Document and Entity Information (USD $)	12 Months Ended
Document and Entity Information (USD $)	Dec. 31, 2012	Jan. 31, 2013	Jun. 30, 2012
Document and Entity Information
Entity Registrant Name	Altisource Portfolio Solutions S.A.
Entity Central Index Key	0001462418
Document Type	10-K
Document Period End Date	Dec. 31, 2012
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float			$ 1,269,084,321
Entity Common Stock, Shares Outstanding		23,426,763
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	FY

Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Current assets:
Cash and cash equivalents	$ 105,502	$ 32,125
Accounts receivable, net	88,955	52,005
Prepaid expenses and other current assets	7,618	5,002
Deferred tax assets, net	1,775	1,133
Total current assets	203,850	90,265
Premises and equipment, net	50,399	25,600
Deferred tax assets, net	4,073	4,373
Intangible assets, net	56,586	64,950
Goodwill	14,915	14,915
Investment in equity affiliate	12,729	14,470
Loan to Ocwen	75,000
Other assets	11,674	9,586
Total assets	429,226	224,159
Current liabilities:
Accounts payable and accrued expenses	58,976	44,867
Current portion of long-term debt	2,000
Current portion of capital lease obligations	233	634
Other current liabilities	10,423	9,939
Total current liabilities	71,632	55,440
Long-term debt, less current portion	196,027
Capital lease obligations, less current portion		202
Other non-current liabilities	1,738	2,574
Commitment and contingencies (Note 20)
Equity:
Common stock ($1.00 par value; 100,000 shares authorized; 25,413 issued and 23,427 outstanding as of December 31, 2012; 25,413 issued and 23,405 outstanding as of December 31, 2011)	25,413	25,413
Additional paid-in-capital	86,873	83,229
Retained earnings	124,127	126,161
Treasury stock, at cost (1,986 shares as of December 31, 2012 and 2,008 shares as of December 31, 2011)	(77,954)	(72,048)
Altisource equity	158,459	162,755
Non-controlling interests	1,370	3,188
Total equity	159,829	165,943
Total liabilities and equity	$ 429,226	$ 224,159

Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
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	23,427	23,405
Treasury stock, shares	1,986	2,008

Number of shares of common stock outstanding. Common stock represent the ownership interest in a corporation.

+ References+ Details

Consolidated Statements of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Consolidated Statements of Operations
Revenue	$ 568,360	$ 423,687	$ 301,378
Cost of revenue	366,201	275,849	189,059
Gross profit	202,159	147,838	112,319
Selling, general and administrative expenses	74,712	62,131	57,352
Income from operations	127,447	85,707	54,967
Other (expense) income, net:
Interest expense	(1,210)	(85)	(119)
Other (expense) income, net	(1,588)	288	923
Total other (expense) income, net	(2,798)	203	804
Income before income taxes and non-controlling interests	124,649	85,910	55,771
Income tax (provision) benefit	(8,738)	(7,943)	403
Net income	115,911	77,967	56,174
Net income attributable to non-controlling interests	(5,284)	(6,855)	(6,903)
Net income attributable to Altisource	110,627	71,112	49,271
Earnings per share:
Basic (in dollars per share)	$ 4.74	$ 2.92	$ 1.96
Diluted (in dollars per share)	$ 4.43	$ 2.77	$ 1.88
Weighted average shares outstanding:
Basic (in shares)	23,358	24,373	25,083
Diluted (in shares)	24,962	25,685	26,259
Transactions with related parties included above:
Revenue	338,227	245,262	154,988
Selling, general and administrative expenses	2,430	1,893	1,056
Other income	$ 86

