31,519			18,452			71		80,027			54,485			47
Income from operations	45,055			31,249			44		117,550			93,989			25
Other income (expense), net:
Interest expense	(6,188		)	(10		)	N/M		(14,302		)	(39		)	N/M
Other income (expense), net	(253		)	(257		)	2		529			(900		)	159
Total other income (expense), net	(6,441		)	(267		)	N/M		(13,773		)	(939		)	N/M
Income before income taxes and non-controlling interests	38,614			30,982			25		103,777			93,050			12
Income tax provision	(1,659		)	(2,898		)	43		(6,227		)	(8,493		)	27
Net income	36,955			28,084			32		97,550			84,557			15
Net income attributable to non-controlling interests	(947		)	(1,060		)	11		(3,093		)	(4,223		)	27
Net income attributable to Altisource	$	36,008		$	27,024		33		$	94,457		$	80,334		18
Margins:
Gross profit/service revenue	42		%	42		%			42		%	43		%
Income from operations/service revenue	25		%	26		%			25		%	27		%
Earnings per share:
Basic	$	1.56		$	1.16		34		$	4.07		$	3.44		18
Diluted	$	1.42		$	1.08		31		$	3.77		$	3.23		17
N/M — not meaningful.

Revenue

We recognized service revenue of $469.6 million for the nine months ended September 30, 2013, a 36% increase when compared to the nine months ended September 30, 2012 ($180.4 million for the third quarter of 2013, a 52% increase over the third quarter of 2012).  The continued growth in service revenue was driven by Ocwen’s Homeward and ResCap acquisitions along with expansion of the Financial Services segment. The Homeward non-GSE portfolio was boarded on REALServicing from January 1, 2013 through April 1, 2013, and more than one-half of the ResCap non-GSE loans were boarded on REALServicing during the third quarter of 2013. Financial Services’ growth was primarily from the mortgage collection services on the ResCap and Ocwen portfolios and the growth of the customer relationship management business as a result of retaining our existing customers, expanding relationships and attracting new customers.  Service revenue growth was also driven by increases in Technology Services’ licensing revenue.

Our revenues are impacted by seasonality.  More specifically, the Financial Services segment’s asset recovery revenue tends to be higher in the first quarter and generally declines throughout the year.  Mortgage Services revenue is impacted by REO sales,

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which tend to be at their lowest level during the fall and winter months and highest during the spring and summer months.  We believe that customer growth is likely to offset the typical impacts of seasonality.

Cost of Revenue and Gross Profit

Cost of revenue principally includes payroll and employee benefits associated with personnel employed in customer service and operations roles, fees paid to external providers related to the provision of services, reimbursable expenses, technology and telecommunications expenses and depreciation and amortization of operating assets.

We recognized cost of revenue of $348.2 million for the nine months ended September 30, 2013, a 25% increase when compared to the nine months ended September 30, 2012 ($134.3 million for the third quarter of 2013, a 42% increase over the third quarter of 2012).  The increase in cost of revenue is directly attributable to compensation, technology and vendor costs associated with the growth in Ocwen’s servicing portfolio, including its acquisition of the Homeward and ResCap portfolios, and higher costs in our Technology Services segment as we continue to invest in the development of our next generation technology and technology infrastructure to support our growth.  Additionally, we are fully staffed to support the increase in the number of loans on REALServicing through the first half of 2014.

Gross profit increased to $197.6 million, representing 42% of service revenue, for the nine months ended September 30, 2013 from $148.5 million, representing 43% of service revenue, for the nine months ended September 30, 2012 ($76.6 million, representing 42% of service revenue, for the third quarter of 2013 from $49.7 million, representing 42% of service revenue for the third quarter of 2012).  The decrease in gross profit margin for the nine months ended September 30, 2013 compared to the nine months ended September 30, 2012 was driven by revenue mix. We experienced higher growth in the lower margin property inspection and preservation services from the early referrals from the Homeward and ResCap portfolios, partially offset by improved performance in our Financial Services segment from the mortgage charge-off business and the customer relationship management growth. Gross profit margins were also impacted by the carrying costs to support Mortgage Services’ anticipated growth and higher costs in our Technology Services segment as we continue to invest in the development of our next generation technology to support our growth initiatives.  Our gross profit margins can vary significantly from period to period.  The most significant factors that contribute to margin variability include the mix of services delivered, timing of investments in new services, hiring of staff in advance of new business and the timing of loan boardings by our customers.

Selling, General and Administrative Expenses and Income from Operations

Selling, general and administrative expenses (“SG&A”) include payroll for personnel employed in executive, finance, legal, human resources, vendor management, risk and operational effectiveness roles.  This category also includes occupancy costs, professional fees, depreciation and amortization on non-operating assets.

We recognized SG&A of $80.0 million for the nine months ended September 30, 2013, a 47% increase compared to the nine months ended September 30, 2012 ($31.5 million for the third quarter of 2013, a 71% increase over the third quarter of 2012). This increase is primarily driven by higher amortization of intangible assets recorded in connection with the Homeward and ResCap transactions totaling $15.3 million for the nine months ended September 30, 2013 ($7.4 million for the third quarter of 2013; there were no comparative amounts in 2012). In addition, we are expanding some of our corporate functions to support Altisource’s growth.  On a consolidated basis, income from operations as a percentage of service revenue declined to 25% for the nine months ended September 30, 2013 from 27% for the nine months ended September 30, 2012 (25% for the third quarter of 2013 and 26% for the third quarter of 2012) as a result of lower gross margins and the increase of SG&A as a percentage of service revenue.

Other Income (Expense), net

Other income (expense), net principally includes interest expense, interest income and equity loss in affiliates.  Interest expense for the nine months ended September 30, 2013 increased by $14.3 million (increased by $6.2 million for the third quarter of 2013) from the $200 million senior secured term loan borrowed in the fourth quarter of 2012 and increased to $400 million on May 7, 2013 (no comparative amounts in 2012).  The higher interest expense was partially offset by $0.8 million of interest income recognized for the nine months ended September 30, 2013 (no comparative amounts in 2012) from a $75.0 million loan to Ocwen. Ocwen repaid the loan in February 2013.

Income Tax Provision

We recognized an income tax provision of $6.2 million for the nine months ended September 30, 2013 and $1.7 million for the third quarter of 2013.  Altisource’s effective tax rate differs from the Luxembourg statutory tax rate of 29.2% primarily because of the effect of a favorable tax ruling in Luxembourg and the mix of income and losses in multiple tax jurisdictions.  Our effective tax rate for the nine months ended September 30, 2013 was 6.0% compared to 9.1% for the nine months ended September 30, 2012 (4.3% and 9.4% for the third quarter of 2013 and 2012, respectively). The lower effective tax rates in 2013

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are due to higher relative taxable income in the current year in tax jurisdictions with a lower tax rate.  Our consolidated effective income tax rate for financial reporting purposes may change periodically due to changes in enacted tax rates, fluctuations in the mix of income earned from our domestic and international operations, which may be subject to differing tax rates, and our ability to utilize net operating loss and tax credit carryforwards.

SEGMENT RESULTS OF OPERATIONS

The following section provides a discussion of pre-tax results of operations of our business segments for the three and nine months ended September 30, 2013 and 2012.  Transactions between segments are accounted for as third party arrangements for purposes of presenting segment results of operations.  Intercompany transactions primarily consist of IT infrastructure services and charges for the use of certain REALSuite applications from our Technology Services segment to our other two segments.  Generally, we reflect these charges within technology and telecommunications in the segment receiving the services, except for consulting services, which we reflect in outside fees and services.  Certain prior year amounts have been reclassified to conform to the current period presentation.

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Financial information for our segments is as follows:

	Three months ended September 30, 2013
										Corporate
	Mortgage			Financial			Technology			Items and			Consolidated
(dollars in thousands)	Services			Services			Services			Eliminations			Altisource
Revenue
Service revenue	$	134,317		$	27,168		$	25,175		$	(6,268	)	$	180,392
Reimbursable expenses	29,397			99			—			—			29,496
Non-controlling interests	947			—			—			—			947
	164,661			27,267			25,175			(6,268		)	210,835
Cost of revenue	106,412			14,998			18,569			(5,718		)	134,261
Gross profit	58,249			12,269			6,606			(550		)	76,574
Selling, general and administrative expenses	14,224			4,616			2,621			10,058			31,519
Income from operations	44,025			7,653			3,985			(10,608		)	45,055
Other income (expense), net	(41		)	—			—			(6,400		)	(6,441		)
Income before income taxes and non-controlling interests	$	43,984		$	7,653		$	3,985		$	(17,008	)	$	38,614
Margins:
Gross profit/service revenue	43		%	45		%	26		%	N/M			42		%
Income from operations/service revenue	33		%	28		%	16		%	N/M			25		%
Transactions with related parties:
Revenue	$	120,067		$	10,057		$	13,433		$	—		$	143,557
Selling, general and administrative expenses	28			—			—			692			720

N/M — not meaningful.

	Three months ended September 30, 2012
										Corporate
	Mortgage			Financial			Technology			Items and			Consolidated
(dollars in thousands)	Services			Services			Services			Eliminations			Altisource
Revenue
Service revenue	$	90,607		$	15,283		$	19,076		$	(6,364	)	$	118,602
Reimbursable expenses	24,215			111			—			—			24,326
Non-controlling interests	1,060			—			—			—			1,060
	115,882			15,394			19,076			(6,364		)	143,988
Cost of revenue	72,774			11,784			15,418			(5,689		)	94,287
Gross profit	43,108			3,610			3,658			(675		)	49,701
Selling, general and administrative expenses	6,155			3,116			1,851			7,330			18,452
Income from operations	36,953			494			1,807			(8,005		)	31,249
Other income (expense), net	(290		)	(6		)	(5		)	34			(267		)
Income before income taxes and non-controlling interests	$	36,663		$	488		$	1,802		$	(7,971	)	$	30,982
Margins:
Gross profit/service revenue	48		%	24		%	19		%	N/M			42		%
Income from operations/service revenue	41		%	3		%	9		%	N/M			26		%
Transactions with related parties:
Revenue	$	78,970		$	56		$	7,532		$	—		$	86,558
Selling, general and administrative expenses	—			—			—			621			621

N/M — not meaningful.

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	Nine months ended September 30, 2013
										Corporate
	Mortgage			Financial			Technology			Items and			Consolidated
(dollars in thousands)	Services			Services			Services			Eliminations			Altisource
Revenue
Service revenue	$	350,581		$	66,259		$	70,189		$	(17,411	)	$	469,618
Reimbursable expenses	72,645			416			—			—			73,061
Non-controlling interests	3,093			—			—			—			3,093
	426,319			66,675			70,189			(17,411		)	545,772
Cost of revenue	267,859			40,831			55,088			(15,583		)	348,195
Gross profit	158,460			25,844			15,101			(1,828		)	197,577
Selling, general and administrative expenses	32,272			11,000			7,514			29,241			80,027
Income from operations	126,188			14,844			7,587			(31,069		)	117,550
Other income (expense), net	(153		)	(8		)	3			(13,615		)	(13,773		)
Income before income taxes and non-controlling interests	$	126,035		$	14,836		$	7,590		$	(44,684	)	$	103,777
Margins:
Gross profit/service revenue	45		%	39		%	22		%	N/M			42		%
Income from operations/service revenue	36		%	22		%	11		%	N/M			25		%
Transactions with related parties:
Revenue	$	301,194		$	16,779		$	36,916		$	—		$	354,889
Selling, general and administrative expenses	86			—			—			2,047			2,133
Interest income	—			—			—			773			773

N/M — not meaningful.

	Nine months ended September 30, 2012
										Corporate
	Mortgage			Financial			Technology			Items and			Consolidated
(dollars in thousands)	Services			Services			Services			Eliminations			Altisource
Revenue
Service revenue	$	259,926		$	49,100		$	53,984		$	(17,820	)	$	345,190
Reimbursable expenses	77,297			549			—			—			77,846
Non-controlling interests	4,223			—			—			—			4,223
	341,446			49,649			53,984			(17,820		)	427,259
Cost of revenue	218,969			35,780			40,098			(16,062		)	278,785
Gross profit	122,477			13,869			13,886			(1,758		)	148,474
Selling, general and administrative expenses	17,458			10,550			5,519			20,958			54,485
Income from operations	105,019			3,319			8,367			(22,716		)	93,989
Other income (expense), net	(857		)	(22		)	(22		)	(38		)	(939		)
Income before income taxes and non-controlling interests	$	104,162		$	3,297		$	8,345		$	(22,754	)	$	93,050
Margins:
Gross profit/service revenue	47		%	28		%	26		%	N/M			43		%
Income from operations/service revenue	40		%	7		%	15		%	N/M			27		%
Transactions with related parties:
Revenue	$	235,933		$	174		$	21,384		$	—		$	257,491
Selling, general and administrative expenses	—			—			—			1,801			1,801

N/M — not meaningful.

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Mortgage Services

Revenue

Revenue by service line was as follows:

	Three months ended September 30,						Nine months ended September 30,
					% Increase						% Increase
(in thousands)	2013		2012		(decrease)		2013		2012		(decrease)
Service revenue:
Asset management services	$	55,427	$	29,600	87		$	133,543	$	78,736	70
Closing and insurance services	33,142		20,779		59		82,516		63,969		29
Residential property valuation	28,475		20,356		40		77,314		61,784		25
Default management services	10,266		12,489		(18	)	33,124		35,763		(7	)
Origination management services	7,007		7,383		(5	)	24,084		19,674		22
Total service revenue	134,317		90,607		48		350,581		259,926		35
Reimbursable expenses:
Asset management services	27,380		23,459		17		68,937		75,319		(8	)
Default management services	1,304		731		78		2,342		1,716		36
Closing and insurance services	647		25		N/M		1,168		262		N/M
Origination management services	66		—		N/M		198		—		N/M
Total reimbursable expenses	29,397		24,215		21		72,645		77,297		(6	)
Non-controlling interests	947		1,060		(11	)	3,093		4,223		(27	)
Total revenue	$	164,661	$	115,882	42		$	426,319	$	341,446	25
Transactions with related parties:
Asset management services	$	76,485	$	47,192	62		$	182,738	$	141,363	29
Residential property valuation	27,526		18,408		50		73,892		56,666		30
Closing and insurance services	10,879		9,636		13		30,199		28,502		6
Default management services	4,582		3,734		23		13,186		9,402		40
Origination management services	595		—		N/M		1,179		—		N/M
Total	$	120,067	$	78,970	52		$	301,194	$	235,933	28

N/M — not meaningful.

Revenue growth in all business lines, except default management services and origination management services, primarily reflects Ocwen’s Homeward and ResCap servicing platform acquisitions. The Homeward non-GSE portfolio was boarded on REALServicing from January 1, 2013 through April 1, 2013 and more than one-half of the ResCap non-GSE loans were boarded on REALServicing during the third quarter of 2013. The growth in asset management services is driven by higher property inspection and preservation services primarily from the Homeward and ResCap portfolios. The growth in the closing and insurance services and residential property valuation businesses also reflects Ocwen’s larger loan portfolio. Default management services revenue was lower as one of Ocwen’s subservicing customers is continuing its temporary moratorium on the foreclosure of its loans, the requirements under the “Making Homes Affordable” program limit servicers’ ability to initiate a foreclosure while pursuing other avenues of resolution and a greater percentage of loans pending foreclosure actions are being placed on hold for modification consideration or stopped due to modification.  The higher origination management services revenue for the nine months ended September 30, 2013 is driven by the growth of Lenders One and the incremental roll-out of new origination related services to the members and Ocwen.  For the nine months ended September 30, 2013, the Lenders One membership grew to 249 members, a net increase of 8 members from September 30, 2012.

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Cost of Revenue and Gross Profit

Cost of revenue consists of the following:

	Three months ended September 30,						Nine months ended September 30,
					% Increase						% Increase
(in thousands)	2013		2012		(decrease)		2013		2012		(decrease)
Compensation and benefits	$	16,780	$	13,752	22		$	47,479	$	40,585	17
Outside fees and services	55,003		29,434		87		132,997		85,985		55
Reimbursable expenses	29,397		24,215		21		72,645		77,297		(6	)
Technology and telecommunications	4,826		4,997		(3	)	13,551		14,162		(4	)
Depreciation and amortization	406		376		8		1,187		940		26
Cost of revenue	$	106,412	$	72,774	46		$	267,859	$	218,969	22

Cost of revenue increased during the third quarter and nine months ended September 30, 2013 primarily due to higher outside fees and services and compensation and benefits.  Outside fees and services increased in line with the increase in service revenue, particularly the increase in property inspection and preservation orders. However, compensation and benefits costs as a percentage of service revenue continued to decrease as we began to experience the benefit of our workforce efficiency initiatives on higher referral volumes even after incurring carrying costs to support Mortgage Services’ anticipated growth.

