Investor Business Update - April 6, 2021 DRAFT - Privileged and Confidential - Altisource Asset Management ...
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Investor Business Update
April 6, 2021
DRAFT – Privileged and Confidential
© 2021 Altisource Asset Management Corporation. All rights reserved.Executive Overview
AAMC plans to aggregate US real estate backed construction loans (“FixNFlip loans”)
The core focus of this business will be originating and underwriting short duration
construction loans focused on the Single Family Rental (“SFR”) space
• Short term funding to SFR investors to rehabilitate and sell homes
FixNFlip • Attractive levered yields of ~11-12% *
• Loan terms of 9-18 months
• Short duration protects investors against rising interest rates
Market • Single Family Rentals provide affordable housing to a weakening middle class
Dynamics • Housing shortage in states with attractive income tax and business attributes
• Sourcing loans from a fragmented network of construction and renovation
Barriers to companies
Entry • Operationally intense underwriting and oversight process requires a large team
familiar with the operation complexities of property management and auction
*Based on internal estimates as well as leverage available. No assurance can be given with respect to actual yields.
© 2021 AltisourceTM Asset Management Corporation. All rights reserved. 1Business Description and Operational Procedures © 2021 AltisourceTM Asset Management Corporation. All rights reserved. 2
FixNFlip
Transitional Loan
Construction
Program Type Definition Loan to Management
ARV
FixNFlip for the investor who wants to Origination
purchase & renovate a 75% Avg. FICO
property in order to sell it
score
New for the investor looking to build 727 Drawdown request
Construction new single family residential or 70%
resale Avg. loan
Bridge Plus for investor looking to amount
Site inspection
purchase or refinance the 80% 191k
property for resale or long- of As-is value
term financing
Avg. After-Repair
value Inspection report
Level Completed Loan to Loan to Cost Loan to
Flips Value ARV 275k
1 0 85% 85% 70%
Avg. loan to After- Review
2 1-4 90% 90% 70% Repair value
3 5 - 11 90% 92.50% 75% 69%
Approved amount
4 12 - 23 90% 92.50% 75% wired
5 24+ 90% 92.50% 75%
For FixNFlip loans Escrow module
updated
*All information reflects internal estimates as well as loan pools available for purchase as of 04/05/2021. No assurance can be given to actual loan acquisition and characteristics.
© 2021 AltisourceTM Asset Management Corporation. All rights reserved. 3AAMC Partners with Experienced Originators
Closing
Documents Construction
approved Due management
Final
diligence drawdown
inspection
files posted request
of Property
received and
processed
Closing
Wait Payoff
scheduled
Loans demand
Loan requested Payoff wire
Loan allocated to Loan received
transferred
closes investors/ servicing
to servicing
system lenders
Billing & Insurance
Payment and Tax Lien release
processing monitoring filed
Closing
packages
received,
scrubbed and
delivered to
custodians as
applicable
*Based on generic MLPAs that AAMC is contemplating with originators
© 2021 AltisourceTM Asset Management Corporation. All rights reserved. 4Default Management
DEFAULT OCCURS
30-60 • Employee escalated contact methods including
days text & dialler campaigns, manual calls & in REO-Liquidation
DQ person service • Determine as is and after-repair value during
REO process
0-180
• Consult with realtors & contractors to obtain
days multiple bids and maximize property value
PRE-FORECLOSURE
• Develop full P&L for each option and work with
• Aggressively preserve property
3 months experienced local teams to maximize returns
• to include alarm systems, HVAC cages,
to 1 year lockboxes etc.
DQ • Remain in contact with borrower. Leverage
Deed-in-lieu if viable
Keys to success:
• Business purpose loans, hence FDCPA* guidelines are not
applicable; quicker foreclosure timelines
• Experienced servicing partner in this space with an oversight by an
internal team which has managed ~17000 NPLs and RPLs
* FDCPA is Fair Debt Collections Practices Act applicable to consumer loans only.