Consolidated Statements of Equity (USD $) In Thousands, except Share data, unless otherwise specified	Total	Common stock	Additional paid-in capital	Retained earnings	Treasury stock, at cost	Non-controlling interests
Balance at Dec. 31, 2009	$ 86,348	$ 24,145	$ 50,538	$ 11,665
Balance (in shares) at Dec. 31, 2009		24,145,000
Increase (Decrease) in Stockholders' Equity
Net Income	56,174			49,271		6,903
Acquisition of MPA	27,168	959	22,941			3,268
Acquisition of MPA, shares		959,000
Contributions from non-controlling interest holders	41					41
Distributions to non-controlling interest holders	(7,152)					(7,152)
Share-based compensation expense	3,110		3,110
Exercise of stock options	3,986	298	2,708	(2,390)	3,370
Exercise of stock options, shares		298,000
Delivery of vested restricted stock	11	11
Delivery of vested restricted stock, shares		11,000
Repurchase of shares	(17,788)				(17,788)
Balance at Dec. 31, 2010	151,898	25,413	79,297	58,546	(14,418)	3,060
Balance (in shares) at Dec. 31, 2010		25,413,000
Increase (Decrease) in Stockholders' Equity
Net Income	77,967			71,112		6,855
Contributions from non-controlling interest holders	49					49
Distributions to non-controlling interest holders	(6,776)					(6,776)
Share-based compensation expense	3,932		3,932
Exercise of stock options	1,024			(3,497)	4,521
Repurchase of shares	(62,151)				(62,151)
Balance at Dec. 31, 2011	165,943	25,413	83,229	126,161	(72,048)	3,188
Balance (in shares) at Dec. 31, 2011		25,413,000
Increase (Decrease) in Stockholders' Equity
Net Income	115,911			110,627		5,284
Contributions from non-controlling interest holders	43					43
Distributions to non-controlling interest holders	(7,145)					(7,145)
Net assets distributed in connection with the Separation of the Residential Asset Businesses	(105,000)			(105,000)
Share-based compensation expense	3,644		3,644
Exercise of stock options	3,214			(7,661)	10,875
Exercise of stock options, shares	285,054
Repurchase of shares	(16,781)				(16,781)
Balance at Dec. 31, 2012	$ 159,829	$ 25,413	$ 86,873	$ 124,127	$ (77,954)	$ 1,370
Balance (in shares) at Dec. 31, 2012		25,413,000

Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Cash flows from operating activities:
Net income	$ 115,911	$ 77,967	$ 56,174
Reconciling items:
Depreciation and amortization	12,776	8,351	7,158
Amortization of intangible assets	5,030	5,291	4,891
Goodwill impairment			2,816
Share-based compensation expense	3,644	3,932	3,110
Equity in losses of and impairment loss on investment in affiliate	1,741	530
Bad debt expense	3,049	967	1,534
Amortization of debt discount	27
Amortization of debt issuance costs	57
Deferred income taxes	2,992	(381)	(1,119)
Loss on sale or disposal of fixed assets	445
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable	(39,999)	812	(18,259)
Prepaid expenses and other current assets	(2,616)	747	(9,851)
Other assets	2,172	(4,892)	(2,799)
Accounts payable and accrued expenses	11,652	14,760	8,180
Other current and non-current liabilities	(352)	3,527	977
Net cash flows provided by operating activities	116,529	111,611	52,812
Cash flows from investing activities:
Additions to premises and equipment	(35,563)	(16,442)	(11,614)
Acquisition of business, net of cash acquired		(2,515)	(26,830)
Investment in equity affiliate		(15,000)
Loan to Ocwen	(75,000)
Change in restricted cash		887	(1,045)
Net cash flows used in investing activities	(110,563)	(33,070)	(39,489)
Cash flows from financing activities:
Proceeds from issuance of long-term debt	198,000
Distribution of cash in connection with the Separation of Residential Asset Businesses	(105,000)
Debt issuance costs	(4,317)
Principal payments on capital lease obligations	(603)	(696)	(743)
Proceeds from stock option exercises	3,214	1,024	3,997
Purchases of treasury stock	(16,781)	(62,151)	(17,788)
Contributions from non-controlling interests	43	49	41
Distributions to non-controlling interests	(7,145)	(6,776)	(7,152)
Net cash flows provided by (used in) financing activities	67,411	(68,550)	(21,645)
Net increase (decrease) in cash and cash equivalents	73,377	9,991	(8,322)
Cash and cash equivalents at the beginning of the period	32,125	22,134	30,456
Cash and cash equivalents at the end of the period	105,502	32,125	22,134
Supplemental cash flow information
Interest paid	1,134	83	108
Income taxes paid (refunded), net	4,912	(1,956)	6,069
Non-cash investing and financing activities
Amortization of tax-deductible goodwill	3,334	3,367	3,029
Premises and equipment purchased on account	$ 2,457