Gross profit as a percentage of service revenue decreased to 45% for the nine months ended September 30, 2013 from 47% for the nine months ended September 30, 2012 (a decrease to 43% in the third quarter of 2013 from 48% in the third quarter of 2012).  The most significant factors impacting gross profit margins were the higher proportionate growth of lower margin property preservation and property inspection orders, partially offset by lower compensation and benefits costs as a percentage of service revenue from process efficiencies. Property inspections are higher during initial boardings of new portfolios, which occurred in 2013 in connection with the Homeward and ResCap portfolios.  Generally, we have been able to maintain our margins in a period of accelerated growth, and we anticipate that, going forward, we will improve margins by reducing employee and vendor costs as a percent of service revenue through our workforce efficiency initiatives, displacing vendors with internal personnel at a lower cost and deploying vendor, process and payment management technologies.

Our margins can vary substantially depending upon when servicing rights are acquired and boarded to REALServicing by Ocwen.  Typically, compensation and benefits will increase in anticipation of a boarding as we hire and train personnel to deliver services in advance of the actual boarding of loans.  Subsequently, as new loans are boarded, for the initial months post-boarding, we tend to deliver an elevated level of lower margin valuations and property inspection and preservation services.

Selling, General and Administrative Expenses and Income from Operations

SG&A increased during the nine months ended September 30, 2013 principally due to the amortization of intangible assets recorded in connection with the Homeward and ResCap transactions totaling $12.3 million ($6.3 million for the third quarter of 2013; there were no comparative amounts in 2012).  Higher SG&A was also driven by increased marketing costs related to Hubzu and employee-related costs due to increased headcount. Income from operations as a percentage of service revenue decreased to 36% for the nine months ended September 30, 2013 from 40% for the nine months ended September 30, 2012 (33% in the third quarter of 2013 compared to 41% in the third quarter of 2012) principally due to lower gross profit margins and higher amortization expense.

34

Financial Services

Revenue

Revenue by service line was as follows:

	Three months ended September 30,						Nine months ended September 30,
					% Increase						% Increase
(in thousands)	2013		2012		(decrease)		2013		2012		(decrease)
Service revenue:
Asset recovery management	$	14,858	$	6,705	122		$	32,982	$	23,330	41
Customer relationship management	12,310		8,578		44		33,277		25,770		29
Total service revenue	27,168		15,283		78		66,259		49,100		35
Reimbursable expenses:
Asset recovery management	99		111		(11	)	416		549		(24	)
Total reimbursable expenses	99		111		(11	)	416		549		(24	)
Total revenue	$	27,267	$	15,394	77		$	66,675	$	49,649	34
Transactions with related parties included above:
Asset recovery management	$	10,057	$	56	N/M		$	16,779	$	174	N/M

N/M — not meaningful.

Financial Services revenue increased during the third quarter and nine months ended September 30, 2013 due to increased charge-off mortgage collections and growth in customer relationship management revenues from the addition of one new client in the first quarter of 2013 and one new client in the second quarter of 2013.  The increases were partially offset by lower credit card charge-off placements due to continuing record low credit card delinquency rates.  With respect to the charge-off mortgage business, we expanded our capabilities in connection with the ResCap fee-based business transaction, and in the second quarter we began providing these services to the ResCap loans serviced by Ocwen and a greater portion of the other loans in the Ocwen portfolio.

Our Financial Services business is impacted by seasonality.  Asset recovery management revenue tends to be higher in the first quarter of each year as borrowers utilize tax refunds and bonuses to pay debts.

Cost of Revenue and Gross Profit

Cost of revenue consists of the following:

	Three months ended September 30,						Nine months ended September 30,
					% Increase						% Increase
(in thousands)	2013		2012		(decrease)		2013		2012		(decrease)
Compensation and benefits	$	11,503	$	8,261	39		$	30,913	$	24,639	25
Outside fees and services	1,176		1,262		(7	)	3,547		4,511		(21	)
Reimbursable expenses	99		111		(11	)	416		549		(24	)
Technology and telecommunications	2,030		1,926		5		5,308		5,654		(6	)
Depreciation and amortization	190		224		(15	)	647		427		52
Cost of revenue	$	14,998	$	11,784	27		$	40,831	$	35,780	14

Compensation and benefits increased during the third quarter and nine months ended September 30, 2013 primarily due to higher mortgage charge-off and customer relationship management headcount in connection with new business. These increases were partially offset by lower outside fees and services.  We continually evaluate our cost structure in our asset recovery management business in connection with lower credit card charge-off placements.

35

Gross profit as a percentage of service revenue increased to 39% for the nine months ended September 30, 2013 compared to 28% for the nine months ended September 30, 2012 (45% for the third quarter of 2013 compared to 24% for the third quarter of 2012) due to the revenue mix in the asset recovery management business and growth in the higher margin customer relationship management business.

Selling, General and Administrative Expenses and Income from Operations

SG&A increased in the third quarter and nine months ended September 30, 2013 principally from higher amortization of intangible assets recorded in connection with the ResCap transaction totaling $2.6 million for the nine months ended September 30, 2013 ($1.3 million for the third quarter of 2013; there were no comparative amounts in 2012).

Income from operations as a percentage of service revenue for the nine months ended September 30, 2013 increased to 22% compared to 7% for the nine months ended September 30, 2012 (28% for the third quarter of 2013 compared to 3% for the third quarter of 2012) due to higher gross margins and slower SG&A growth.

Technology Services

Revenue

Revenue by service line was as follows:

	Three months ended September 30,					Nine months ended September 30,
					% Increase					% Increase
(in thousands)	2013		2012		(decrease)	2013		2012		(decrease)
Revenue:
REALSuite	$	15,209	$	11,015	38	$	43,507	$	31,693	37
IT infrastructure services	9,966		8,061		24	26,682		22,291		20
Total revenue	$	25,175	$	19,076	32	$	70,189	$	53,984	30
Transactions with related parties included above:
REALSuite	$	8,448	$	4,906	72	$	24,382	$	14,085	73
IT infrastructure services	4,985		2,626		90	12,534		7,299		72
Total	$	13,433	$	7,532	78	$	36,916	$	21,384	73

The increase in REALSuite revenue in the third quarter and nine months ended September 30, 2013 is primarily attributable to licensing revenue from REALDoc (none in 2012) and the growth in Ocwen’s residential loan servicing portfolio on REALServicing driven by the Homeward and ResCap loan boardings.

IT infrastructure services revenue also increased in the third quarter and nine months ended September 30, 2013 due to an increase in cost to support strategic initiatives and headcount growth at both Ocwen and Altisource.  IT infrastructure services are billed on a cost plus basis.

Services provided to our other segments are eliminated in consolidation but are included as revenue in the Technology Services segment and as technology and telecommunications expense, a component of cost of revenue, in our other segments for segment presentation purposes.

36

Cost of Revenue and Gross Profit

Cost of revenue consists of the following:

	Three months ended September 30,						Nine months ended September 30,
					% Increase						% Increase
(in thousands)	2013		2012		(decrease)		2013		2012		(decrease)
Compensation and benefits	$	11,317	$	6,828	66		$	30,531	$	19,090	60
Outside fees and services	490		479		2		1,505		1,197		26
Technology and telecommunications	4,263		5,574		(24	)	14,536		13,937		4
Depreciation and amortization	2,499		2,537		(1	)	8,516		5,874		45
Cost of revenue	$	18,569	$	15,418	20		$	55,088	$	40,098	37

Cost of revenue increased in the third quarter and nine months ended September 30, 2013 due to hiring more and higher cost personnel to support the development of our next generation REALSuite software.  We expect cost of revenue in the Technology Services segment to increase as we continue to invest in personnel to support our development and growth initiatives.  Depreciation and amortization increased in the nine months ended September 30, 2013 primarily as a result of our 2012 investment in a disaster recovery center.  Technology and telecommunications costs were lower in the third quarter of 2013 primarily as a result of favorable telephony costs and the timing of consulting fees related to strategic projects.

Gross profit margins declined in the nine months ended September 30, 2013, compared to the nine months ended September 30, 2012, as we continue to invest in the development of our next generation technologies. However, gross profit margins improved in the third quarter of 2013 primarily as a result of favorable telephony costs and lower consulting fees compared to the third quarter of 2012, partially offset by investments in the development of our next generation technologies.  We invest in the development of our next generation technologies to support our continued expansion.

Selling, General and Administrative Expenses and Income from Operations

SG&A increased in the third quarter and nine months ended September 30, 2013 principally due to higher administrative employee costs and increased depreciation from increased administrative assets.

Income from operations as a percentage of service revenue for the nine months ended September 30, 2013 decreased to 11% compared to 15% for the nine months ended September 30, 2012 due to lower gross margins and higher SG&A as described above. However, income from operations as a percentage of service revenue for the third quarter of 2013 increased to 16% compared to 9% for the third quarter of 2012 as a result of higher gross profit, partially offset by higher SG&A, as described above.

Corporate Items and Eliminations

Our Corporate segment includes costs related to corporate support functions including executive, finance, legal, human resources, vendor management, risk, operational effectiveness and interest expense.  It also includes eliminations of transactions between our business segments.

Corporate costs increased in the third quarter and nine months ended September 30, 2013 compared to the similar periods of the prior year primarily due to higher compensation and employee-related costs, consulting, depreciation and amortization, lease costs and interest expense. We incurred higher compensation and employee-related costs as we are expanding certain corporate functions in 2013 to support our continued growth.  The higher depreciation and amortization and lease costs relate to the build out of new facilities to support our continued expansion.  We reflect initial lease and other facility-related costs in our corporate segment until the facilities are approximately 40% occupied by the business units, at which time the cost is reflected in the respective segment’s financial statements.  In 2014, we expect our overhead expenditures to reach a stable level.

Interest expense for the nine months ended September 30, 2013 increased by $14.3 million (increased by $6.2 million for the third quarter of 2013) from the $200 million senior secured term loan borrowed in the fourth quarter of 2012 and increased to $400 million on May 7, 2013 (no comparative amounts in 2012).  We recognized interest income of $0.8 million for the nine months ended September 30, 2013 (no comparative amounts in 2012) from a fourth quarter 2012 $75.0 million loan to Ocwen. Ocwen repaid the loan in February 2013.

37

The amount of intercompany revenue eliminated in consolidation was consistent in the third quarter and nine months ended September 30, 2013 compared to the similar periods of the prior year.  These intercompany transactions primarily consisted of IT infrastructure services as well as charges for the use of certain REALSuite applications from our Technology Service segment to our other two business segments.  While the expenses are recognized in the Mortgage Services and Financial Services segments above, the elimination of these expenses are reflected in Corporate items and eliminations.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Our primary source of liquidity is cash flows from operations.  We seek to deploy excess cash generated in a disciplined manner. Principally, we intend to use excess cash to develop complementary services and businesses that we believe will generate attractive margins in line with our core capabilities.  Further, we evaluate potential acquisitions that align with our vision and accelerate the achievement of our strategic objectives.  We also intend to use excess cash to repurchase shares of our stock and repay amounts outstanding under our senior secured term loan (as described below).

Senior Secured Term Loan

On November 27, 2012, we entered into a seven-year senior secured term loan agreement with Bank of America, N.A. as administrative agent, pursuant to which we borrowed $200 million.  On May 7, 2013, we amended the senior secured term loan agreement to increase the principal amount of the senior secured term loan by $200 million (to $400 million) and provide additional share repurchase capacity, among other changes. Under the terms of the senior secured term loan, as amended, we have the ability to borrow an additional $200 million under an accordion provision.

The senior secured term loan must be repaid in equal consecutive quarterly principal installments of 0.25% of the initial principal amounts outstanding on the borrowing dates, with the balance due on November 27, 2019.  However, if leverage ratios, as defined in the senior secured term loan agreement, exceed a defined threshold, a percentage of cash flow must be used to repay principal.  Interest payments are due monthly.  The interest rate as of September 30, 2013 was 5.75%.

The debt covenants in the senior secured term loan agreement limit, among other things, our ability to incur additional debt, pay dividends and repurchase stock.  In the event we require additional liquidity, our ability to obtain it may be limited by the senior secured term loan.

Cash Flows

The following table presents our cash flows for the nine months ended September 30:

(dollars in thousands)	2013			2012			% Increase (decrease)
Net income adjusted for non-cash items	$	135,852		$	101,909		33
Working capital	(1,212		)	(4,772		)	75
Cash flows from operating activities	134,640			97,137			39
Cash flows from investing activities	(137,497		)	(24,199		)	N/M
Cash flows from financing activities	109,940			(20,634		)	N/M
Net change in cash	107,083			52,304			105
Cash and cash equivalents at beginning of period	105,502			32,125			228
Cash and cash equivalents at end of period	$	212,585		$	84,429		152

N/M — not meaningful.

Cash Flows from Operating Activities

Cash flows from operating activities generally consist of the cash effects of transactions and events that enter into the determination of net income.  For the nine months ended September 30, 2013, we generated $134.6 million of positive cash flows from operations, or approximately $0.29 per every dollar of service revenue compared to $97.1 million of positive cash flows from operations, or approximately $0.28 per every dollar of service revenue for the nine months ended September 30, 2012.  For the three months ended September 30, 2013, we generated $67.2 million in positive cash flows from operations, or approximately $0.37 per every dollar of service revenue compared to $43.1 million of positive cash flows from operations, or approximately $0.36 per every dollar of service revenue for the three months ended September 30, 2012.  The increase in cash flows from operations on an absolute basis for the three and nine months ended September 30, 2013, compared to the three and nine months

38

ended September 30, 2012, is principally driven by the increase in net income, after adding back depreciation and amortization, including amortization of intangible assets and favorable changes in working capital.

In periods of growth, operating cash flows per service revenue dollar can be negatively impacted because of the nature of some of our services.  Certain services are performed immediately following or shortly after the referral, but the collection of the receivable does not occur until a specific event occurs (i.e., the foreclosure is complete, the REO asset is sold, etc.).  As we continue to grow, our receivables will also grow and our cash flows from operations may be negatively impacted when comparing one interim period to another.

Cash Flows from Investing Activities

On March 29, 2013, we acquired the Homeward fee-based business from Ocwen for $75.8 million, after a working capital and net income adjustment.  On April 12, 2013, we entered into an agreement with Ocwen to establish additional terms related to the existing servicing arrangements between Altisource and Ocwen in connection with Ocwen’s acquisition of certain mortgage servicing platform assets of ResCap.  The cash consideration paid by Altisource to Ocwen under the ResCap agreement totaled $128.8 million. On February 15, 2013, Ocwen repaid the $75.0 million loan that was borrowed from us in December 2012.  Capital expenditures of $20.5 million and $24.2 million for the nine months ended September 30, 2013 and 2012, respectively, primarily related to facility build-outs and investments in infrastructure and the next generation of our REALSuite of software applications.  The prior year period also included investments in a disaster recovery center that continued, to a lesser degree, in 2013.  On March 31, 2013, we sold our 49% interest in Correspondent One to Ocwen for $12.6 million.

Cash Flows from Financing Activities

Cash flows from financing activities for the nine months ended September 30, 2013 and 2012 primarily include activity associated with debt proceeds, share repurchases, stock option exercises and payments to non-controlling interests. On May 7, 2013, we received $201.0 million in connection with amending our senior secured term loan agreement, including a $1.0 million original issue premium. We also incurred debt issuance costs of $2.4 million in connection with this amendment. We spent $87.4 million and $16.8 million to repurchase our common stock for the nine months ended September 30, 2013 and 2012, respectively.  Stock option exercises provided proceeds of $4.7 million and $2.6 million for the nine months ended September 30, 2013 and 2012, respectively.  During the nine months ended September 30, 2013, we repaid $2.5 million of the borrowings under the senior secured term loan. Distributions to non-controlling interests were $3.2 million and $6.0 million for the nine months ended September 30, 2013 and 2012, respectively.

Liquidity Requirements after September 30, 2013

On August 19, 2013, we entered into a Purchase Agreement pursuant to which we agreed to purchase all of the outstanding limited liability company interests of Equator.  The aggregate consideration payable under the Purchase Agreement is up to $150.0 million comprised of (i) $70.0 million in initial consideration and (ii) up to an additional $80.0 million in potential additional consideration, the payment of which is dependent upon the Equator business meeting targeted levels of profitability (as described in the Purchase Agreement) for three consecutive 12-month periods following closing.  Each 12-month period has targeted levels of profitability and potential additional consideration will be paid based on each 12-month period.  We may, at our discretion, pay up to 20% of the initial consideration and up to 20% of each payment of any additional consideration in shares of our restricted stock, with the balance to be paid in cash.