** Day counts reflect internal estimates
© 2021 AltisourceTM Asset Management Corporation. All rights reserved. 5Business Processes
Operations Process External/Internal Remarks
To be acquired with 1-2% of IO Tranche to the
Origination Internal/External
Originator
Acquisition & Underwriting Internal To be managed internally
Escrow Management External To be managed through third party servicer
Inspection Internal/External Vendor managed with oversight by Internal team
Data Analysis & Reporting Internal To be managed internally
Default Management Internal/External Vendor managed with oversight by Internal team
AAMC is in unique position to leverage capabilities of its existing team to manage a core
part of business internally
© 2021 AltisourceTM Asset Management Corporation. All rights reserved. 6Risks
• Aggressive ARV estimation can lead to defaults
Mitigation:
Underwriting
• Target $200k-$300k value homes which are less susceptible to market fluctuations
Risk • Robust due diligence during loan acquisition, performed by teams in India and US
• Avoid markets with high income taxes and stagnant job markets
• Loan drawdown in excess of actual construction
Fraudulent Mitigation:
drawdown • Use of experienced Construction Management team of the servicer to monitor construction images
versus a scoping budget with an oversight by an internal team
• Sale might take extended time depending on market factors, increased default risk
Mitigation:
Extension risk • Higher interest rate for term extensions
• Robust underwriting and default management process to minimize loss severity in case of default
• AAMC has strategic relationship with online brokerage websites
• Reinvestment of capital post every cycle
Reinvestment
Mitigation:
Risk
• Contracts with originating partners
• Inability to dispose foreclosed homes at cost due to extended timelines of foreclosure
Default Mitigation:
management • Extensive relationship with vendors that have disposed of ~7,000 Non Performing Loans and Re-
Performing Loans for AAMC since 2012
© 2021 AltisourceTM Asset Management Corporation. All rights reserved. 7Investment Dynamics and Relative Value © 2021 AltisourceTM Asset Management Corporation. All rights reserved. 8
Total Addressable Market is Growing
• The market for FixnFlip loans is expected to keep growing in 2021
• Institutional penetration in the market remains small compared to other Fixed Income Asset
classes
Illustration of a Fix and Flip Loan
2018** 2019** 2020 E* Purchase Price 200,000
NAR Existing Home Sales (count) 5,452,000 5,504,000 5,640,000 Average Loan to Cost 80%
% of Annual Home Sales Flipped 5.70% 5.60% 5.50% Loan Amount 160,000
Median Home Price (After Repair Value) $ 188,265 $ 196,619 $ 209,554 Equity Investment 40,000
Total Value ($bn) $ 58.5 $ 61.2 $ 62.3
Rehabilitation Costs 75,000
Estimate Loan to After-Repair Value 60% 60% 60%
Total Addressable Loan Market ($bn) $ 35.1 $ 36.7 $ 37.4 Sales Price 390,000
Loan Repayment + Rehab 235,000
Pct of flips that were financed 30% 35% 40% Interest (9%) 21,150
Estiamte Annual Loan Production ($bn) $ 10.5 $ 12.9 $ 14.9 Taxes, Insurance (3%) 7,050
Closing Costs (5%) 19,500
Home Price Appreciation 5.40% 5.50% 5.50% Selling Costs (5%) 19,500
NAR Sales Growth (per US Econ.) 1% -1.80% Net Proceeds 87,800
Source – RealtyTrac, NAR
Coverage on Loan 1.34x
*Based on internal estimates
**Source: Realty Trac and NAR
© 2021 AltisourceTM Asset Management Corporation. All rights reserved. 9Attractive Relative Value
• FixNFlip loans offer a superior risk adjusted spread and Loan to Value (“LTV”) coverage ratio
compared to traditional Fixed Income asset classes, for a significantly shorter duration
• Non-QM: Non-Qualified Mortgages, RPL: Reperforming Defaulted Loans, CRT: Agency Credit Risk
Transfer Notes, Legacy RMBS: Legacy Subprime Mortgages, CMBS: Commercial Mortgage Backed
Securities, Corp: Investment Grade Corporate Bonds
Fix and Flip Loans offer a spread of ~950 bps for 1 year paper
Comparitive Spreads for Fixed Income Asset Classes
Sector Current Level Loan to Value Average Tenor (in years)
Overall 70% 1.1
Non-QM AAA 85
Non-QM AA 105
Non-QM 93% 3.5
Non-QM A 120
Non-QM BBB 155
RPL RPL AAA 60 90% 2.7
CRT M2 230