ORGANIZATION AND BASIS OF PRESENTATION

12 Months Ended

Dec. 31, 2012

ORGANIZATION AND BASIS OF PRESENTATION

ORGANIZATION AND BASIS OF PRESENTATION

1. ORGANIZATION AND BASIS OF PRESENTATION

Altisource Portfolio Solutions S.A., together with its subsidiaries, (which may be referred to as Altisource™, the Company, we, us or our) is a global provider of services focused on high-value, technology-enabled, knowledge-based solutions principally related to real estate and mortgage portfolio management, asset recovery and customer relationship management.

We were incorporated under the laws of Luxembourg on November 4, 1999 as Ocwen Luxembourg S.à r.l., renamed Altisource Portfolio Solutions S.à r.l. on May 12, 2009 and converted into Altisource Portfolio Solutions S.A. on June 5, 2009. We became a publicly traded company on the NASDAQ Global Select (“NASDAQ”) market under the symbol “ASPS” as of August 10, 2009 (the “Separation from Ocwen”). Prior to the Separation from Ocwen, our businesses were wholly-owned subsidiaries of Ocwen Financial Corporation (“Ocwen”).

In February 2010, we acquired all of the outstanding membership interests of The Mortgage Partnership of America, L.L.C. (“MPA™”). MPA was formed as a Missouri limited liability company to serve as the manager of Best Partners Mortgage Cooperative, Inc. (“BPMC™”) doing business as Lenders One Mortgage Cooperative (“Lenders One®”). Lenders One is a national alliance of independent mortgage bankers (“Members”) that provides its Members with education and training along with revenue enhancing, cost reducing and market share expanding opportunities. In April 2011, we acquired Springhouse, LLC (“Springhouse™”) an appraisal management company that utilizes a nationwide panel of appraisers to provide real estate appraisals principally to mortgage originators, including the members of Lenders One, and real estate asset managers. In July 2011, we acquired the assembled workforce of a sub-contractor (“Tracmail”) in India that performs asset recovery services (see Note 5).

On December 21, 2012, we completed the distribution of two wholly-owned subsidiaries via the spin-off of two separate publicly-traded companies, Altisource Residential Corporation (“Residential”) and Altisource Asset Management Corporation (“AAMC”). Residential’s common stock is listed on the New York Stock Exchange under the symbol “RESI,” and AAMC common stock is listed on the OTCQX market tier operated by OTC Markets Group, Inc. (the “OTC Market”) under the symbol “AAMC.” We distributed all of the shares of Residential common stock and AAMC common stock to Altisource’s shareholders of record as of December 17, 2012 (the “Record Date”) (see Note 3).

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 21 for a description of our business segments).

Basis of Presentation — Our consolidated financial statements include the assets, liabilities, revenue and expenses directly attributable to our operations. All significant intercompany and inter-segment transactions and accounts have been eliminated in consolidation.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2012

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting — The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Principles of Consolidation — The financial statements include the accounts of the Company, its wholly-owned subsidiaries and those entities in which we have a variable interest and are the primary beneficiary. Intercompany balances and transactions have been eliminated.