During the fourth quarter of 2013, we expect to distribute $1.0 million to the Lenders One members representing non-controlling interests and repay $1.0 million of the senior secured term loan.

We believe that we will generate sufficient cash flow to fund operations, capital expenditures and required debt and interest payments as well as repurchase shares of our common stock.  If we require additional capital, we believe that we have adequate access to both debt and equity capital markets.

Contractual Obligations, Commitments and Contingencies

For the nine months ended September 30, 2013, there were no significant changes to our contractual obligations from those identified in our Form 10-K for the fiscal year ended December 31, 2012, other than the additional $200 million borrowed under our senior secured term loan and those that occur in the normal course of business (primarily the addition of operating leases due to our growth).  See also Note 17 to the interim condensed consolidated financial statements.

39

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We prepare our interim condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States.  In applying many of these accounting principles, we need to make assumptions, estimates and/or judgments that affect the reported amounts of assets, liabilities, revenue and expenses in our interim condensed consolidated financial statements.  We base our estimates and judgments on historical experience and other assumptions that we believe are reasonable under the circumstances.  These assumptions, estimates and/or judgments, however, are often subjective.  Actual results may be affected negatively based on changing circumstances.  If actual amounts are ultimately different from our estimates, the revisions are included in our results of operations for the period in which the actual amounts become known.

Our critical accounting policies are described in the MD&A section of our Form 10-K for the year ended December 31, 2012 filed with the SEC on February 13, 2013.  Those policies have not changed during the nine months ended September 30, 2013.

OTHER MATTERS

Related Parties

Ocwen

For the nine months ended September 30, 2013, we generated segment revenue from Ocwen of $301.2 million for Mortgage Services ($120.1 million for the third quarter of 2013), $16.8 million for Financial Services ($10.1 million for third quarter of 2013) and $36.9 million for Technology Services ($13.4 million for the third quarter of 2013).  Services provided to Ocwen during these periods included residential property valuation, real estate asset management and sales, trustee management services, property inspection and preservation, closing and insurance services, charge-off mortgage collections, core technology back office support and multiple business technologies including our REALSuite of products.  We provided all services at rates we believe to be comparable to market rates.

For the nine months ended September 30, 2013 and 2012, we billed Ocwen $1.8 million and $2.0 million, respectively ($0.6 million for the third quarter of 2013 and 2012), and Ocwen billed us $2.1 million and $1.8 million, respectively ($0.7 million and $0.6 million for the third quarter of 2013 and 2012, respectively), for services provided under the agreements described in Note 2 to the condensed consolidated financial statements.  These amounts are reflected as a component of selling, general and administrative expenses in the condensed consolidated statements of operations.

On December 27, 2012, we entered into a senior unsecured term loan agreement with Ocwen pursuant to which we loaned $75.0 million to Ocwen.  Interest income related to this loan was $0.8 million for the nine months ended September 30, 2013 (no comparative amounts in 2012).  On February 15, 2013, Ocwen repaid the entire outstanding principal amount of this loan plus all accrued and unpaid interest and the term loan was terminated.

Correspondent One and HLSS

For the nine months ended September 30, 2013 and 2012, we billed Correspondent One less than $0.1 million and $0.2 million, respectively (none for the third quarter of 2013 and $0.1 million for the third quarter of 2012).  We also provided certain origination related services to Correspondent One.  We earned revenue of $0.1 million and $0.2 million for the nine months ended September 30, 2013 and 2012, respectively, for these services (none for the third quarter of 2013 and $0.2 million for the third quarter of 2012). These amounts are reflected as a component of selling, general and administrative expenses in the condensed consolidated statements of operations.

For the nine months ended September 30, 2013 and 2012, we billed HLSS $0.5 million and $0.4 million, respectively ($0.2 million for the third quarter of 2013 and 2012) under services agreements.  These amounts are reflected as a component of selling, general and administrative expenses in the condensed consolidated statements of operations.

Residential and AAMC

For the nine months ended September 30, 2013, we billed Residential $0.4 million, and we billed AAMC $0.9 million ($0.2 million for Residential and $0.7 million for AAMC for the third quarter of 2013 and no comparative amounts in 2012).  These amounts are reflected as a component of selling, general and administrative expenses in the condensed consolidated statements of operations.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

Market Risk

Our financial market risk consists primarily of interest rate and foreign currency exchange risk.

40

Interest Rate Risk

As of September 30, 2013, the interest rate charged on the senior secured term loan was 5.75%.  The interest rate is calculated based on the Adjusted Eurodollar Rate (as defined in the senior secured term loan agreement) (with a minimum floor of 1.25%) plus 4.5%.

Based on the principal amount outstanding at September 30, 2013, a 1% increase in the Eurodollar rate would not impact our annual interest expense, as the Adjusted Eurodollar Rate would remain below the minimum floor rate.

Foreign Currency Exchange Risk

We are exposed to currency risk from potential changes in currency values of our foreign currency denominated assets, liabilities and cash flows.  Our most significant foreign currency exposures relate to the Euro and Indian Rupee; however, the balances in Euros and Indian Rupees are immaterial.

Item 4.  Controls and Procedures

a)Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this quarterly report.  Based on such evaluation, such officers have concluded that our disclosure controls and procedures as of the end of the period covered by this quarterly report were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and to ensure that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

b)Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the quarter ended September 30, 2013, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

41

PART II — OTHER INFORMATION

Item 1.  Legal Proceedings

From time to time, we are involved in legal and administrative proceedings arising in the ordinary course of business.  In the opinion of management, after consultation with legal counsel and considering insurance coverage where applicable, the outcome of current legal proceedings, both individually and in the aggregate, will not have a material impact on the Company’s financial condition, results of operations or cash flows.

Item 1A.  Risk Factors

As of the date of this filing, there have been no material changes in our risk factors from those disclosed in Part I, Item 1A, of our Form 10-K for the year ended December 31, 2012 filed with the SEC on February 13, 2013.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

Equity securities purchased by us:

The following table presents information related to our repurchases of our equity securities during the three months ended September 30, 2013:

Period	Total number of shares purchased(1)	Weighted average price paid per share		Total number of shares purchased as part of publicly announced plans or programs(2)	Maximum number of shares that may yet be purchased under the plans or programs
Common stock:
July 1 — 31, 2013	—	$	—	—	2,917,807
August 1 — 31, 2013	66,300	128.94		66,300	2,851,507
September 1 — 30, 2013	200,000	136.82		200,000	2,651,507
Total shares of common stock	266,300	$	134.86	266,300	2,651,507

(1)Includes shares withheld from employees to satisfy tax withholding obligations that arose from the exercise of stock options.

(2)In May 2012, our shareholders authorized us to purchase up to 3.5 million shares of our common stock in the open market.

The provisions of our senior secured term loan agreement, as amended, limit, among other things, our ability to incur additional debt, pay dividends and repurchase stock.

42

Item 6.	Exhibits
	2.1	Purchase and Sale Agreement, dated as of August 19, 2013, by and among Altisource Portfolio Solutions S.A., Altisource Solutions S.à r.l. and the Equity Interestholders of Equator, LLC (incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed on August 21, 2013)
	31.1	Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
	31.2	Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
	32.1	Certification by the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
	101	Pursuant to Rule 405 of Regulation S-T, the following financial information from the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2013, is formatted in XBRL interactive data files: (i) Condensed Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012; (ii) Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2013 and 2012; (iii) Condensed Consolidated Statements of Equity for the nine months ended September 30, 2013 and 2012; (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2012; and (v) Notes to Condensed Consolidated Financial Statements

43

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ALTISOURCE PORTFOLIO SOLUTIONS S.A.

(Registrant)

Date: October 24, 2013	By:	/s/ Michelle D. Esterman
		Michelle D. EstermanChief Financial Officer (On behalf of the Registrant and as its Principal Financial Officer)

44

EX-31.1

Exhibit 31.1

CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, William B. Shepro, hereby certify that:

1.I have reviewed this quarterly report on Form 10-Q for the period ending September 30, 2013 of Altisource Portfolio Solutions S.A.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)  Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)  Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors:

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)  any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:   October 24, 2013	By:	/s/ William B. Shepro
		William B. Shepro
		Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION BY THE CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Michelle D. Esterman, hereby certify that:

1.I have reviewed this quarterly report on Form 10-Q for the period ending September 30, 2013 of Altisource Portfolio Solutions S.A.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)  Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors:

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)  any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:   October 24, 2013	By:	/s/ Michelle D. Esterman
		Michelle D. Esterman
		Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION UNDER SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(UNITED STATES CODE, TITLE 18, CHAPTER 63, SECTION 1350)

ACCOMPANYING QUARTERLY REPORT ON FORM 10-Q OF

ALTISOURCE PORTFOLIO SOLUTIONS S.A. FOR THE QUARTER ENDED

SEPTEMBER 30, 2013

In connection with the Quarterly Report on Form 10-Q of Altisource Portfolio Solutions S.A. for the quarterly period ending September 30, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), William B. Shepro, as Chief Executive Officer of our Company, and Michelle D. Esterman, as Chief Financial Officer of our Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, that:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of our Company.

By:	/s/ William B. Shepro	By:	/s/ Michelle D. Esterman
	William B. Shepro		Michelle D. Esterman
	Director and Chief Executive Officer		Chief Financial Officer
	(Principal Executive Officer)		(Principal Financial Officer and Principal Accounting Officer)
	October 24, 2013		October 24, 2013

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LONG-TERM DEBT

9 Months Ended

Sep. 30, 2013

LONG-TERM DEBT

LONG-TERM DEBT

NOTE 11 — LONG-TERM DEBT

Long-term debt consists of the following:

	September 30,			December 31,
(in thousands)	2013			2012
Senior secured term loan	$	397,497		$	200,000
Less: Unamortized discount, net	(789		)	(1,973		)
Net long-term debt	396,708			198,027
Less: Current portion	(4,000		)	(2,000		)
Long-term debt, less current portion	$	392,708		$	196,027

On November 27, 2012, we entered into a senior secured term loan agreement with Bank of America, N.A., as administrative agent, and certain lenders, pursuant to which we borrowed $200 million.  The senior secured term loan was issued with a 1.0% original issue discount ($2.0 million), resulting in net proceeds of $198.0 million (the “Initial Proceeds”), with the Company and certain wholly-owned subsidiaries acting as guarantors (collectively, the “Guarantors”).

On May 7, 2013, we amended the senior secured term loan agreement to increase the principal amount of the senior secured term loan by $200 million (the “Incremental Term Loan”), which was issued with a $1.0 million original issue premium, resulting in gross proceeds to the Company of $201.0 million.

The Initial Proceeds and the Incremental Term Loan must be repaid in equal consecutive quarterly principal installments of 0.25% of the initial principal amounts, with the balance due at maturity. The aggregate amount of each quarterly scheduled principal installment of the term loans is equal to approximately $1.0 million.  All amounts outstanding under the senior secured term loan agreement will become due on the earlier of (i) November 27, 2019, being the seventh anniversary of the closing date of the senior secured term loan agreement or (ii) the date on which the loans are declared to be due and owed by the administrative agent at the request (or with the consent) of the lenders upon the occurrence of any event of default under the senior secured term loan agreement.

The Incremental Term Loan was used to fund a portion of the Company’s previously announced transaction with Ocwen related to the ResCap servicing portfolio (see Note 3), with the remainder to be used for stock repurchases and for general corporate purposes, including potential acquisitions. Additionally, the Incremental Term Loan was used to pay certain fees, commissions and expenses in connection with the Incremental Term Loan.  The Company paid legal fees and other costs associated with the Incremental Term Loan of $2.4 million, which were recorded as debt issuance costs in other assets in the accompanying condensed consolidated balance sheets.

Additionally, the Incremental Term Loan modified the senior secured term loan agreement to, among other changes, provide for an additional $200 million incremental term loan facility accordion and increase the maximum amount of Restricted Payments (as defined in the senior secured term loan) that may be made by us, including increasing the amount of Company share repurchases permitted.

All of the term loans outstanding bear interest at rates based upon, at our option, the Adjusted Eurodollar Rate or the Base Rate (each as defined in the senior secured term loan agreement). Eurodollar Rate loans bear interest at a rate per annum equal to the sum of (i) the greater of (x) the Adjusted Eurodollar Rate for the applicable interest period and (y) 1.25% plus (ii) a 4.50% margin. Base Rate loans bear interest at a rate per annum equal to the sum of (i) the greater of (x) the Base Rate and (y) 2.25% plus (ii) a 3.50% margin. The interest rate at September 30, 2013 was 5.75%.

Payments under the senior secured term loan agreement are guaranteed by the Guarantors and are secured by a pledge of all equity interests of certain subsidiaries, as well as a lien on substantially all of the assets of Altisource Solutions S.à r.l., a wholly-owned subsidiary of Altisource, and the Guarantors, subject to certain exceptions.

At September 30, 2013, debt issuance costs were $6.1 million, net of $0.8 million of accumulated amortization.  At December 31, 2012, debt issuance costs were $4.3 million, net of $0.1 million of accumulated amortization. Debt issuance costs are included in other assets in the accompanying condensed consolidated balance sheets.

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ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Accounts payable and accrued expenses
Accounts payable	$ 7,818	$ 5,079
Accrued expenses - general	16,903	16,528
Accrued salaries and benefits	23,222	19,613
Income taxes payable	14,774	8,750
Total	66,848	58,976
Ocwen
Accounts payable and accrued expenses
Payable to related party	4,131	8,865
AAMC
Accounts payable and accrued expenses
Payable to related party		$ 141

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Revenue	$ 210,835	$ 143,988	$ 545,772	$ 427,259
Cost of revenue	134,261	94,287	348,195	278,785
Gross profit	76,574	49,701	197,577	148,474
Selling, general and administrative expenses	31,519	18,452	80,027	54,485
Income from operations	45,055	31,249	117,550	93,989
Other income (expense), net:
Interest expense	(6,188)	(10)	(14,302)	(39)
Other income (expense), net	(253)	(257)	529	(900)
Total other income (expense), net	(6,441)	(267)	(13,773)	(939)
Income before income taxes and non-controlling interests	38,614	30,982	103,777	93,050
Income tax provision	(1,659)	(2,898)	(6,227)	(8,493)
Net income	36,955	28,084	97,550	84,557
Net income attributable to non-controlling interests	(947)	(1,060)	(3,093)	(4,223)
Net income attributable to Altisource	36,008	27,024	94,457	80,334
Earnings per share:
Basic (in dollars per share)	$ 1.56	$ 1.16	$ 4.07	$ 3.44
Diluted (in dollars per share)	$ 1.42	$ 1.08	$ 3.77	$ 3.23
Weighted average shares outstanding:
Basic (in shares)	23,025	23,338	23,185	23,347
Diluted (in shares)	25,333	25,016	25,070	24,895
Transactions with related parties included above:
Revenue	143,557	86,558	354,889	257,491
Selling, general and administrative expenses	720	621	2,133	1,801
Other income			$ 773

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ACCOUNTS RECEIVABLE, NET

9 Months Ended

Sep. 30, 2013

ACCOUNTS RECEIVABLE, NET

ACCOUNTS RECEIVABLE, NET

NOTE 4 — ACCOUNTS RECEIVABLE, NET

Accounts receivable, net consists of the following:

	September 30,			December 31,
(in thousands)	2013			2012
Billed
Non-related parties	$	27,392		$	25,950
Ocwen	11,146			19,817
Correspondent One	—			27
HLSS	71			163
AAMC	595			14
Residential	71			—
Other receivables	234			353
	39,509			46,324
Unbilled
Non-related parties	40,010			39,496
Ocwen	8,940			6,377
Correspondent One	—			32
	88,459			92,229
Allowance for doubtful accounts	(4,608		)	(3,274		)
Total	$	83,851		$	88,955

Unbilled fees consist primarily of asset management and default management services for which we recognize revenues over the service delivery period but bill following completion of the service.

XML

SEGMENT REPORTING

9 Months Ended

Sep. 30, 2013

SEGMENT REPORTING

SEGMENT REPORTING

NOTE 18 — SEGMENT REPORTING

Our business segments are based upon our organizational structure, which focuses primarily on the services offered, and are consistent with the internal reporting used by our Chief Executive Officer to evaluate operating performance and to assess the allocation of our resources.