CRT 75-85% 4
CRT B1 340
Legacy RMBS POA/Alt-A SSNR 140 74% 4.1
CMBS CMBS AA 100 70% 5.1
Corp. IG Cash 90 90% 6.7
*As of March 31, 2021, All data from Bloomberg and Bank of America Securities research
© 2021 AltisourceTM Asset Management Corporation. All rights reserved. 10Opportunistic Investments in Mortgage REITs © 2021 AltisourceTM Asset Management Corporation. All rights reserved. 11
Mortgage REIT (mREIT) Investments
• AAMC announced on Feb 18, 2021, that it invested $68 MM dollars of cash on hand and ~ $29 MM borrowed
mREIT
under a standard margin arrangement with our banking institution to acquire a portfolio of mREITs (Annaly
Investments Capital Management, Inc. (NLY), AGNC Investment Corp.(AGNC), Chimera Investment Corporation (CIM),
PennyMac Mortgage Investment Trust (PMT) and New Residential Investment Corp. (NRZ).
• The opportunity in mREITs was created by the COVID-19 sell off in 1Q/2Q 2020. (Mortgage assets did not rally
with interest rate compression due to prepayment risks, whereas all the hedges rallied and hurt disciplined
investors). We believe we are well positioned to benefit from AAMC’s expertise in real estate assets, and take
advantage of a market opportunity to generate attractive IRRs.
• Our view is that the book value accretion for these mREITs will continue as the economy improves, COVID-19
risk is reduced gradually, and credit spreads tighten due to the yield-starved investor environment,
particularly overseas, as well as value investor driven aversion to elevated market multiples and a rotation to
Investment investments that trade below book value. Agency and non-agency mortgages have not seen an elevated level
Thesis of loss given defaults, given the implicit government guarantee on Freddie/Fannie and Ginnie Mae loans, as
well as the robust underwriting in the non-agency market.
• We expect the real estate market to fare well due to a multitude of factors including the Fed focus on
keeping short term rates anchored close to historically low levels, a general preference for housing in low
income tax states, as well as the continued shift toward single family rental housing. There is also a shortage
of housing supply that supports housing prices and the associated mortgages in the US.
• Management believes in aligning compensation with book equity creation and generating positive returns on
assets
Investment Goal
• Our investment strategy is discussed on our file 8-k available at https://ir.altisourceamc.com/static-
files/723fc9ee-470e-4c66-95c2-66111a05e6a8
© 2021 AltisourceTM Asset Management Corporation. All rights reserved. 12AAMC Overview © 2021 AltisourceTM Asset Management Corporation. All rights reserved. 13
Core Values
What we do:
• Our core business is to provide asset management services to real estate investors
• We bring a unique blend of investment management experience and business operator
discipline to create downside protected alternatives to traditional fixed income asset
classes
How we do it:
• Team of ~20 with expertise in the real estate and mortgage industry
• 8 years of experience in buying, selling & managing Loans, REOs and SFR rentals
• Experience in acquiring and selling ~14,500 SFR rentals across US
• Experience in acquiring ~17,000 loans and disposing ~7,000 NPLs and RPLs
© 2021 AltisourceTM Asset Management Corporation. All rights reserved. 14AAMC Advantage
• AAMC has a unique team structure where significant number of its employees are part of its India Operations
• India Operations is capable of supporting all asset-management activities of AAMC, including managing Loans
AAMC Structure & REOs and operations of a Single Family Rentals (SFR)
• AAMC is uniquely positioned to grow its operations without significant increase in overheads, thanks to its
well trained & capable team in India
• Operations team supporting entire spectrum of business activities including Capital Markets, Underwriting &
Due Diligence, Operations, Accounting, Accounts Payable, FP&A, Analytics, Technology and Vendor
Qualified and Management
Experienced
• Team comprises of highly-qualified personnel, including Chartered Accountants and MBAs from premier IIMs
Human Capital
(Indian Institute of Management).