Prior to our acquisition of MPA, MPA and Lenders One entered into a management agreement that ends on December 31, 2025. MPA was formed to act on behalf of Lenders One and its Members principally to provide its Members with education and training along with revenue enhancing, cost reducing and market share expanding opportunities. For providing these services, MPA receives payment from Lenders One, and in some instances the vendors, based upon the benefits achieved for the Members. The management agreement provides MPA with broad powers such as recruiting members for Lenders One, collection of fees and other obligations from Members of Lenders One, processing of all rebates owed to Lenders One, day-to-day operation of Lenders One and negotiation of contracts with vendors including signing contracts on behalf of 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 consolidated financial statements on a consolidated basis with the interests of the members reflected as non-controlling interests. At December 31, 2012, Lenders One had total assets of $2.3 million and liabilities of less than $0.1 million.

Use of Estimates — The preparation of financial statements in conformity with GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses, and related disclosures of contingent liabilities in the consolidated financial statements and accompanying notes. Estimates are used for, but not limited to, determining shared-based compensation, income taxes, collectability of receivables, valuation of acquired intangibles and goodwill, depreciable lives of fixed assets and contingencies. Actual results could differ materially from those estimates.

Cash and Cash Equivalents — We classify all highly liquid instruments with an original maturity of three months or less at the time of purchase as cash equivalents.

Accounts Receivable, Net — Accounts receivable are net of an allowance for doubtful accounts that represent an amount that we estimate to be uncollectible. We have estimated the allowance for doubtful accounts based on our historical write-offs, our analysis of past due accounts based on the contractual terms of the receivables, and our assessment of the economic status of our customers, if known. The carrying value of accounts receivable, net, approximates fair value.

Premises and Equipment, Net — We report premises and equipment, net at cost or estimated fair value at acquisition and depreciate them over their estimated useful lives using the straight-line method as follows:

Furniture and fixtures		5 years
Office equipment		5 years
Computer hardware		5 years
Computer software		3 years
Leasehold improvements		Shorter of useful life or term of lease

Maintenance and repair costs are expensed as incurred. We capitalize expenditures for significant improvements and new equipment and depreciate them over the shorter of the capitalized asset’s life or the life of the lease.

We review premises and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. We measure recoverability of assets to be held and used by comparison of the carrying amount of an asset or asset group to estimated undiscounted future cash flows expected to be generated by the asset or asset group. If the carrying amount of an asset or asset group exceeds its estimated future cash flows, we recognize an impairment charge in the amount by which the carrying amount of the assets exceeds the fair value of the asset or asset group.

Computer software includes the fair value of software acquired in business combinations and purchased software. Purchased software is recorded at cost and amortized using the straight-line method over its estimated useful life. Software acquired in business combinations is recorded at its fair value and amortized using the straight-line method over its estimated useful life, ranging from two to three years.

Business Combinations— We account for acquisitions using the purchase method of accounting in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations. The purchase price of the acquisition is allocated to the assets acquired and liabilities assumed using the fair values determined by management as of the acquisition date.

Investment in Equity Affiliate— We utilize the equity method to account for investments in equity securities where we have the ability to exercise significant influence over operating and financial policies of the investee. We include a proportionate share of earnings and/or losses of equity method investees in equity income (loss) in affiliates, net which is included in other income (expense), net in the consolidated statements of operations. We review the investment in equity affiliate for an other than temporary impairment whenever events or circumstances indicate that the carrying value is greater than the value of the investment and the loss is other than a temporary decline.

Goodwill — Goodwill represents the excess cost of an acquired business over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed in a business combination. We evaluate goodwill for impairment annually or more frequently when an event occurs or circumstances change that indicate that the carrying value may not be recoverable. We test goodwill for impairment by first comparing the book value of net assets to the fair value of the reporting units. If the fair value is determined to be less than the book value, a second step is performed to compute the amount of impairment as the difference between the estimated fair value of goodwill and the carrying value. We estimate the fair value of the reporting units using discounted cash flows. Forecasts of future cash flows are based on our best estimate of future net sales and operating expenses, based primarily on estimated category expansion, pricing, market segment share and general economic conditions.