We classify our businesses into three reportable segments. The Mortgage Services segment provides services that span the mortgage and real estate lifecycle and are typically outsourced by loan servicers, loan originators and investors in single family homes. The Financial Services segment provides collection and customer relationship management services primarily to debt originators and servicers (e.g., credit card, auto lending, retail credit and mortgage) and the utility and insurance industries. The Technology Services segment principally consists of our REALSuite software applications as well as our information technology infrastructure services. The REALSuite platform provides a fully integrated set of software applications and technologies that manage the end-to-end lifecycle for residential and commercial mortgage loan servicing including the automated management and payment of a distributed network of vendors. In addition, our Corporate Items and Eliminations segment includes eliminations of transactions between the reporting segments, interest expense and costs related to corporate support functions including executive, finance, legal, human resources, vendor management, risk and operational effectiveness.

Financial information for our segments is as follows:

	Three months ended September 30, 2013
								Corporate
	Mortgage			Financial		Technology		Items and			Consolidated
(in thousands)	Services			Services		Services		Eliminations			Altisource
Revenue	$	164,661		$	27,267	$	25,175	$	(6,268	)	$	210,835
Cost of revenue	106,412			14,998		18,569		(5,718		)	134,261
Gross profit	58,249			12,269		6,606		(550		)	76,574
Selling, general and administrative expenses	14,224			4,616		2,621		10,058			31,519
Income from operations	44,025			7,653		3,985		(10,608		)	45,055
Other income (expense), net	(41		)	—		—		(6,400		)	(6,441		)
Income before income taxes and non-controlling interests	$	43,984		$	7,653	$	3,985	$	(17,008	)	$	38,614

	Three months ended September 30, 2012
										Corporate
	Mortgage			Financial			Technology			Items and			Consolidated
(in thousands)	Services			Services			Services			Eliminations			Altisource
Revenue	$	115,882		$	15,394		$	19,076		$	(6,364	)	$	143,988
Cost of revenue	72,774			11,784			15,418			(5,689		)	94,287
Gross profit	43,108			3,610			3,658			(675		)	49,701
Selling, general and administrative expenses	6,155			3,116			1,851			7,330			18,452
Income from operations	36,953			494			1,807			(8,005		)	31,249
Other income (expense), net	(290		)	(6		)	(5		)	34			(267		)
Income before income taxes and non-controlling interests	$	36,663		$	488		$	1,802		$	(7,971	)	$	30,982

	Nine months ended September 30, 2013
									Corporate
	Mortgage			Financial			Technology		Items and			Consolidated
(in thousands)	Services			Services			Services		Eliminations			Altisource
Revenue	$	426,319		$	66,675		$	70,189	$	(17,411	)	$	545,772
Cost of revenue	267,859			40,831			55,088		(15,583		)	348,195
Gross profit	158,460			25,844			15,101		(1,828		)	197,577
Selling, general and administrative expenses	32,272			11,000			7,514		29,241			80,027
Income from operations	126,188			14,844			7,587		(31,069		)	117,550
Other income (expense), net	(153		)	(8		)	3		(13,615		)	(13,773		)
Income before income taxes and non-controlling interests	$	126,035		$	14,836		$	7,590	$	(44,684	)	$	103,777

	Nine months ended September 30, 2012
										Corporate
	Mortgage			Financial			Technology			Items and			Consolidated
(in thousands)	Services			Services			Services			Eliminations			Altisource
Revenue	$	341,446		$	49,649		$	53,984		$	(17,820	)	$	427,259
Cost of revenue	218,969			35,780			40,098			(16,062		)	278,785
Gross profit	122,477			13,869			13,886			(1,758		)	148,474
Selling, general and administrative expenses	17,458			10,550			5,519			20,958			54,485
Income from operations	105,019			3,319			8,367			(22,716		)	93,989
Other income (expense), net	(857		)	(22		)	(22		)	(38		)	(939		)
Income before income taxes and non-controlling interests	$	104,162		$	3,297		$	8,345		$	(22,754	)	$	93,050

							Corporate
	Mortgage		Financial		Technology		Items and		Consolidated
(in thousands)	Services		Services		Services		Eliminations		Altisource
Total assets:
September 30, 2013	$	313,441	$	52,578	$	120,059	$	161,676	$	647,754
December 31, 2012	132,924		37,782		64,570		193,950		429,226

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EQUITY AND SHARE-BASED COMPENSATION (Details) (USD $)	1 Months Ended	3 Months Ended		9 Months Ended						9 Months Ended												3 Months Ended		9 Months Ended		41 Months Ended		9 Months Ended
	Mar. 31, 2012	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	May 07, 2013	Dec. 31, 2012	Sep. 30, 2013 Minimum	Sep. 30, 2013 Maximum	Sep. 30, 2013 Black-Scholes	Sep. 30, 2012 Black-Scholes	Sep. 30, 2013 Black-Scholes Minimum	Sep. 30, 2012 Black-Scholes Minimum	Sep. 30, 2013 Black-Scholes Maximum	Sep. 30, 2012 Black-Scholes Maximum	Sep. 30, 2013 Binomial	Sep. 30, 2012 Binomial	Sep. 30, 2013 Binomial Minimum	Sep. 30, 2012 Binomial Minimum	Sep. 30, 2013 Binomial Maximum	Sep. 30, 2012 Binomial Maximum	Sep. 30, 2013 Stock Repurchase Programs	Sep. 30, 2012 Stock Repurchase Programs	Sep. 30, 2013 Stock Repurchase Programs	Sep. 30, 2012 Stock Repurchase Programs	Sep. 30, 2013 Stock Repurchase Programs	May 31, 2012 2012 Stock Repurchase Program Maximum	Sep. 30, 2013 Service-based Options	Sep. 30, 2013 Market-based Options item	Sep. 30, 2013 Ordinary performance grants	Sep. 30, 2013 Ordinary performance grants Minimum item	Sep. 30, 2013 Extraordinary performance grants	Sep. 30, 2013 Extraordinary performance grants Minimum item
Stock Repurchase Plan
Number of shares of common stock authorized to be purchased																											3,500,000
Number of shares of common stock purchased																						300,000	0	800,000	300,000	3,400,000
Average purchase price per share (in dollars per share)																						$ 134.86		$ 103.45	$ 63.25	$ 53.94
Remaining number of shares available for repurchase under the plan																						2,700,000		2,700,000		2,700,000
Amount available to repurchase common stock under Luxembourg law (in dollars)																						$ 38,000,000		$ 38,000,000		$ 38,000,000
Senior secured term loan		397,497,000		397,497,000		400,000,000	200,000,000
Capacity available to repurchase common stock under senior secured term loan (in dollars)																						107,000,000		107,000,000		107,000,000
EQUITY AND SHARE-BASED COMPENSATION
Share-based compensation expense (in dollars)		600,000	1,100,000	2,100,000	2,000,000
Reversal of share-based compensation expense (in dollars)	800,000
Vesting period																												4 years
Expiration term																												10 years
Outstanding (in shares)		2,736,530		2,736,530			3,058,309																					800,000	1,900,000
Number of components of an award																													2
Market-based options subject to specified performance achievement (as a percent)																														0.67		0.33
Percentage of compounded annual gain of stock price over exercise price required for the award to vest																															20.00%		25.00%
Vesting percentage for awards that vest upon achievement of certain criteria																													25.00%
Cumulative vesting percentage for awards that vest in equal annual installments																													75.00%
Number of equal annual installments for vesting of award																													3
Stock options granted (in shares)				75,000	300,000
Weighted average exercise price of stock options granted (in dollars per share)				$ 104.84	$ 69.48
Multiplier of stock price over exercise price as a condition for the award to vest																															2		3
Assumptions used to determine the fair value of options as of the grant date
Risk-free interest rate, minimum (as a percent)										1.02%	0.87%					0.01%	0.08%
Risk-free interest rate, maximum (as a percent)										1.81%	1.17%					2.71%	2.04%
Expected stock price volatility, minimum (as a percent)										36.35%	34.22%					36.40%	34.20%
Expected stock price volatility, maximum (as a percent)										36.76%	34.65%					36.80%	34.60%
Expected option life										6 years 3 months	6 years 3 months
Contractual life																14 years	14 years
Fair value (in dollars per share)				$ 32.59	$ 20.77							$ 31.33	$ 19.25	$ 49.14	$ 29.80			$ 16.12	$ 9.98	$ 41.72	$ 22.76
Weighted average fair value of stock options granted and total intrinsic value of stock options exercised
Weighted average fair value at grant date per share (in dollars per share)				$ 32.59	$ 20.77							$ 31.33	$ 19.25	$ 49.14	$ 29.80			$ 16.12	$ 9.98	$ 41.72	$ 22.76
Intrinsic value of options exercised (in dollars)				24,587,000	11,535,000
Fair value of options vested (in dollars)				1,867,000	1,491,000
Estimated forfeiture rate (as a percent)								1.00%	10.00%
Estimated unrecognized compensation costs (in dollars)		$ 3,000,000		$ 3,000,000
Weighted average remaining requisite service period for stock options over which unrecognized compensation costs would be recognized				2 years 10 months 24 days

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EQUITY AND SHARE-BASED COMPENSATION

9 Months Ended

Sep. 30, 2013

EQUITY AND SHARE-BASED COMPENSATION

EQUITY AND SHARE-BASED COMPENSATION

NOTE 12 — EQUITY AND SHARE-BASED COMPENSATION

Stock Repurchase Plan

In May 2012, our shareholders approved a stock repurchase program, which replaced the previous stock repurchase program. Under the program, we are authorized to purchase up to 3.5 million shares of our common stock in the open market in addition to amounts previously purchased under the prior program. From authorization of the previous program in May 2010 through September 30, 2013, we have purchased approximately 3.4 million shares of our common stock in the open market at an average price of $53.94 per share.  We purchased 0.8 million shares of common stock (at an average price of $103.45 per share) and 0.3 million shares of common stock (at an average price of $63.25 per share) during the nine months ended September 30, 2013 and 2012, respectively (0.3 million shares at an average price of $134.86 per share for the third quarter of 2013 and no comparative amounts in the third quarter of 2012). Approximately 2.7 million shares of common stock remain available for repurchase under the program.  Luxembourg law limits share repurchases to approximately the balance of Altisource Portfolio Solutions S.A. (unconsolidated parent company) retained earnings less shares repurchased.  As of September 30, 2013, approximately $38 million was available to repurchase our common stock under Luxembourg law.  Our $200 million senior secured term loan, increased to $400 million on May 7, 2013, also limits the amount we can spend on share repurchases in any year and may prevent repurchases in certain circumstances.  As of September 30, 2013, approximately $107 million was available to repurchase our common stock under our senior secured term loan.

Share-Based Compensation

We issue share-based awards in the form of stock options and certain other equity-based awards for certain employees and officers. We recorded share-based compensation expense of $2.1 million and $2.0 million for the nine months ended September 30, 2013 and 2012, respectively ($0.6 million and $1.1 million for the third quarter of 2013 and 2012, respectively). The amount for the nine months ended September 30, 2012 includes the reversal of $0.8 million of share-based compensation expense related to the departure of an executive officer in March 2012.

Outstanding share-based compensation currently consists primarily of stock option grants that are a combination of service-based and market-based options.

Service-based Options.  These options are granted at fair value on the date of grant. The options generally vest over four years with equal annual cliff-vesting and expire on the earlier of 10 years after the date of grant or following termination of service. A total of 0.8 million service-based awards were outstanding at September 30, 2013.

Market-based Options.  These option grants have two components each of which vest only upon the achievement of certain criteria. The first component, which we refer to internally as “ordinary performance” grants, consists of two-thirds of the market-based grant and begins to vest if the stock price is at least double the exercise price, as long as the stock price realizes a compounded annual gain of at least 20% over the exercise price. The remaining third of the market-based options, which we refer to internally as “extraordinary performance” grants, begins to vest if the stock price is at least triple the exercise price, as long as the stock price realizes a compounded annual gain of at least 25% over the exercise price. The vesting schedule for all market-based awards is 25% upon achievement of the criteria and the remaining 75% in three equal annual installments. A total of 1.9 million market-based awards were outstanding at September 30, 2013.

The Company granted less than 0.1 million stock options (at a weighted average exercise price of $104.84 per share) and 0.3 million stock options (at a weighted average exercise price of $69.48 per share) during the nine months ended September 30, 2013 and 2012, respectively.

The fair value of the service-based options was determined using the Black-Scholes option pricing model, and a lattice (binomial) model was used to determine the fair value of the market-based options, using the following assumptions as of the grant date:

	Nine months endedSeptember 30, 2013		Nine months endedSeptember 30, 2012
	Black-Scholes	Binomial	Black-Scholes	Binomial
Risk-free interest rate	1.02% — 1.81%	0.01% — 2.71%	0.87% — 1.17%	0.08% — 2.04%
Expected stock price volatility	36.35% — 36.76%	36.40% — 36.80%	34.22% — 34.65%	34.20% — 34.60%
Expected dividend yield	—	—	—	—
Expected option life (in years)	6.25	—	6.25	—
Contractual life (in years)	—	14	—	14
Fair value	$31.33 — $49.14	$16.12 — $41.72	$19.25 — $29.80	$9.98 — $22.76

The following table summarizes the weighted average fair value of stock options granted, the total intrinsic value of stock options exercised and the fair value of options vested:

	Nine months ended September 30,
(in thousands, except per share amounts)	2013		2012
Weighted average fair value at grant date per share	$	32.59	$	20.77
Intrinsic value of options exercised	24,587		11,535
Fair value of options vested	1,867		1,491

Share-based compensation expense is recorded net of estimated forfeiture rates ranging from 1% to 10%.

As of September 30, 2013, estimated unrecognized compensation costs related to share-based payments amounted to $3.0 million, which we expect to recognize over a weighted average remaining requisite service period of approximately 2.9 years.

The following table summarizes the activity related to our stock options:

	Number of options		Weighted average exercise price		Weighted average contractual term (in years)	Aggregate intrinsic value (in thousands)
Outstanding at December 31, 2012	3,058,309		$	17.69	6.1	$	211,072
Granted	75,000		104.84
Exercised	(279,531	)	17.12
Forfeited	(117,248	)	59.49
Outstanding at September 30, 2013	2,736,530		18.34		5.4	332,955
Exercisable at September 30, 2013	2,216,347		11.99		4.9	283,735

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PREMISES AND EQUIPMENT, NET (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
PREMISES AND EQUIPMENT, NET
Premises and equipment, gross	$ 125,023		$ 125,023		$ 102,247
Less: Accumulated depreciation and amortization	(65,559)		(65,559)		(51,848)
Total	59,464		59,464		50,399
Depreciation and amortization expense, inclusive of capital leases	4,500	3,800	13,791	9,038
Computer hardware and software
PREMISES AND EQUIPMENT, NET
Premises and equipment, gross	81,897		81,897		68,329
Office equipment and other
PREMISES AND EQUIPMENT, NET
Premises and equipment, gross	21,849		21,849		15,592
Furniture and fixtures
PREMISES AND EQUIPMENT, NET
Premises and equipment, gross	6,414		6,414		5,344
Leasehold improvements
PREMISES AND EQUIPMENT, NET
Premises and equipment, gross	$ 14,863		$ 14,863		$ 12,982

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EQUITY AND SHARE-BASED COMPENSATION (Details 2) (USD $) In Thousands, except Share data, unless otherwise specified	9 Months Ended		12 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
Number of Options
Outstanding at the beginning of the period (in shares)	3,058,309
Granted (in shares)	75,000	300,000
Exercised (in shares)	(279,531)
Forfeited (in shares)	(117,248)
Outstanding at the end of the period (in shares)	2,736,530		3,058,309
Exercisable at the end of the period (in shares)	2,216,347
Weighted average exercise price
Outstanding at the beginning of the period (in dollars per share)	$ 17.69
Granted (in dollars per share)	$ 104.84	$ 69.48
Exercised (in dollars per share)	$ 17.12
Forfeited (in dollars per share)	$ 59.49
Outstanding at the end of the period (in dollars per share)	$ 18.34		$ 17.69
Exercisable at the end of the period (in dollars per share)	$ 11.99
Weighted average contractual term
Weighted average contractual term	5 years 4 months 24 days		6 years 1 month 6 days
Exercisable at the end of the period	4 years 10 months 24 days
Aggregate intrinsic value
Aggregate intrinsic value (in dollars)	$ 332,955		$ 211,072
Exercisable at the end of the period (in dollars)	$ 283,735

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EARNINGS PER SHARE (Tables)