• Team members have a significant experience in US REIT/real estate/mortgage industry
• ~4.6 yrs remaining on a 4,306 sq. ft. facility lease with capacity of ~ 50 seats
Leverageable
SFR Operating • Currently Operates in 12 PM to 9 PM IST or 2:30 AM to 11:30 AM EST providing partial overlap with US
operations with an ability to support 24x7 operations
Base
India operations have been extremely resilient during the current pandemic, with seamless transition to work-
from-home and no disruption to business operations
© 2021 AltisourceTM Asset Management Corporation. All rights reserved. 15Team Capabilities
Non-Performing Loans Real Estate Owned Single Family Rentals
(NPLs) (REOs) (SFRs)
• Devised the NPL-to-SFR resolution operational strategy
• Valuation for acquisition of ~17,000 NPLs with nationwide presence worth ~$2.4 billion using in house proprietary valuation models
• Due Diligence for NPL Acquisition including review of Collateral documents, Title reports, Compliance reports, Servicing comments,
Property Appraisal
• Managed entire NPL portfolio till resolution with oversight on escrow management and default management
• Team with prior experience of working with 3rd party loan servicer Ocwen & real estate related service provider ASPS on loan
underwriting, credit review, escrow management, analytics, BPO review checking appropriateness of comps, property specs, etc.
• Oversaw alternate resolution of ~2,300 NPLs via refinance, short-sale, foreclosure sale and sale of re-performing loans based on
statutory requirements and cost benefit analysis
• Oversaw ~8,000 NPL-to-REO conversions taking assets through entire foreclosure process or earlier resolution through DIL, Cash for Keys
• Oversaw REO Conversion to REO sale process including optimizing property preservation from cost perspective, setting list price based
on appraisal reports and agent’s recommendations, any price reduction needed & approving final offer received
• Deep understanding of nuances and pitfalls of foreclosure process in all states like statute of limitation, HOA super liens, tax liens,
MCALA requirement, etc. impacting timelines and enforceability of lien
• Supported equity raise of ~$1.1 billion across three accretive offerings for RESI
• Managed $1.4 billion of warehouse and NPL securitization debt for RESI
• Oversight of multiple servicing and real-estate management partners i.e. Ocwen, ASPS, Fay, BSI
• Valuation and due-diligence for acquisition of ~14,500 rental properties worth $1.9 billion
• Doubled SFR portfolio size from 2018 to 2020
• Oversight of multiple rental property management partners i.e. ASPS and MSR including review of renovation scoping and budget
• Scaled up operations rapidly to support RESI’s internal property management platform, HavenBrook
The team has consistently and effectively worked with multiple servicing and asset resolution partners
© 2021 AltisourceTM Asset Management Corporation. All rights reserved. 16Infrastructure/Technology – India Operations
• Currently Operates in 12 PM to 9 PM IST or 2:30 AM to 11:30 AM EST with partial overlap with US operations
Shift Timing
• Ability to support 24*7 Operations based on operational requirement
• ~4,306 sq. ft. office facility; located close to Central Business District
• Seating capacity of ~50 people
Office Space
• 47 work-stations, 3 cabins, 1 conference room, 1 discussion room
• Completed 0.4-year of occupancy in a 5-year lease
• 100 Mbps primary Internet Leased Line (ILL)
Internet
• 80 Mbps secondary Internet Leased Line (ILL)
• IP telephony solution, compliant with Indian regulations with 99% uptime
Telephony • Supports 10 concurrent channels/conversations
• Can be scaled up as per operational requirements
Cloud-based • All user/company data/applications reside on the Azure cloud which is PII and HIPAA compliant
Technology Infra. • Laptops used as terminals to work on cloud servers via Citrix
A combination of stable on-premise and cloud technology infrastructure has enabled India Operations to
maintain business continuity during the current pandemic
© 2021 AltisourceTM Asset Management Corporation. All rights reserved. 17Delivering Shareholder Value © 2021 AltisourceTM Asset Management Corporation. All rights reserved. 18
Shareholder Value Creation
AAMC appointed Indroneel Chatterjee as the Co-CEO in January of 2020. Mr. Chatterjee
has worked with a talented group of individuals to delivery shareholder value.