We conduct our annual impairment test as of November 30 each year. No impairment of goodwill was recorded for the years ended December 31, 2012 and 2011 as the fair value exceeded the carrying value. In 2010, we recorded a $2.8 million impairment in our Financial Services segment.

Intangible Assets, Net — Identifiable intangible assets acquired in business combinations are recorded based on their fair values at the date of acquisition. We determine the useful lives of our identifiable intangible assets after considering the specific facts and circumstances related to each intangible asset. Factors we consider when determining useful lives include the contractual term of any arrangements, the history of the asset, our long-term strategy for use of the asset and other economic factors. We amortize intangible assets that we deem to have definite lives on a straight-line basis over their useful lives, generally ranging from 5 to 20 years.

We perform tests for impairment if conditions exist that indicate the carrying value may not be recoverable. When facts and circumstances indicate that the carrying value of intangible assets determined to have definite lives may not be recoverable, management assesses the recoverability of the carrying value by preparing estimates of cash flows of discrete intangible assets consistent with models utilized for internal planning purposes. If the sum of the undiscounted expected future cash flows is less than the carrying value, we would recognize an impairment to the extent the carrying amount exceeds fair value. No impairment was recognized during the periods presented.

Debt Issuance Costs — Debt issuance costs are capitalized and amortized to interest expense through maturity of the related debt using the effective interest method.

Long-term Debt — Long-term debt is reported net of applicable discount. The debt discount is amortized to interest expense through maturity of the related debt using the effective interest method.

Fair Value of Financial Instruments — Our financial instruments primarily include cash and cash equivalents, restricted cash, accounts receivable, the loan to Ocwen, accounts payable, accrued expenses and long-term debt. The carrying values of cash and cash equivalents, restricted cash, accounts receivable and accounts payable and accrued expenses are carried at amounts that approximate their fair value due to the short-term nature of these instruments. The carrying amounts of the loan to Ocwen and long-term debt approximates fair value due to their variable interest rates.

Functional Currency — The currency of the primary economic environment in which our operations are conducted is the United States dollar. Therefore, the United States dollar has been determined to be our functional and reporting currency. Non-dollar transactions and balances have been measured in United States dollars in accordance with ASC Topic 830, Foreign Currency Matters. All transaction gains and losses from the measurement of monetary balance sheet items denominated in non-dollar currencies are reflected in the statement of operations as income or expenses, as appropriate.

Defined Contribution 401(k) Plan — Some of our employees currently participate in a defined contribution 401(k) plan under which we may make matching contributions equal to a discretionary percentage determined by us. We recorded expense of $0.2 million, $0.1 million and $0.2 million in 2012, 2011 and 2010, respectively, related to our discretionary amounts contributed.

Share-based Compensation — Share-based compensation is accounted for under the provisions of ASC Topic 718, Compensation — Stock Compensation. Under ASC Topic 718, the cost of employee services received in exchange for an award of equity instruments is generally measured based on the grant-date fair value of the award. Share-based awards that do not require future service are expensed immediately. Share-based employee awards that require future service are recognized over the relevant service period. Further, as required under ASC Topic 718, we estimate forfeitures for share-based awards that are not expected to vest.

Earnings Per Share — We compute earnings per share (“EPS”) in accordance with ASC Topic 260, Earnings Per Share. Basic net income per share is computed by dividing net income attributable to Altisource by the weighted-average number of shares of common stock outstanding for the period. Diluted net income per share reflects the assumed conversion of all dilutive securities.