9 Months Ended

Sep. 30, 2013

EARNINGS PER SHARE

Schedule of basic and diluted EPS calculation

	Three months ended September 30,				Nine months ended September 30,
(in thousands, except per share data)	2013		2012		2013		2012
Net income attributable to Altisource	$	36,008	$	27,024	$	94,457	$	80,334
Weighted average common shares outstanding, basic	23,025		23,338		23,185		23,347
Dilutive effect of stock options	2,308		1,678		1,885		1,548
Weighted average common shares outstanding, diluted	25,333		25,016		25,070		24,895
Earnings per share
Basic	$	1.56	$	1.16	$	4.07	$	3.44
Diluted	$	1.42	$	1.08	$	3.77	$	3.23

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ACCOUNTS RECEIVABLE, NET (Tables)

9 Months Ended

Sep. 30, 2013

ACCOUNTS RECEIVABLE, NET

Schedule of accounts receivable, net

	September 30,			December 31,
(in thousands)	2013			2012
Billed
Non-related parties	$	27,392		$	25,950
Ocwen	11,146			19,817
Correspondent One	—			27
HLSS	71			163
AAMC	595			14
Residential	71			—
Other receivables	234			353
	39,509			46,324
Unbilled
Non-related parties	40,010			39,496
Ocwen	8,940			6,377
Correspondent One	—			32
	88,459			92,229
Allowance for doubtful accounts	(4,608		)	(3,274		)
Total	$	83,851		$	88,955

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ACQUISITIONS (Tables)

9 Months Ended

Sep. 30, 2013

ACQUISITIONS

Schedule of the preliminary adjusted allocation of the purchase price

(in thousands)
Premises and equipment	$	1,559
Customer relationship	75,609
	77,168
Accounts payable and accrued expenses	(1,351		)
Purchase price	$	75,817

Schedule of estimated life of identified assets acquired as a result of acquisitions

	Estimated life (in years)
Premises and equipment	3 - 5
Customer relationship	7

Schedule of unaudited pro forma condensed consolidated results of operations

	Nine months ended September 30, 2013
(in thousands, except per share amounts)	As reported		Pro forma
Revenue	$	545,772	$	579,263
Net income attributable to Altisource	94,457		101,413
Earnings per share — diluted	3.77		4.05

	Nine months ended September 30, 2012
(in thousands, except per share amounts)	As reported		Pro forma
Revenue	$	427,259	$	536,647
Net income attributable to Altisource	80,334		103,313
Earnings per share — diluted	3.23		4.15

	Three months ended September 30, 2012
(in thousands, except per share amounts)	As reported		Pro forma
Revenue	$	143,988	$	180,451
Net income attributable to Altisource	27,024		34,665
Earnings per share — diluted	1.08		1.39

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ACCOUNTS RECEIVABLE, NET (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Accounts receivable, net
Accounts receivable, gross	$ 88,459	$ 92,229
Allowance for doubtful accounts	(4,608)	(3,274)
Total	83,851	88,955
Billed
Accounts receivable, net
Non-related party, Accounts receivable	27,392	25,950
Other receivables	234	353
Accounts receivable, gross	39,509	46,324
Billed | Ocwen
Accounts receivable, net
Receivable from related party	11,146	19,817
Billed | Correspondent One
Accounts receivable, net
Receivable from related party		27
Billed | HLSS
Accounts receivable, net
Receivable from related party	71	163
Billed | AAMC
Accounts receivable, net
Receivable from related party	595	14
Billed | Residential
Accounts receivable, net
Receivable from related party	71
Unbilled
Accounts receivable, net
Non-related party, Accounts receivable	40,010	39,496
Unbilled | Ocwen
Accounts receivable, net
Receivable from related party	8,940	6,377
Unbilled | Correspondent One
Accounts receivable, net
Receivable from related party		$ 32

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EQUITY AND SHARE-BASED COMPENSATION (Tables)

9 Months Ended

Sep. 30, 2013

EQUITY AND SHARE-BASED COMPENSATION

Schedule of assumptions used to determine the fair value of options as of the grant date

	Nine months endedSeptember 30, 2013		Nine months endedSeptember 30, 2012
	Black-Scholes	Binomial	Black-Scholes	Binomial
Risk-free interest rate	1.02% — 1.81%	0.01% — 2.71%	0.87% — 1.17%	0.08% — 2.04%
Expected stock price volatility	36.35% — 36.76%	36.40% — 36.80%	34.22% — 34.65%	34.20% — 34.60%
Expected dividend yield	—	—	—	—
Expected option life (in years)	6.25	—	6.25	—
Contractual life (in years)	—	14	—	14
Fair value	$31.33 — $49.14	$16.12 — $41.72	$19.25 — $29.80	$9.98 — $22.76

Summary of the weighted average fair value of stock options granted, the total intrinsic value of stock options exercised and the fair value of options vested

	Nine months ended September 30,
(in thousands, except per share amounts)	2013		2012
Weighted average fair value at grant date per share	$	32.59	$	20.77
Intrinsic value of options exercised	24,587		11,535
Fair value of options vested	1,867		1,491

Summary of the activity of the entity's stock options

	Number of options		Weighted average exercise price		Weighted average contractual term (in years)	Aggregate intrinsic value (in thousands)
Outstanding at December 31, 2012	3,058,309		$	17.69	6.1	$	211,072
Granted	75,000		104.84
Exercised	(279,531	)	17.12
Forfeited	(117,248	)	59.49
Outstanding at September 30, 2013	2,736,530		18.34		5.4	332,955
Exercisable at September 30, 2013	2,216,347		11.99		4.9	283,735

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ORGANIZATION AND BASIS OF PRESENTATION (Details) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2013 item	Sep. 30, 2013 Lenders One	Dec. 31, 2012 Lenders One
ORGANIZATION AND BASIS OF PRESENTATION
Number of reportable segments	3
Summary of significant accounting policies
Total assets		$ 3.8	$ 2.3
Liabilities		$ 2.5	$ 1.0

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GOODWILL AND INTANGIBLE ASSETS, NET (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
GOODWILL AND INTANGIBLE ASSETS, NET
Changes in goodwill	$ 0
Changes in goodwill
Balance at the end of the period	14,915	14,915
Mortgage Services
Changes in goodwill
Balance at the end of the period	10,919	10,919
Financial Services
Changes in goodwill
Balance at the end of the period	2,378	2,378
Technology Services
Changes in goodwill
Balance at the end of the period	$ 1,618	$ 1,618

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OTHER ASSETS (Tables)

9 Months Ended

Sep. 30, 2013

OTHER ASSETS

Schedule of other assets

	September 30,		December 31,
(in thousands)	2013		2012
Security deposits, net	$	7,105	$	5,019
Debt issuance costs, net	6,143		4,260
Maintenance agreements, non-current portion	1,743		1,614
Restricted cash	158		158
Other	94		623
Total	$	15,243	$	11,674

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SEGMENT REPORTING (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013 item	Sep. 30, 2012	Dec. 31, 2012
SEGMENT REPORTING
Number of reportable segments			3
SEGMENT REPORTING
Revenue	$ 210,835	$ 143,988	$ 545,772	$ 427,259
Cost of revenue	134,261	94,287	348,195	278,785
Gross profit	76,574	49,701	197,577	148,474
Selling, general and administrative expenses	31,519	18,452	80,027	54,485
Income from operations	45,055	31,249	117,550	93,989
Other income (expense), net	(6,441)	(267)	(13,773)	(939)
Income before income taxes and non-controlling interests	38,614	30,982	103,777	93,050
Total Assets:
Total Assets	647,754		647,754		429,226
Mortgage Services
SEGMENT REPORTING
Revenue	164,661	115,882	426,319	341,446
Cost of revenue	106,412	72,774	267,859	218,969
Gross profit	58,249	43,108	158,460	122,477
Selling, general and administrative expenses	14,224	6,155	32,272	17,458
Income from operations	44,025	36,953	126,188	105,019
Other income (expense), net	(41)	(290)	(153)	(857)
Income before income taxes and non-controlling interests	43,984	36,663	126,035	104,162
Total Assets:
Total Assets	313,441		313,441		132,924
Financial Services
SEGMENT REPORTING
Revenue	27,267	15,394	66,675	49,649
Cost of revenue	14,998	11,784	40,831	35,780
Gross profit	12,269	3,610	25,844	13,869
Selling, general and administrative expenses	4,616	3,116	11,000	10,550
Income from operations	7,653	494	14,844	3,319
Other income (expense), net		(6)	(8)	(22)
Income before income taxes and non-controlling interests	7,653	488	14,836	3,297
Total Assets:
Total Assets	52,578		52,578		37,782
Technology Services
SEGMENT REPORTING
Revenue	25,175	19,076	70,189	53,984
Cost of revenue	18,569	15,418	55,088	40,098
Gross profit	6,606	3,658	15,101	13,886
Selling, general and administrative expenses	2,621	1,851	7,514	5,519
Income from operations	3,985	1,807	7,587	8,367
Other income (expense), net		(5)	3	(22)
Income before income taxes and non-controlling interests	3,985	1,802	7,590	8,345
Total Assets:
Total Assets	120,059		120,059		64,570
Corporate Items and Eliminations
SEGMENT REPORTING
Revenue	(6,268)	(6,364)	(17,411)	(17,820)
Cost of revenue	(5,718)	(5,689)	(15,583)	(16,062)
Gross profit	(550)	(675)	(1,828)	(1,758)
Selling, general and administrative expenses	10,058	7,330	29,241	20,958
Income from operations	(10,608)	(8,005)	(31,069)	(22,716)
Other income (expense), net	(6,400)	34	(13,615)	(38)
Income before income taxes and non-controlling interests	(17,008)	(7,971)	(44,684)	(22,754)
Total Assets:
Total Assets	$ 161,676		$ 161,676		$ 193,950

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ACQUISITIONS (Details 2) (ResCap, USD $)	6 Months Ended	0 Months Ended		3 Months Ended
	Sep. 30, 2013	May 10, 2013 Ocwen	Apr. 12, 2013 Ocwen	Jun. 30, 2013 Ocwen
Acquisitions
Amount paid		$ 48,800,000	$ 80,000,000	$ 128,800,000
Service revenue recorded from the date of acquisition	28,600,000
Estimated pre-tax income recorded from the date of acquisition	10,900,000
Preliminary allocation of the purchase price
Acquired tangible assets			0
Assumed liabilities in connection with the acquisition			0
Customer relationship			$ 128,800,000
Estimated life (in years)
Customer relationship			7 years

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TRANSACTIONS WITH RELATED PARTIES (Tables)

9 Months Ended

Sep. 30, 2013

TRANSACTIONS WITH RELATED PARTIES

Schedule of related party revenue as a percentage of segment and consolidated revenue

	Three months ended September 30,				Nine months ended September 30,
	2013		2012		2013		2012
Mortgage Services	73	%	68	%	71	%	69	%
Financial Services	37	%	<1	%	25	%	<1	%
Technology Services	53	%	39	%	53	%	40	%
Consolidated revenue	68	%	60	%	65	%	60	%

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Cash flows from operating activities:
Net income	$ 97,550	$ 84,557
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	13,791	9,038
Amortization of intangible assets	18,857	3,833
Share-based compensation expense	2,076	2,038
Equity in losses of affiliates	176	872
Bad debt expense	1,338	1,170
Amortization of debt discount	184
Amortization of debt issuance costs	702
Loss on sale or disposal of fixed assets	1,178	401
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable	3,762	(11,662)
Prepaid expenses and other current assets	(6,142)	(4,058)
Other assets	(1,871)	809
Accounts payable and accrued expenses	4,574	10,405
Other current and non-current liabilities	(1,535)	(266)
Net cash provided by operating activities	134,640	97,137
Cash flows from investing activities:
Additions to premises and equipment	(20,528)	(24,199)
Acquisition of businesses, net of cash acquired	(204,567)
Investment in equity affiliate	(50)
Proceeds from sale of equity affiliate	12,648
Proceeds from loan to Ocwen	75,000
Net cash used in investing activities	(137,497)	(24,199)
Cash flows from financing activities:
Proceeds from issuance of long-term debt	201,000
Repayment of long-term debt	(2,503)
Debt issuance costs	(2,400)
Principal payments on capital lease obligations	(233)	(491)
Proceeds from stock option exercises	4,710	2,619
Purchase of treasury stock	(87,418)	(16,781)
Contributions from non-controlling interests	18	27
Distributions to non-controlling interests	(3,234)	(6,008)
Net cash provided by (used in) financing activities	109,940	(20,634)
Increase in cash and cash equivalents	107,083	52,304
Cash and cash equivalents at the beginning of the period	105,502	32,125
Cash and cash equivalents at the end of the period	212,585	84,429
Supplemental cash flow information
Interest paid	13,592	39
Income taxes paid, net	2,360	2,252
Non-cash investing and financing activities
Amortization of tax-deductible goodwill		2,524
Premises and equipment purchased on account	$ 1,947	$ 5,992

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TRANSACTIONS WITH RELATED PARTIES

9 Months Ended

Sep. 30, 2013

TRANSACTIONS WITH RELATED PARTIES

TRANSACTIONS WITH RELATED PARTIES

NOTE 2 — TRANSACTIONS WITH RELATED PARTIES

Ocwen®

Ocwen Financial Corporation, together with its subsidiaries (“Ocwen”), is our largest customer.  Our Chairman is also the Chairman of Ocwen.  Ocwen is contractually obligated to purchase certain mortgage services and technology services from us through August 2025 under the terms of a master services agreement and amendments to the master services agreement (collectively, the “Service Agreements”).  In connection with our acquisition from Ocwen of the fee-based businesses of Homeward Residential, Inc. (“Homeward”) that closed on March 29, 2013 and the acquisition from Ocwen related to the fee-based businesses of Residential Capital, LLC (“ResCap”) that closed on April 12, 2013 (see Note 3), our Service Agreements with Ocwen were amended to extend the term from 2020 to 2025.  Further, as part of the amendments, we are the exclusive provider of services to Ocwen with respect to the Homeward and ResCap servicing portfolios, and Ocwen agreed not to establish similar fee-based businesses that would directly or indirectly compete with Altisource’s services with respect to the Homeward and ResCap businesses.  We settle amounts with Ocwen on a daily, weekly or monthly basis depending upon the nature of the service and when the service is provided.

Related party revenue consists of revenue earned directly from Ocwen and revenue earned from the loans serviced by Ocwen when Ocwen designates us as the service provider.  We earn additional revenue on the portfolios serviced by Ocwen that are not considered related party revenue when a party other than Ocwen selects the service provider.  Related party revenue as a percentage of segment and consolidated revenue was as follows:

	Three months ended September 30,				Nine months ended September 30,
	2013		2012		2013		2012
Mortgage Services	73	%	68	%	71	%	69	%
Financial Services	37	%	<1	%	25	%	<1	%
Technology Services	53	%	39	%	53	%	40	%
Consolidated revenue	68	%	60	%	65	%	60	%

We record revenue we earn from Ocwen under 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 fees Ocwen pays to other service providers and fees charged by our competitors.

Support Services

We have support services agreements with Ocwen.  These services provided and received pursuant to the above agreements include such areas as human resources, vendor management, corporate services, operational effectiveness, quality assurance, quantitative analytics and treasury.  Payment for the services provided or received is 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, 2013 and 2012, we billed Ocwen $1.8 million and $2.0 million, respectively ($0.6 million for the third quarter of 2013 and 2012), and Ocwen billed us $2.1 million and $1.8 million, respectively ($0.7 million and $0.6 million for the third quarter of 2013 and 2012, respectively), for services provided under these agreements.  These amounts are reflected as a component of selling, general and administrative expenses in the condensed consolidated statements of operations.

Unsecured Term Loan

On December 27, 2012, we entered into a senior unsecured term loan agreement with Ocwen under which we loaned $75.0 million to Ocwen.  Payments of interest were due quarterly at a rate per annum equal to the Eurodollar Rate (as defined in the agreement) plus 6.75%, provided that the Eurodollar Rate shall at no time be less than 1.50%.  On February 15, 2013, Ocwen repaid the outstanding principal amount of $75.0 million, plus all accrued and unpaid interest and the term loan was terminated.  Interest income related to this loan was $0.8 million for the nine months ended September 30, 2013 (no comparative amounts for 2012).

Transactions Related to Fee-Based Businesses

On January 31, 2013, we entered into non-binding letters of intent with Ocwen to acquire certain fee-based businesses associated with Ocwen’s acquisitions of the Homeward and the ResCap servicing portfolios.  Ocwen acquired the Homeward servicing portfolio on December 27, 2012 and the ResCap servicing portfolio on February 15, 2013.  Altisource acquired the Homeward fee-based businesses from Ocwen on March 29, 2013 (see Note 3).  Altisource entered into an agreement with Ocwen on April 12, 2013 to establish additional terms related to our services in connection with the ResCap fee-based businesses (see Note 3).