• The AAMC team negotiated a favorable termination of the Asset Management Agreement with Front Yard Residential Corporation.
https://ir.altisourceamc.com/static-files/1601bb40-1cc9-400d-bea2-572ea1b13981
• The AAMC team has focused diligently on reducing our cost footprint, with a commitment to being free cash flow positive.
https://ir.altisourceamc.com/static-files/0714478d-b841-4db3-bd06-99ff439b39b8
• The AAMC team successfully negotiated an advantageous settlement with Putnam. https://ir.altisourceamc.com/static-files/4feb21e6-
96db-43c1-ad5c-9e35144b26bb
• The AAMC team made a strategic investment in mortgage REITs to enhance the company’s liquidity position
https://ir.altisourceamc.com/static-files/723fc9ee-470e-4c66-95c2-66111a05e6a8
© 2021 AltisourceTM Asset Management Corporation. All rights reserved. 19Cautionary Notes and Disclaimers © 2021 AltisourceTM Asset Management Corporation. All rights reserved. 20
Disclaimer
This presentation does not constitute an offer to sell, a solicitation of an offer to buy, or a recommendation of any security
or any other product or service by Altisource Asset Management Corporation (“AAMC”) or any other third party
regardless of whether such security, product or service is referenced in this presentation. Furthermore, nothing in this
presentation is intended to provide tax, legal, or investment advice and nothing in this presentation should be construed
as a recommendation to buy, sell, or hold any investment or security or to engage in any investment strategy or
transaction. AAMC does not represent that the securities, products, or services discussed in this presentation are suitable
for any particular investor. You are solely responsible for determining whether any investment, investment strategy,
security or related transaction is appropriate for you based on your personal investment objectives, financial
circumstances and risk tolerance. You should consult your business advisor, attorney, or tax and accounting advisor
regarding your specific business, legal and tax situation.
This presentation contains forward-looking statements that involve significant risks and uncertainties. These forward-
looking statements include all statements that are not historical fact, including statements that relate to, among other
things, future events or our future performance or financial condition. These statements may be identified by words such
as “anticipate,” “intend,” “expect,” “may,” “could,” “should,” “would,” “plan,” “estimate,” “seek,” “believe,” “potential” or
“continue” or the negative of these terms and comparable terminology. Such statements are based on expectations as to
the future and are not statements of historical fact. Furthermore, 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. 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 “Risk Factors” in our Form 10-K filing with the
Securities and Exchange Commission, as the same may be updated from time to time in our Form 10-Q filings. We
caution you not to place undue reliance on these forward looking statements which reflect our view only as of the date of
this presentation. 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 change in events,
conditions or circumstances on which such statement is based. The risks and uncertainties to which forward-looking
statements are subject include, but are not limited to, risks related to the COVID-19 pandemic, customer concentration,
our strategic relationships with loan originators and aggregators, the use and success of our products and services, our
ability to retain existing customers and attract new customers and the potential for changes in our customer relationships,
technology disruptions, our compliance with applicable information privacy requirements, anti-money laundering laws and
bribery laws, the performance of third party vendors and contractors, our ability to effectively manage potential conflicts of
interest, macro-economic and industry specific conditions, our ability to effectively manage our regulatory and contractual
obligations, the adequacy of our financial resources, as well as AAMC’s ability to retain key executives or employees,
behavior of customers, suppliers and/or competitors, technological developments and governmental regulations, taxes
and policies.
© 2021 AltisourceTM Asset Management Corporation. All rights reserved. 21You can also read