Revenue Recognition — We recognize revenue from the services we provide in accordance with ASC Topic 605, Revenue Recognition. ASC Topic 605 sets forth guidance as to when revenue is realized or realizable and earned, which is generally when all of the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been performed; (3) the seller’s price to the buyer is fixed or determinable; and (4) collectability is reasonably assured. Generally, the contract terms for these services are relatively short in duration, and we recognize revenue as the services are performed either on a per unit or a fixed price basis. Specific policies for each of our reportable segments are as follows:

Mortgage Services: We recognize revenue for the majority of the services we provide in this segment on completion of the service to our customer. For default processing services and certain property preservation services, we recognize revenue over the period during which we perform the related services, with full recognition on completion of the related foreclosure filing or on closing of the related real estate transaction. We record revenue associated with real estate sales on a net basis as we perform services as an agent without assuming the risks and rewards of ownership of the asset and the commission earned on the sale is a fixed percentage. Reimbursable expenses of $95.6 million, $80.1 million and $44.6 million incurred in 2012, 2011 and 2010, respectively, primarily in conjunction with our property preservation and default processing services are included in revenue with an equal offsetting expense included in cost of revenue. These amounts are recognized on a gross basis, principally because we have complete control over selection of vendors.

Financial Services: We generally earn our fees for asset recovery management services as a percentage of the amount we collect on delinquent consumer receivables on behalf of our clients and recognize revenue upon collection from the debtors. We also provide customer relationship management services for which we earn and recognize revenue on a per-call, per-person or per minute basis as the related services are performed.

Technology Services: For our REALSuite™ platform, we charge based on the number of our clients’ loans processed on the system or on a per-transaction basis. We record transactional revenue when the service is provided and other revenue monthly based on the number of loans processed, employees serviced or services provided. Furthermore, we provide information technology (“IT”) infrastructure services to Ocwen and charge for these services primarily based on the number of employees that are using the applicable systems and the number and type of licensed products used by Ocwen. We record revenue associated with implementation services upon completion and maintenance ratably over the related service period.

Income Taxes — We account for certain income and expense items differently for financial purposes and income tax purposes. We recognize deferred income tax assets and liabilities for these differences between the financial reporting basis and the tax basis of our assets and liabilities as well as expected benefits of utilizing net operating loss and credit carryforwards. The most significant temporary differences relate to accrued compensation, amortization, and loss and credit carryforwards. We measure deferred income tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which we expect to recover or settle those temporary differences. The effect on deferred assets and liabilities of a change in tax rates is recognized in income in the period when the change is enacted. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all the deferred tax assets will not be realized.

Tax laws are complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities. Significant judgment is required in determining tax expense and in evaluating tax positions including evaluating uncertainties under ASC Topic 740, Income Taxes.

- Definition

The entire disclosure for all significant accounting policies of the reporting entity.

+ References+ Details

SEPARATION OF RESIDENTIAL ASSET BUSINESSES

12 Months Ended

Dec. 31, 2012

SEPARATION OF RESIDENTIAL ASSET BUSINESSES

SEPARATION OF RESIDENTIAL ASSET BUSINESSES

3. SEPARATION OF RESIDENTIAL ASSET BUSINESSES

On December 21, 2012, we completed the spin-offs of two wholly-owned subsidiaries, Residential and AAMC, into separate publicly-traded companies (the “Separation of the Residential Asset Businesses”).

Altisource shareholders of record as of December 17, 2012 received a pro rata distribution of:

· one share of Residential common stock for every three shares of Altisource common stock held;

· one share of AAMC common stock for every ten shares of Altisource common stock held and

· received cash in lieu of Residential and AAMC fractional shares.

We eliminated the assets and liabilities of Residential and AAMC from our consolidated balance sheet effective at the close of business on December 21, 2012. As Residential and AAMC are development stage companies and have not commenced operations, these entities had no historical results of operations.

The carrying value of the net assets transferred by Altisource was as follows:

(in thousands)	Residential		AAMC		Total

Cash	$	100,000	$	5,000	$	105,000

Reduction in Altisource retained earnings	$	100,000	$	5,000	$	105,000

We incurred $2.7 million of expenses in 2012 representing salaries of certain employees who became employees of AAMC after the separation (included in cost of revenue) and advisory expenses (included in selling, general and administrative expenses) incurred in connection with the Separation of the Residential Asset Businesses. These expenses are included in our Mortgage Services segment.