Correspondent One® and HLSS™

In July 2011, we acquired an equity interest in Correspondent One S.A. (“Correspondent One”) (see Note 8).  Correspondent One purchased closed conforming and government guaranteed residential mortgages from approved mortgage bankers.  On March 31, 2013, we sold our 49% interest in Correspondent One to Ocwen for $12.6 million. Under a support services agreement, we provided Correspondent One certain finance, human resources, legal support, facilities, technology, vendor management and risk management services.  For the nine months ended September 30, 2013 and 2012, we billed Correspondent One less than $0.1 million and $0.2 million, respectively (none for the third quarter of 2013 and $0.1 million for the third quarter of 2012).  We also provided certain origination related services to Correspondent One.  We earned revenue of $0.1 million and $0.2 million for the nine months ended September 30, 2013 and 2012, respectively, for these services (none for the third quarter of 2013 and $0.2 million for the third quarter of 2012).

Home Loan Servicing Solutions, Ltd. (“HLSS”) is a publicly traded company whose primary objective is the acquisition of mortgage servicing rights and advances. In connection with the February 2012 HLSS initial public offering and subsequent thereto, HLSS acquired mortgage servicing related assets from Ocwen.  Our Chairman is also the Chairman of HLSS.  Under a support services agreement, we provide HLSS certain finance, human resources and legal support services.  For the nine months ended September 30, 2013 and 2012, we billed HLSS $0.5 million and $0.4 million, respectively ($0.2 million for the third quarter of 2013 and 2012).

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

Residential and AAMC

Altisource Residential Corporation (“Residential”) and Altisource Asset Management Corporation (“AAMC”) were established, capitalized and their equity was distributed to our shareholders on December 21, 2012 and are each separate publicly traded companies (the “Separation of the Residential Asset Businesses”).   Residential is focused on acquiring and managing single family rental properties by acquiring portfolios of sub-performing and non-performing residential mortgage loans throughout the United States.  AAMC is an asset management company providing portfolio management and corporate governance services to Residential. Our Chairman is also the Chairman of each of Residential and AAMC.

For purposes of governing certain ongoing relationships between Altisource, Residential and AAMC after the Separation of the Residential Asset Businesses, and to provide for an orderly transition, we entered into certain agreements with Residential and AAMC.  We have agreements to provide Residential with renovation management, lease management and property management services. In addition, we have agreements with Residential and AAMC to provide support services such as finance, human resources, legal support, facilities, technology, vendor management and risk management.  Further, we have separate agreements for certain services related to income tax matters, trademark licenses and technology products and services.  For the nine months ended September 30, 2013, we billed Residential $0.4 million, and we billed AAMC $0.9 million ($0.2 million for Residential and $0.7 million for AAMC for the third quarter of 2013 and no comparative amounts in 2012), under these agreements.

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PREPAID EXPENSES AND OTHER CURRENT ASSETS

9 Months Ended

Sep. 30, 2013

PREPAID EXPENSES AND OTHER CURRENT ASSETS

PREPAID EXPENSES AND OTHER CURRENT ASSETS

NOTE 5 — PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following:

	September 30,		December 31,
(in thousands)	2013		2012
Maintenance agreements, current portion	$	4,350	$	3,636
Income taxes receivable	4,256		1,814
Prepaid expenses	4,646		1,640
Other current assets	508		528
Total	$	13,760	$	7,618

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ACQUISITIONS

9 Months Ended

Sep. 30, 2013

ACQUISITIONS

ACQUISITIONS

NOTE 3 — ACQUISITIONS

Homeward Fee-Based Businesses

On March 29, 2013, we acquired certain fee-based businesses associated with Ocwen’s acquisition of Homeward.  As part of the acquisition, Ocwen agreed not to develop similar fee-based businesses that would directly or indirectly compete with services provided by Altisource relative to the Homeward servicing portfolio.  Additionally, the terms of the Service Agreements were amended to extend the term from 2020 to 2025 (see Note 2).  We paid $75.8 million, after a working capital and net income adjustment of $11.1 million, for the Homeward fee-based businesses.  From the acquisition date through September 30, 2013, we recorded service revenue of $74.3 million and we estimate pre-tax income is $14.2 million related to these businesses.

Since the acquisition date, management adjusted the preliminary purchase price allocation and assigned associated asset lives based upon information that has become available. In addition to the working capital adjustment, we also reduced premises and equipment by $1.2 million based on a post-acquisition detailed analysis of software licenses received.  The purchase price allocation and assessment of asset lives will continue to be revised as additional information about the fair value of assets and liabilities becomes available. Such assessment must be completed within 12 months from the acquisition date.

The preliminary adjusted allocation of the purchase price is estimated as follows:

(in thousands)
Premises and equipment	$	1,559
Customer relationship	75,609
	77,168
Accounts payable and accrued expenses	(1,351		)
Purchase price	$	75,817

	Estimated life (in years)
Premises and equipment	3 - 5
Customer relationship	7

ResCap Fee-Based Businesses

On April 12, 2013, we entered into an agreement with Ocwen to establish additional terms related to the existing servicing arrangements between Altisource and Ocwen in connection with certain mortgage servicing platform assets of ResCap (the “ResCap Business”).  The Service Agreements provide that (i) Altisource will be the exclusive provider, except as prohibited by applicable law, to Ocwen of certain services related to the ResCap Business, (ii) Ocwen will not establish similar fee-based businesses that would directly or indirectly compete with Altisource’s services as they relate to the ResCap Business and (iii) Ocwen will market and promote the utilization of Altisource’s services to their various third party relationships.  Additionally, the parties agreed to use commercially reasonable best efforts to ensure that the loans associated with the ResCap Business are boarded onto Altisource’s mortgage servicing platform.  We paid $128.8 million ($80.0 million on April 12, 2013 and $48.8 million on May 10, 2013) for the ResCap fee-based businesses. From the acquisition date through September 30, 2013, we recorded service revenue of $28.6 million and we estimate pre-tax income is $10.9 million related to these businesses.

We acquired no tangible assets and assumed no liabilities in connection with the acquisition.  However, certain employees as well as practices and processes developed to support the ResCap servicing portfolio were components of the transaction.  We accounted for this transaction as a business combination in accordance with ASC Topic 805, Business Combinations.

Management prepared a preliminary purchase price allocation and assigned associated asset lives based upon available information at the time of the agreement and through the date of filing.  This preliminary allocation and assessment of asset lives will be revised as additional information about the fair value of assets and liabilities becomes available. Such assessment must be completed within 12 months from the acquisition date. The agreement consideration of $128.8 million was fully allocated to the customer relationship intangible asset with an estimated average useful life of 7 years.

The following tables present the unaudited pro forma condensed consolidated results of operations as if the Homeward and ResCap Business transactions had occurred at the beginning of the earliest period presented.

	Nine months ended September 30, 2013
(in thousands, except per share amounts)	As reported		Pro forma
Revenue	$	545,772	$	579,263
Net income attributable to Altisource	94,457		101,413
Earnings per share — diluted	3.77		4.05

	Nine months ended September 30, 2012
(in thousands, except per share amounts)	As reported		Pro forma
Revenue	$	427,259	$	536,647
Net income attributable to Altisource	80,334		103,313
Earnings per share — diluted	3.23		4.15

	Three months ended September 30, 2012
(in thousands, except per share amounts)	As reported		Pro forma
Revenue	$	143,988	$	180,451
Net income attributable to Altisource	27,024		34,665
Earnings per share — diluted	1.08		1.39

The unaudited pro forma information presents the combined operating results of Altisource and the Homeward and ResCap Business transactions.  The Homeward and ResCap Business operating results were derived from their historical financial statements for the most comparable periods available.  The results prior to the acquisition dates have been adjusted to include the pro forma impact of the adjustment of amortization of the acquired intangible assets based on the preliminary purchase price allocations, the adjustment of interest expense reflecting the portion of our $200 million senior secured term loan, increased to $400 million on May 7, 2013, used in the Homeward and ResCap Business transactions and to reflect the impact of income taxes on the pro forma adjustments utilizing Altisource’s effective income tax rate in each period presented.

The unaudited pro forma results are presented for illustrative purposes only and do not reflect additional revenue opportunities, the realization of any potential cost savings and any related integration costs.  Certain revenue opportunities and cost savings may result from the transactions and the conversion to the Altisource model; however, there can be no assurance that these revenue opportunities and cost savings will be achieved.  These pro forma results do not purport to be indicative of the results that would have actually been obtained if the transactions occurred as of the beginning of each of the periods presented, nor is the pro forma data intended to be a projection of results that may be obtained in the future.

Equator Acquisition

On August 19, 2013, we entered into a Purchase and Sale Agreement (the “Purchase Agreement”) pursuant to which we agreed to purchase all of the outstanding limited liability company interests of Equator, LLC, a California limited-liability company (“Equator”).  The aggregate consideration payable under the Purchase Agreement is up to $150.0 million comprised of (i) $70.0 million in initial consideration and (ii) up to an additional $80.0 million in potential additional consideration, the payment of which is dependent upon the Equator business meeting targeted levels of profitability (as described in the Purchase Agreement) for three consecutive 12-month periods following closing.  Each 12-month period has targeted levels of profitability and potential additional consideration will be paid based on each 12-month period. We may, at our discretion, pay up to 20% of the initial consideration and up to 20% of each payment of any additional consideration in shares of our restricted stock, with the balance to be paid in cash.  The closing is subject to the satisfaction of customary closing terms and conditions, including, without limitation, clearance under the Hart-Scott-Rodino (“HSR”) Act. The purchase price is subject to certain adjustments based on targeted amounts of current assets and current liabilities of Equator at closing, to be settled within 90 days of the closing date.

We initially filed the HSR application with the Federal Trade Commission (the “FTC”) in the third quarter and initially expected to receive approval and close the acquisition in the third quarter of 2013.  With the recent disruption of the United States government and shutdown of nonessential services, approval from the FTC has been delayed. To ensure that the HSR waiting period did not expire during the United States government disruption, and following discussions with the staff of the FTC, we voluntarily withdrew our initial application and re-filed it early in the fourth quarter of 2013.  We believe, although there can be no assurance, the transaction will close in the fourth quarter of 2013.

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TRANSACTIONS WITH RELATED PARTIES (Details) (USD $)	3 Months Ended		9 Months Ended			3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended		0 Months Ended		9 Months Ended			0 Months Ended	3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended		3 Months Ended	9 Months Ended	3 Months Ended	9 Months Ended	3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012	Sep. 30, 2013 Residential	Sep. 30, 2012 Residential	Sep. 30, 2013 Residential	Sep. 30, 2012 Residential	Sep. 30, 2013 AAMC	Sep. 30, 2012 AAMC	Sep. 30, 2013 AAMC	Sep. 30, 2012 AAMC	Sep. 30, 2013 Ocwen	Sep. 30, 2012 Ocwen	Sep. 30, 2013 Ocwen	Sep. 30, 2012 Ocwen	Mar. 31, 2013 Ocwen Correspondent One	Feb. 15, 2013 Ocwen Senior unsecured term loan	Sep. 30, 2013 Ocwen Senior unsecured term loan	Sep. 30, 2012 Ocwen Senior unsecured term loan	Dec. 27, 2012 Ocwen Senior unsecured term loan	Dec. 27, 2012 Ocwen Senior unsecured term loan Eurodollar Rate	Sep. 30, 2013 Ocwen Support Services Agreement	Sep. 30, 2012 Ocwen Support Services Agreement	Sep. 30, 2013 Ocwen Support Services Agreement	Sep. 30, 2012 Ocwen Support Services Agreement	Sep. 30, 2013 Ocwen Mortgage Services	Sep. 30, 2012 Ocwen Mortgage Services	Sep. 30, 2013 Ocwen Mortgage Services	Sep. 30, 2012 Ocwen Mortgage Services	Sep. 30, 2013 Ocwen Financial Services	Sep. 30, 2013 Ocwen Financial Services	Sep. 30, 2012 Ocwen Financial Services Maximum	Sep. 30, 2012 Ocwen Financial Services Maximum	Sep. 30, 2013 Ocwen Technology Services	Sep. 30, 2012 Ocwen Technology Services	Sep. 30, 2013 Ocwen Technology Services	Sep. 30, 2012 Ocwen Technology Services	Sep. 30, 2013 Correspondent One	Sep. 30, 2012 Correspondent One	Sep. 30, 2013 Correspondent One	Sep. 30, 2012 Correspondent One	Sep. 30, 2013 Correspondent One Support Services Agreement	Sep. 30, 2012 Correspondent One Support Services Agreement	Sep. 30, 2012 Correspondent One Support Services Agreement	Sep. 30, 2013 Correspondent One Maximum Support Services Agreement	Sep. 30, 2013 HLSS Support Services Agreement	Sep. 30, 2012 HLSS Support Services Agreement	Sep. 30, 2013 HLSS Support Services Agreement	Sep. 30, 2012 HLSS Support Services Agreement
TRANSACTIONS WITH RELATED PARTIES
Related party revenue as a percentage of segment revenue																												73.00%	68.00%	71.00%	69.00%	37.00%	25.00%	1.00%	1.00%	53.00%	39.00%	53.00%	40.00%
Related party revenue as a percentage of consolidated revenue														68.00%	60.00%	65.00%	60.00%
Amount billed to related party						$ 200,000	$ 0	$ 400,000	$ 0	$ 700,000	$ 0	$ 900,000	$ 0											$ 600,000	$ 600,000	$ 1,800,000	$ 2,000,000																	$ 0	$ 100,000	$ 200,000	$ 100,000	$ 200,000	$ 200,000	$ 500,000	$ 400,000
Amount billed by related party	720,000	621,000	2,133,000	1,801,000																				700,000	600,000	2,100,000	1,800,000
Revenue earned from related party	143,557,000	86,558,000	354,889,000	257,491,000																																				0	200,000	100,000	200,000
Amount of loan provided to related party					75,000,000																	75,000,000
Reference rate																							Eurodollar Rate
Interest rate margin (as a percent)																							6.75%
Interest rate, variable interest rate floor (as a percent)																							1.50%
Repayment of outstanding principal amount			75,000,000																75,000,000
Interest income																				800,000	0
Percentage of equity interest sold to the related party																		49.00%
Proceeds from sale of equity interest																		$ 12,600,000

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PREPAID EXPENSES AND OTHER CURRENT ASSETS (Tables)

9 Months Ended

Sep. 30, 2013

PREPAID EXPENSES AND OTHER CURRENT ASSETS

Schedule of prepaid expenses and other current assets

	September 30,		December 31,
(in thousands)	2013		2012
Maintenance agreements, current portion	$	4,350	$	3,636
Income taxes receivable	4,256		1,814
Prepaid expenses	4,646		1,640
Other current assets	508		528
Total	$	13,760	$	7,618

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ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Tables)

9 Months Ended

Sep. 30, 2013

ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Schedule of accounts payable and accrued expenses

	September 30,		December 31,
(in thousands)	2013		2012
Accounts payable	$	7,818	$	5,079
Accrued expenses - general	16,903		16,528
Accrued salaries and benefits	23,222		19,613
Income taxes payable	14,774		8,750
Payable to Ocwen	4,131		8,865
Payable to AAMC	—		141
Total	$	66,848	$	58,976

Schedule of other current liabilities

	September 30,		December 31,
(in thousands)	2013		2012
Deferred revenue	$	1,512	$	2,482
Facility closure cost accrual, current portion	141		138
Book overdrafts	4,601		5,229
Other	3,117		2,574
Total	$	9,371	$	10,423

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OTHER INCOME (EXPENSE), NET (Tables)

9 Months Ended

Sep. 30, 2013

OTHER INCOME (EXPENSE), NET

Schedule of other income (expense), net

	Three months ended September 30,						Nine months ended September 30,
(in thousands)	2013			2012			2013			2012
Loss in equity affiliates	$	(54	)	$	(293	)	$	(176	)	$	(872	)
Interest income	14			49			881			75
Other, net	(213		)	(13		)	(176		)	(103		)
Total	$	(253	)	$	(257	)	$	529		$	(900	)