Impact on Share-based Compensation

The exercise price of each outstanding stock option of Altisource was adjusted to reflect the value of Residential and AAMC common stock distributed to Altisource shareholders. On the separation date, all holders of Altisource stock options received the following:

· stock options (issued by Residential and AAMC) to acquire the number of shares of Residential or AAMC common stock equal to the product of (a) the number of Altisource stock options held on the separation date and (b) the distribution ratio of 1 share of Residential common stock for every 3 shares of Altisource common stock and 1 share of AAMC stock for every 10 shares of Altisource common stock and

· an adjusted Altisource stock option, with a reduced exercise price per stock option.

We determined the exercise price of the new Residential and AAMC stock option and the adjusted Altisource stock option in a manner so that the fair value of the adjusted Altisource stock award and the new Residential and AAMC stock options immediately following the Separation of the Residential Asset Businesses was equivalent to the fair value of such Altisource stock award immediately prior to the Separation of the Residential Asset Businesses. No incremental share-based compensation was recognized as a result of this adjustment.

As of December 31, 2012, AAMC employees held less than 0.1 million options to purchase Altisource common stock. As of December 31, 2012, our current employees held 0.5 million options to purchase Residential common stock and 0.2 million options to purchase AAMC common stock. In addition, our Chairman held 0.3 million options to purchase Residential common stock and 0.1 million options to purchase AAMC common stock.

We are responsible for fulfilling all stock options related to Altisource common stock, and Residential and AAMC are responsible for fulfilling all stock options related to their respective common stock, regardless of whether such stock options are held by our or AAMC’s employees. Notwithstanding the foregoing, our stock-based compensation expense, resulting from awards outstanding at the date of Separation of the Residential Asset Businesses, is based on the stock options held by our employees regardless of whether such awards were issued by Altisource, Residential or AAMC. Accordingly, stock-based compensation that we recognize as expense with respect to Residential and AAMC stock options is included in additional paid-in capital on our consolidated balance sheet. See Note 14 for additional information regarding our employee share-based compensation plans.

TRANSACTIONS WITH RELATED PARTIES

12 Months Ended

Dec. 31, 2012

TRANSACTIONS WITH RELATED PARTIES

TRANSACTIONS WITH RELATED PARTIES

4. TRANSACTIONS WITH RELATED PARTIES

Ocwen®

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

Related party revenue consists of revenue earned directly from Ocwen and its subsidiaries and revenue earned from the loans serviced by Ocwen or its subsidiaries when Ocwen determines the service provider. We earn additional revenue on the portfolios serviced by Ocwen or its subsidiaries that are not considered related party revenue when a party other than Ocwen selects the service provider. As a percentage of each of our segment revenue and as a percentage of consolidated revenue, related party revenue was as follows for the years ended December 31:

	2012		2011		2010

Mortgage Services	68	%	72	%	73	%
Technology Services	42	%	39	%	37	%
Financial Services	< 1	%	< 1	%	< 1	%
Consolidated revenues	60	%	58	%	51	%

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; fees commensurate with market surveys prepared by unaffiliated firms; and fees charged by our competitors. As of January 1, 2011, we modified our pricing for IT infrastructure and support services within our Technology Services segment from a rate card model primarily based on headcount to a fully loaded cost plus mark-up where cost is allocated based on the underlying cost driver.

Support Services

On August 10, 2012, we entered into a five-year support services agreement with OMS (the “Support Services Agreement”), setting forth certain services Altisource and OMS will provide to each other which are similar to the services Altisource and Ocwen provided to each other pursuant to a transition services agreement. These services include such areas as human resources, vendor management, corporate services, six sigma, quality assurance, quantitative analytics, treasury, accounting, risk management, legal, strategic planning and compliance. Payment for the services provided is based on the fully-allocated cost of providing the service based on an estimate of the time and expense of providing the service. For the years ended December 31, 2012, 2011 and 2010, we billed Ocwen $2.7 million, $2.6 million and $1.8 million, respectively, and Ocwen billed us $2.4 million, $1.9 million and $1.1 million, respectively, for services provided under this agreement. These amounts are reflected as a component of selling, general and administrative expenses in the consolidated statements of operations.