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LONG-TERM DEBT (Details) (USD $)	9 Months Ended			0 Months Ended				9 Months Ended		0 Months Ended
	Sep. 30, 2013	May 07, 2013	Dec. 31, 2012	May 07, 2013 Senior secured term loan	Nov. 27, 2012 Senior secured term loan	Sep. 30, 2013 Senior secured term loan	Dec. 31, 2012 Senior secured term loan	Sep. 30, 2013 Senior secured term loan Adjusted Eurodollar Rate	Sep. 30, 2013 Senior secured term loan Base Rate	May 07, 2013 Incremental Term Loan
Debt
Senior secured term loan	$ 397,497,000	$ 400,000,000	$ 200,000,000
Less: Unamortized discount, net	(789,000)		(1,973,000)		(2,000,000)
Net long-term debt	396,708,000		198,027,000
Less: Current portion	(4,000,000)		(2,000,000)
Long-term debt, less current portion	392,708,000		196,027,000
Amount borrowed					200,000,000					200,000,000
Original issue discount (as a percent)					1.00%
Original issue premium										1,000,000
Proceeds from issuance of long-term debt	201,000,000				198,000,000					201,000,000
Quarterly principal installments of loan as a percentage of the initial principal amount										0.25%
Aggregate amount of each quarterly scheduled principal installment				1,000,000
Payment of legal fees and other costs	2,400,000									2,400,000
Reference rate								Adjusted Eurodollar Rate	Base Rate
Fixed interest rate base (as a percent)								1.25%	2.25%
Interest rate margin (as a percent)								4.50%	3.50%
Interest rate at the end of the period (as a percent)						5.75%
Debt issuance costs, net	6,143,000		4,260,000			6,100,000	4,300,000
Accumulated amortization						$ 800,000	$ 100,000

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GOODWILL AND INTANGIBLE ASSETS, NET (Details 2) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
Intangible Assets, Net
Gross carrying amount	$ 289,639,000		$ 289,639,000		$ 85,280,000
Accumulated amortization	(47,551,000)		(47,551,000)		(28,694,000)
Net book value	242,088,000		242,088,000		56,586,000
Amortization expense for definite lived intangible assets	8,620,000	1,201,000	18,857,000	3,833,000
2013	27,600,000		27,600,000
2014	46,900,000		46,900,000
2015	40,400,000		40,400,000
2016	32,500,000		32,500,000
2017	26,000,000		26,000,000
Trademarks
Intangible Assets, Net
Weighted average estimated useful life			16 years
Gross carrying amount	10,614,000		10,614,000		10,614,000
Accumulated amortization	(4,414,000)		(4,414,000)		(4,060,000)
Net book value	6,200,000		6,200,000		6,554,000
Customer-related intangible assets
Intangible Assets, Net
Weighted average estimated useful life			9 years
Gross carrying amount	242,725,000		242,725,000		38,366,000
Accumulated amortization	(35,520,000)		(35,520,000)		(18,567,000)
Net book value	207,205,000		207,205,000		19,799,000
Operating agreement
Intangible Assets, Net
Weighted average estimated useful life			20 years
Gross carrying amount	35,000,000		35,000,000		35,000,000
Accumulated amortization	(6,417,000)		(6,417,000)		(5,104,000)
Net book value	28,583,000		28,583,000		29,896,000
Non-compete agreement
Intangible Assets, Net
Weighted average estimated useful life			4 years
Gross carrying amount	1,300,000		1,300,000		1,300,000
Accumulated amortization	(1,200,000)		(1,200,000)		(963,000)
Net book value	$ 100,000		$ 100,000		$ 337,000

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ACQUISITIONS (Details 4) (Equator, USD $) In Millions, unless otherwise specified	0 Months Ended
	Aug. 19, 2013 item
Acquisitions
Initial consideration	$ 70.0
Number of consecutive 12-month periods for meeting targeted levels of adjusted EBITA	3
Number of months for each consecutive period for meeting targeted levels of adjusted EBITA	12 months
Settlement period of purchase price from closing date	90 days
Maximum
Acquisitions
Aggregate consideration	150.0
Additional consideration	$ 80.0
Initial consideration that can be paid in restricted stock shares (as a percent)	20.00%
Additional consideration that can be paid in restricted stock shares (as a percent)	20.00%

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
CONDENSED CONSOLIDATED BALANCE SHEETS
Common stock, par value (in dollars per share)	$ 1.00	$ 1.00
Common stock, shares authorized	100,000	100,000
Common stock, shares issued	25,413	25,413
Common stock, shares outstanding	22,866	23,427
Treasury stock, shares	2,547	1,986

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INVESTMENT IN EQUITY AFFILIATES

9 Months Ended

Sep. 30, 2013

INVESTMENT IN EQUITY AFFILIATES

INVESTMENT IN EQUITY AFFILIATES

NOTE 8 — INVESTMENT IN EQUITY AFFILIATES

Correspondent One purchased closed conforming and government guaranteed residential mortgages from approved mortgage bankers.  Prior to the sale of our interest in Correspondent One to Ocwen on March 31, 2013 (see Note 2), we had significant influence over the general operations of Correspondent One consistent with our 49% ownership level, and therefore, accounted for our investment under the equity method. On March 31, 2013, we sold our 49% interest in Correspondent One to Ocwen for $12.6 million.

Our net loss on this investment was $0.1 million and $0.9 million for the nine months ended September 30, 2013 and 2012, respectively (none for the third quarter of 2013 and $0.3 million net loss for the third quarter of 2012).

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CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (USD $) In Thousands, unless otherwise specified	Total	Common stock	Additional paid-in capital	Retained earnings	Treasury stock, at cost	Non-controlling interests
Balance at Dec. 31, 2011	$ 165,943	$ 25,413	$ 83,229	$ 126,161	$ (72,048)	$ 3,188
Balance (in shares) at Dec. 31, 2011		25,413
Increase (Decrease) in Equity
Net income	84,557			80,334		4,223
Contributions from non-controlling interest holders	27					27
Distributions to non-controlling interest holders	(6,008)					(6,008)
Share-based compensation expense	2,038		2,038
Exercise of stock options	2,619			(5,759)	8,378
Repurchase of shares	(16,781)				(16,781)
Balance at Sep. 30, 2012	232,395	25,413	85,267	200,736	(80,451)	1,430
Balance (in shares) at Sep. 30, 2012		25,413
Balance at Dec. 31, 2012	159,829	25,413	86,873	124,127	(77,954)	1,370
Balance (in shares) at Dec. 31, 2012		25,413
Increase (Decrease) in Equity
Net income	97,550			94,457		3,093
Contributions from non-controlling interest holders	18					18
Distributions to non-controlling interest holders	(3,234)					(3,234)
Share-based compensation expense	2,076		2,076
Exercise of stock options	4,710			(8,801)	13,511
Repurchase of shares	(87,418)				(87,418)
Balance at Sep. 30, 2013	$ 173,531	$ 25,413	$ 88,949	$ 209,783	$ (151,861)	$ 1,247
Balance (in shares) at Sep. 30, 2013		25,413

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COST OF REVENUE (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
COST OF REVENUE
Compensation and benefits	$ 39,600	$ 28,840	$ 108,923	$ 84,314
Outside fees and services	56,611	31,084	137,851	91,494
Reimbursable expenses	29,496	24,326	73,061	77,846
Technology and telecommunications	5,459	6,900	18,010	17,890
Depreciation and amortization	3,095	3,137	10,350	7,241
Total	$ 134,261	$ 94,287	$ 348,195	$ 278,785

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CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Current assets:
Cash and cash equivalents	$ 212,585	$ 105,502
Accounts receivable, net	83,851	88,955
Prepaid expenses and other current assets	13,760	7,618
Deferred tax assets, net	1,775	1,775
Total current assets	311,971	203,850
Premises and equipment, net	59,464	50,399
Deferred tax assets, net	4,073	4,073
Intangible assets, net	242,088	56,586
Goodwill	14,915	14,915
Investment in Correspondent One		12,729
Loan to Ocwen		75,000
Other assets	15,243	11,674
Total assets	647,754	429,226
Current liabilities:
Accounts payable and accrued expenses	66,848	58,976
Current portion of long-term debt	4,000	2,000
Current portion of capital lease obligations		233
Other current liabilities	9,371	10,423
Total current liabilities	80,219	71,632
Long-term debt, less current portion	392,708	196,027
Other non-current liabilities	1,296	1,738
Commitments and contingencies (Note 17)
Equity:
Common stock ($1.00 par value; 100,000 shares authorized; 25,413 issued and 22,866 outstanding as of September 30, 2013; 25,413 issued and 23,427 outstanding as of December 31, 2012)	25,413	25,413
Additional paid-in-capital	88,949	86,873
Retained earnings	209,783	124,127
Treasury stock, at cost (2,547 shares as of September 30, 2013 and 1,986 shares as of December 31, 2012)	(151,861)	(77,954)
Altisource equity	172,284	158,459
Non-controlling interests	1,247	1,370
Total equity	173,531	159,829
Total liabilities and equity	$ 647,754	$ 429,226

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INVESTMENT IN EQUITY AFFILIATES (Details) (USD $)	3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended			0 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013 Correspondent One	Sep. 30, 2012 Correspondent One	Sep. 30, 2013 Correspondent One	Sep. 30, 2012 Correspondent One	Mar. 29, 2013 Correspondent One	Mar. 31, 2013 Correspondent One Ocwen
Investment in equity affiliates
Ownership percentage									49.00%
Percentage of equity interest sold to the related party										49.00%
Proceeds from sale of equity interest										$ 12,600,000
Net loss on investment	$ 54,000	$ 293,000	$ 176,000	$ 872,000	$ 0	$ 300,000	$ 100,000	$ 900,000

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PREMISES AND EQUIPMENT, NET (Tables)

9 Months Ended

Sep. 30, 2013

PREMISES AND EQUIPMENT, NET

Schedule of premises and equipment, net, which includes amounts recorded under capital leases

	September 30,			December 31,
(in thousands)	2013			2012
Computer hardware and software	$	81,897		$	68,329
Office equipment and other	21,849			15,592
Furniture and fixtures	6,414			5,344
Leasehold improvements	14,863			12,982
	125,023			102,247
Less: Accumulated depreciation and amortization	(65,559		)	(51,848		)
Total	$	59,464		$	50,399

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COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2013

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

NOTE 17 — COMMITMENTS AND CONTINGENCIES

Litigation

From time to time, we are involved in legal proceedings arising in the ordinary course of business.  We record a liability for litigation if an unfavorable outcome is probable and the amount of loss can be reasonably estimated, including expected insurance coverage.  For proceedings where a range of loss is determined, we record a best estimate of loss within the range.

When legal proceedings are material, we disclose the nature of the litigation, and to the extent possible, the estimate of loss or range of loss. In the opinion of management, after consultation with legal counsel and considering insurance coverage where applicable, the outcome of current legal proceedings, both individually and in the aggregate, will not have a material impact on our financial condition, results of operations or cash flows.

Escrow Balances

We hold customers’ assets in escrow at various financial institutions pending completion of certain real estate activities. These amounts are held in escrow for limited periods of time, generally consisting of a few days and are not included in the condensed consolidated balance sheets. Amounts held in escrow were $56.8 million and $47.2 million as of September 30, 2013 and December 31, 2012, respectively.

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ACQUISITIONS (Details 3) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	May 07, 2013	Dec. 31, 2012
Pro forma condensed consolidated results of operations
Revenue, As reported	$ 210,835	$ 143,988	$ 545,772	$ 427,259
Revenue, Pro forma		180,451	579,263	536,647
Net income attributable to Altisource, As reported	36,008	27,024	94,457	80,334
Net income attributable to Altisource, Pro forma		34,665	101,413	103,313
Earnings per share - diluted (in dollars per share), As reported	$ 1.42	$ 1.08	$ 3.77	$ 3.23
Earnings per share - diluted (in dollars per share), Pro forma		$ 1.39	$ 4.05	$ 4.15
Debt carrying amount	$ 397,497		$ 397,497		$ 400,000	$ 200,000

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ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Details 2) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Other current liabilities
Deferred revenue	$ 1,512	$ 2,482
Facility closure cost accrual, current portion	141	138
Book overdrafts	4,601	5,229
Other	3,117	2,574
Total	$ 9,371	$ 10,423

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SEGMENT REPORTING (Tables)

9 Months Ended

Sep. 30, 2013

SEGMENT REPORTING

Schedule of financial information of segments

	Three months ended September 30, 2013
								Corporate
	Mortgage			Financial		Technology		Items and			Consolidated
(in thousands)	Services			Services		Services		Eliminations			Altisource
Revenue	$	164,661		$	27,267	$	25,175	$	(6,268	)	$	210,835
Cost of revenue	106,412			14,998		18,569		(5,718		)	134,261
Gross profit	58,249			12,269		6,606		(550		)	76,574
Selling, general and administrative expenses	14,224			4,616		2,621		10,058			31,519
Income from operations	44,025			7,653		3,985		(10,608		)	45,055
Other income (expense), net	(41		)	—		—		(6,400		)	(6,441		)
Income before income taxes and non-controlling interests	$	43,984		$	7,653	$	3,985	$	(17,008	)	$	38,614

	Three months ended September 30, 2012
										Corporate
	Mortgage			Financial			Technology			Items and			Consolidated
(in thousands)	Services			Services			Services			Eliminations			Altisource
Revenue	$	115,882		$	15,394		$	19,076		$	(6,364	)	$	143,988
Cost of revenue	72,774			11,784			15,418			(5,689		)	94,287
Gross profit	43,108			3,610			3,658			(675		)	49,701
Selling, general and administrative expenses	6,155			3,116			1,851			7,330			18,452
Income from operations	36,953			494			1,807			(8,005		)	31,249
Other income (expense), net	(290		)	(6		)	(5		)	34			(267		)
Income before income taxes and non-controlling interests	$	36,663		$	488		$	1,802		$	(7,971	)	$	30,982

	Nine months ended September 30, 2013
									Corporate
	Mortgage			Financial			Technology		Items and			Consolidated
(in thousands)	Services			Services			Services		Eliminations			Altisource
Revenue	$	426,319		$	66,675		$	70,189	$	(17,411	)	$	545,772
Cost of revenue	267,859			40,831			55,088		(15,583		)	348,195
Gross profit	158,460			25,844			15,101		(1,828		)	197,577
Selling, general and administrative expenses	32,272			11,000			7,514		29,241			80,027
Income from operations	126,188			14,844			7,587		(31,069		)	117,550
Other income (expense), net	(153		)	(8		)	3		(13,615		)	(13,773		)
Income before income taxes and non-controlling interests	$	126,035		$	14,836		$	7,590	$	(44,684	)	$	103,777

	Nine months ended September 30, 2012
										Corporate
	Mortgage			Financial			Technology			Items and			Consolidated
(in thousands)	Services			Services			Services			Eliminations			Altisource
Revenue	$	341,446		$	49,649		$	53,984		$	(17,820	)	$	427,259
Cost of revenue	218,969			35,780			40,098			(16,062		)	278,785
Gross profit	122,477			13,869			13,886			(1,758		)	148,474
Selling, general and administrative expenses	17,458			10,550			5,519			20,958			54,485
Income from operations	105,019			3,319			8,367			(22,716		)	93,989
Other income (expense), net	(857		)	(22		)	(22		)	(38		)	(939		)
Income before income taxes and non-controlling interests	$	104,162		$	3,297		$	8,345		$	(22,754	)	$	93,050

							Corporate
	Mortgage		Financial		Technology		Items and		Consolidated
(in thousands)	Services		Services		Services		Eliminations		Altisource
Total assets:
September 30, 2013	$	313,441	$	52,578	$	120,059	$	161,676	$	647,754
December 31, 2012	132,924		37,782		64,570		193,950		429,226

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COST OF REVENUE (Tables)

9 Months Ended

Sep. 30, 2013

COST OF REVENUE

Schedule of components of cost of revenue

	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2013		2012		2013		2012
Compensation and benefits	$	39,600	$	28,840	$	108,923	$	84,314
Outside fees and services	56,611		31,084		137,851		91,494
Reimbursable expenses	29,496		24,326		73,061		77,846
Technology and telecommunications	5,459		6,900		18,010		17,890
Depreciation and amortization	3,095		3,137		10,350		7,241
Total	$	134,261	$	94,287	$	348,195	$	278,785

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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Tables)

9 Months Ended

Sep. 30, 2013

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Schedule of the components of selling, general and administrative expenses

	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2013		2012		2013		2012
Compensation and benefits	$	6,802	$	5,212	$	18,868	$	15,995
Professional services	2,168		2,089		5,184		5,550
Occupancy related costs	7,438		6,641		21,971		19,308
Amortization of intangible assets	8,620		1,201		18,857		3,833
Depreciation and amortization	1,390		701		3,441		1,797
Other	5,101		2,608		11,706		8,002
Total	$	31,519	$	18,452	$	80,027	$	54,485

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GOODWILL AND INTANGIBLE ASSETS, NET

9 Months Ended

Sep. 30, 2013

GOODWILL AND INTANGIBLE ASSETS, NET

GOODWILL AND INTANGIBLE ASSETS, NET

NOTE 7 — GOODWILL AND INTANGIBLE ASSETS, NET

Goodwill

There were no changes in goodwill during the nine months ended September 30, 2013. The following is a summary of goodwill by segment:

	Mortgage		Financial		Technology
(in thousands)	Services		Services		Services		Total
Balance, September 30, 2013 and December 31, 2012	$	10,919	$	2,378	$	1,618	$	14,915

Intangible Assets, Net

Intangible assets, net consist of the following:

	Weighted average estimated	Gross carrying amount				Accumulated amortization						Net book value
(dollars in thousands)	useful life (years)	September 30, 2013		December 31, 2012		September 30, 2013			December 31, 2012			September 30, 2013		December 31, 2012
Definite lived intangible assets
Trademarks	16	$	10,614	$	10,614	$	(4,414	)	$	(4,060	)	$	6,200	$	6,554
Customer-related intangible assets	9	242,725		38,366		(35,520		)	(18,567		)	207,205		19,799
Operating agreement	20	35,000		35,000		(6,417		)	(5,104		)	28,583		29,896
Non-compete agreement	4	1,300		1,300		(1,200		)	(963		)	100		337
Total		$	289,639	$	85,280	$	(47,551	)	$	(28,694	)	$	242,088	$	56,586

Amortization expense for definite lived intangible assets was $18.9 million and $3.8 million for the nine months ended September 30, 2013 and 2012, respectively ($8.6 million and $1.2 million for the third quarter of 2013 and 2012, respectively). Expected annual definite lived intangible asset amortization for 2013 through 2017 is $27.6 million, $46.9 million, $40.4 million, $32.5 million and $26.0 million, respectively, for assets recorded as of September 30, 2013, including preliminary amounts associated with the Homeward and ResCap fee-based business transactions (see Note 3).

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COMMITMENTS AND CONTINGENCIES (Details) (USD $) In Millions, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Escrow Balances
Amounts held in escrow	$ 56.8	$ 47.2

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GOODWILL AND INTANGIBLE ASSETS, NET (Tables)

9 Months Ended

Sep. 30, 2013

GOODWILL AND INTANGIBLE ASSETS, NET

Summary of goodwill by segment

	Mortgage		Financial		Technology
(in thousands)	Services		Services		Services		Total
Balance, September 30, 2013 and December 31, 2012	$	10,919	$	2,378	$	1,618	$	14,915

Schedule of intangible assets, net

	Weighted average estimated	Gross carrying amount				Accumulated amortization						Net book value
(dollars in thousands)	useful life (years)	September 30, 2013		December 31, 2012		September 30, 2013			December 31, 2012			September 30, 2013		December 31, 2012
Definite lived intangible assets
Trademarks	16	$	10,614	$	10,614	$	(4,414	)	$	(4,060	)	$	6,200	$	6,554
Customer-related intangible assets	9	242,725		38,366		(35,520		)	(18,567		)	207,205		19,799
Operating agreement	20	35,000		35,000		(6,417		)	(5,104		)	28,583		29,896
Non-compete agreement	4	1,300		1,300		(1,200		)	(963		)	100		337
Total		$	289,639	$	85,280	$	(47,551	)	$	(28,694	)	$	242,088	$	56,586

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ACQUISITIONS (Details) (Homeward servicing portfolio, USD $)	0 Months Ended	6 Months Ended
	Mar. 29, 2013	Sep. 30, 2013
Acquisitions
Service revenue recorded from the date of acquisition		$ 74,300,000
Estimated pre-tax income recorded from the date of acquisition		14,200,000
Ocwen
Acquisitions
Amount paid	75,800,000
Working capital and net income adjustment		11,100,000
Reduction in premises and equipment		1,200,000
Preliminary allocation of the purchase price
Premises and equipment	1,559,000
Customer relationship	75,609,000
Assets acquired	77,168,000
Accounts payable and accrued expenses	(1,351,000)
Purchase price	$ 75,817,000
Estimated life (in years)
Customer relationship	7 years
Minimum | Ocwen
Estimated life (in years)
Premises and equipment	3 years
Maximum | Ocwen
Estimated life (in years)
Premises and equipment	5 years

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ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

9 Months Ended

Sep. 30, 2013

ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

NOTE 10 — ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accounts payable and accrued expenses consist of the following:

	September 30,		December 31,
(in thousands)	2013		2012
Accounts payable	$	7,818	$	5,079
Accrued expenses - general	16,903		16,528
Accrued salaries and benefits	23,222		19,613
Income taxes payable	14,774		8,750
Payable to Ocwen	4,131		8,865
Payable to AAMC	—		141
Total	$	66,848	$	58,976

Other current liabilities consist of the following:

	September 30,		December 31,
(in thousands)	2013		2012
Deferred revenue	$	1,512	$	2,482
Facility closure cost accrual, current portion	141		138
Book overdrafts	4,601		5,229
Other	3,117		2,574
Total	$	9,371	$	10,423

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PREMISES AND EQUIPMENT, NET

9 Months Ended

Sep. 30, 2013

PREMISES AND EQUIPMENT, NET

PREMISES AND EQUIPMENT, NET

NOTE 6 — PREMISES AND EQUIPMENT, NET

Premises and equipment, net, which includes amounts recorded under capital leases, consists of the following:

	September 30,			December 31,
(in thousands)	2013			2012
Computer hardware and software	$	81,897		$	68,329
Office equipment and other	21,849			15,592
Furniture and fixtures	6,414			5,344
Leasehold improvements	14,863			12,982
	125,023			102,247
Less: Accumulated depreciation and amortization	(65,559		)	(51,848		)
Total	$	59,464		$	50,399

Depreciation and amortization expense, inclusive of capital leases, amounted to $13.8 million and $9.0 million for the nine months ended September 30, 2013 and 2012, respectively ($4.5 million and $3.8 million for the third quarter of 2013 and 2012, respectively), and is included in cost of revenue for operating assets and in selling, general and administrative expenses for non-operating assets in the accompanying condensed consolidated statements of operations.

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ORGANIZATION AND BASIS OF PRESENTATION

9 Months Ended

Sep. 30, 2013

ORGANIZATION AND BASIS OF PRESENTATION

ORGANIZATION AND BASIS OF PRESENTATION

NOTE 1 — ORGANIZATION AND BASIS OF PRESENTATION

Description of Business

Altisource Portfolio Solutions S.A., together with its subsidiaries (which may be referred to as “Altisource,” the “Company,” “we,” “us” or “our”), is a premier marketplace and transaction solutions provider for the real estate, mortgage and consumer debt industries offering both distribution and content. We leverage proprietary business process, vendor and electronic payment management software and behavioral science based analytics to improve outcomes for marketplace participants.

We are incorporated under the laws of Luxembourg and are publicly traded on the NASDAQ Global Select market under the symbol “ASPS.”

We conduct our operations through three reporting segments: Mortgage Services, Financial Services and Technology Services.  In addition, we report our corporate related expenditures and eliminations as a separate segment (see Note 18 for a description of our business segments).

Basis of Presentation

The unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Securities and Exchange Commission (“SEC”) Regulation S-X.  Accordingly, these financial statements do not include all of the information and notes required by GAAP for complete consolidated financial statements.  In the opinion of management, the interim data includes all normal recurring adjustments considered necessary to fairly state the results for the interim periods presented.  The preparation of interim condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of our interim condensed consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from these estimates.  All significant intercompany and inter-segment transactions and accounts have been eliminated in consolidation.

The Mortgage Partnership of America, L.L.C. (“MPA”), a wholly-owned subsidiary of Altisource®, is the manager of a national alliance of community mortgage bankers, correspondent lenders and suppliers of mortgage products and services that is referred to as the Lenders One® Mortgage Cooperative (“Lenders One”).  The management agreement between MPA and Lenders One, pursuant to which MPA is the management company of Lenders One, represents a variable interest in a variable interest entity.  MPA is the primary beneficiary of Lenders One as it has the power to direct the activities that most significantly impact Lenders One’s economic performance and the obligation to absorb losses or the right to receive benefits from Lenders One.  As a result, Lenders One is presented in the accompanying interim condensed consolidated financial statements on a consolidated basis with the interests of the members reflected as non-controlling interests.  As of September 30, 2013, Lenders One had total assets of $3.8 million and liabilities of $2.5 million.  As of December 31, 2012, Lenders One had total assets of $2.3 million and liabilities of $1.0 million.

These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in our Form 10-K for the year ended December 31, 2012, filed with the SEC on February 13, 2013, which contains a summary of our significant accounting policies.  Certain footnote detail in the Form 10-K is omitted from the information included herein.

Fair Value of Financial Instruments

Our financial instruments primarily include cash and cash equivalents, restricted cash and long-term debt.  Cash and cash equivalents and restricted cash are carried at amounts that approximate their fair value due to the short-term nature of these instruments.  The fair value was determined by level 1 of the three level hierarchy established by the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement, using quoted prices in active markets for identical assets. The carrying amount of the long-term debt approximates fair value due to the variable interest rate. The fair value was determined by level 2 of the three level hierarchy in ASC Topic 820 using inputs other than quoted prices that are observable, either directly or indirectly.

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OTHER ASSETS (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
OTHER ASSETS
Security deposits, net	$ 7,105	$ 5,019
Debt issuance costs, net	6,143	4,260
Maintenance agreements, non-current portion	1,743	1,614
Restricted cash	158	158
Other	94	623
Total	$ 15,243	$ 11,674

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PREPAID EXPENSES AND OTHER CURRENT ASSETS (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
PREPAID EXPENSES AND OTHER CURRENT ASSETS
Maintenance agreements, current portion	$ 4,350	$ 3,636
Income taxes receivable	4,256	1,814
Prepaid expenses	4,646	1,640
Other current assets	508	528
Total	$ 13,760	$ 7,618

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LONG-TERM DEBT (Tables)

9 Months Ended

Sep. 30, 2013

LONG-TERM DEBT

Schedule of long-term debt

	September 30,			December 31,
(in thousands)	2013			2012
Senior secured term loan	$	397,497		$	200,000
Less: Unamortized discount, net	(789		)	(1,973		)
Net long-term debt	396,708			198,027
Less: Current portion	(4,000		)	(2,000		)
Long-term debt, less current portion	$	392,708		$	196,027

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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Compensation and benefits	$ 6,802	$ 5,212	$ 18,868	$ 15,995
Professional services	2,168	2,089	5,184	5,550
Occupancy related costs	7,438	6,641	21,971	19,308
Amortization of intangible assets	8,620	1,201	18,857	3,833
Depreciation and amortization	1,390	701	3,441	1,797
Other	5,101	2,608	11,706	8,002
Total	$ 31,519	$ 18,452	$ 80,027	$ 54,485

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COST OF REVENUE

9 Months Ended

Sep. 30, 2013

COST OF REVENUE

COST OF REVENUE

NOTE 13 — COST OF REVENUE

Cost of revenue principally includes payroll and employee benefits associated with personnel employed in customer service and operations roles, fees paid to external providers related to the provision of services, reimbursable expenses, technology and telecommunications expenses as well as depreciation and amortization of operating assets. The components of cost of revenue were as follows:

	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2013		2012		2013		2012
Compensation and benefits	$	39,600	$	28,840	$	108,923	$	84,314
Outside fees and services	56,611		31,084		137,851		91,494
Reimbursable expenses	29,496		24,326		73,061		77,846
Technology and telecommunications	5,459		6,900		18,010		17,890
Depreciation and amortization	3,095		3,137		10,350		7,241
Total	$	134,261	$	94,287	$	348,195	$	278,785

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OTHER ASSETS

9 Months Ended

Sep. 30, 2013

OTHER ASSETS

OTHER ASSETS

NOTE 9 — OTHER ASSETS

Other assets consist of the following:

	September 30,		December 31,
(in thousands)	2013		2012
Security deposits, net	$	7,105	$	5,019
Debt issuance costs, net	6,143		4,260
Maintenance agreements, non-current portion	1,743		1,614
Restricted cash	158		158
Other	94		623
Total	$	15,243	$	11,674

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EARNINGS PER SHARE

9 Months Ended

Sep. 30, 2013

EARNINGS PER SHARE

EARNINGS PER SHARE

NOTE 16 — EARNINGS PER SHARE

Basic earnings per share (“EPS”) is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the assumed conversion of all dilutive securities using the treasury stock method.

Basic and diluted EPS are calculated as follows:

	Three months ended September 30,				Nine months ended September 30,
(in thousands, except per share data)	2013		2012		2013		2012
Net income attributable to Altisource	$	36,008	$	27,024	$	94,457	$	80,334
Weighted average common shares outstanding, basic	23,025		23,338		23,185		23,347
Dilutive effect of stock options	2,308		1,678		1,885		1,548
Weighted average common shares outstanding, diluted	25,333		25,016		25,070		24,895
Earnings per share
Basic	$	1.56	$	1.16	$	4.07	$	3.44
Diluted	$	1.42	$	1.08	$	3.77	$	3.23

For the nine months ended September 30, 2013 and 2012, less than 0.1 million options (less than 0.1 million for the third quarter of 2013 and 2012), that were anti-dilutive have been excluded from the computation of diluted EPS. These options were anti-dilutive because their exercise price was greater than the average market price of our common stock.  Also excluded from the computation of diluted EPS for the nine months ended September 30, 2013 and 2012 are 0.1 million and 0.3 million options, respectively (0.1 million and 0.2 million options for the third quarter of 2013 and 2012, respectively), granted for shares that are issuable upon the achievement of certain market and performance criteria related to our common stock price and an annualized rate of return to investors that have not been met.

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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

9 Months Ended

Sep. 30, 2013

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

NOTE 14 — SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses include payroll for personnel employed in executive, finance, legal, human resources, vendor management, risk and operational effectiveness roles.  This category also includes occupancy costs, professional fees and depreciation and amortization on non-operating assets.  The components of selling, general and administrative expenses were as follows:

	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2013		2012		2013		2012
Compensation and benefits	$	6,802	$	5,212	$	18,868	$	15,995
Professional services	2,168		2,089		5,184		5,550
Occupancy related costs	7,438		6,641		21,971		19,308
Amortization of intangible assets	8,620		1,201		18,857		3,833
Depreciation and amortization	1,390		701		3,441		1,797
Other	5,101		2,608		11,706		8,002
Total	$	31,519	$	18,452	$	80,027	$	54,485

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Document and Entity Information	9 Months Ended
	Sep. 30, 2013	Oct. 19, 2013
Document and Entity Information
Entity Registrant Name	Altisource Portfolio Solutions S.A.
Entity Central Index Key	0001462418
Document Type	10-Q
Document Period End Date	Sep. 30, 2013
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		22,857,130
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q3

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OTHER INCOME (EXPENSE), NET

9 Months Ended

Sep. 30, 2013

OTHER INCOME (EXPENSE), NET

OTHER INCOME (EXPENSE), NET

NOTE 15 — OTHER INCOME (EXPENSE), NET

Other income (expense), net consists of the following:

	Three months ended September 30,						Nine months ended September 30,
(in thousands)	2013			2012			2013			2012
Loss in equity affiliates	$	(54	)	$	(293	)	$	(176	)	$	(872	)
Interest income	14			49			881			75
Other, net	(213		)	(13		)	(176		)	(103		)
Total	$	(253	)	$	(257	)	$	529		$	(900	)

Loss in equity affiliates primarily represents our proportional share of the losses in Correspondent One (see Note 8), net of the gain on sale of Correspondent One (see Note 2).

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EARNINGS PER SHARE (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
EARNINGS PER SHARE
Net income attributable to Altisource (in dollars)	$ 36,008	$ 27,024	$ 94,457	$ 80,334
Weighted average common shares outstanding, basic	23,025,000	23,338,000	23,185,000	23,347,000
Dilutive effect of stock options (in shares)	2,308,000	1,678,000	1,885,000	1,548,000
Weighted average common shares outstanding, diluted	25,333,000	25,016,000	25,070,000	24,895,000
Earnings per share
Basic (in dollars per share)	$ 1.56	$ 1.16	$ 4.07	$ 3.44
Diluted (in dollars per share)	$ 1.42	$ 1.08	$ 3.77	$ 3.23
Options | Maximum
Anti-dilutive securities
Options excluded from the computation of diluted EPS (in shares)	100,000	100,000	100,000	100,000
Options for shares issuable upon achievement of market and performance criteria
Anti-dilutive securities
Options excluded from the computation of diluted EPS (in shares)	100,000	200,000	100,000	300,000

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OTHER INCOME (EXPENSE), NET (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
OTHER INCOME (EXPENSE), NET
Loss in equity affiliates	$ (54)	$ (293)	$ (176)	$ (872)
Interest income	14	49	881	75
Other, net	(213)	(13)	(176)	(103)
Other income (expense), net	$ (253)	$ (257)	$ 529	$ (900)