Unsecured Term Loan

On December 27, 2012, we entered into a senior unsecured term loan agreement with Ocwen (the “Ocwen Term Loan”) under which we loaned $75.0 million to Ocwen. Payments of interest are 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%. In certain circumstances, we may require the Ocwen Term Loan to bear interest at the Base Rate (as defined in the agreement), which shall at no time be less than 8.25%. Interest income related to this loan was $0.1 million for the year ended December 31, 2012.

Ocwen is required to repay the entire outstanding principal amount of the Ocwen Term Loan plus all accrued and unpaid interest when it repays in full, refinances or replaces its Senior Credit Facility (as defined in the agreement). If its Senior Credit Facility is not repaid in full, refinanced or replaced on or prior to October 1, 2013, then we may require Ocwen to convert all or a portion of the outstanding principal amount and all or a portion of the unpaid interest accrued on the term loan into (i) an investment in or of Homeward Residential Holdings Inc. (“Homeward Residential”), a recent acquisition made by Ocwen, (ii) property or assets of Homeward Residential, (iii) equity interests of Homeward Residential, or (iv) if we and Ocwen agree, any other assets of Ocwen or its subsidiaries. The entire outstanding principal amount of the term loan is due on March 1, 2017 and may be prepaid earlier without penalty.

The Ocwen Term Loan agreement contains representations, warranties, covenants, terms and conditions customary for transactions of this type.

Acquisition of Fee Based Businesses

On January 31 2013, we entered into letters of intent with Ocwen to acquire certain fee based businesses associated with Ocwen’s acquisition of Homeward Residential and the anticipated acquisition of the Residential Capital, LLC (“ResCap”) servicing portfolio (see Note 23 for additional information).

Correspondent One™ and HLSS™

In July 2011, we acquired an equity interest in Correspondent One (see Note 10). We provide Correspondent One certain finance, human resources, legal support, facilities, technology, vendor management and risk management services. For the years ended December 31, 2012 and 2011, we billed Correspondent One $0.4 million and $0.1 million, respectively, under a services agreement.

Home Loan Servicing Solutions, Ltd. (“HLSS”) is a public company whose primary objective is the acquisition of mortgage servicing rights and advances. In connection with the February 2012 HLSS initial public offering, HLSS acquired mortgage servicing related assets from Ocwen. Our Chairman is also the Chairman of HLSS. We provide HLSS certain finance, human resources and legal support services. For the year ended December 31, 2012, we billed HLSS $0.6 million under a services agreement (no comparative amounts in 2011 or 2010).

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

We also provide certain origination related services to Correspondent One. We earned revenue of $0.3 million for the year ended December 31, 2012 from the provision of these services (no comparative amounts in 2011 or 2010).

Residential and AAMC

For purposes of governing certain of the ongoing relationships between Altisource, Residential and AAMC after the Separation of the Residential Asset Businesses, and to provide for an orderly transition to the status of three independent companies, we entered into certain agreements with Residential and AAMC. A brief description of these agreements is as follows:

· Separation Agreement (with each of Residential and AAMC) — These agreements provide for, among other things, the principal corporate transactions required to effect the Separation of the Residential Asset Businesses and certain other agreements relating to the continuing relationship between Altisource and each of the separate companies and their respective affiliates after the Separation of the Residential Asset Businesses.

· Master Services Agreement (with Residential) — This agreement provides for Altisource’s offering of certain services to Residential in connection with their business for an initial term of 15 years, which will automatically renew for successive two-year terms unless either party sends a notice to the other party at least nine months before the completion of the initial or renewal term. Services provided by us under this agreement include property management, lease management and renovation management services associated with single-family rental assets acquired by Residential.

· Support Services Agreement (with each of Residential and AAMC) — Under these agreements, Altisource provide services to each entity, similar to those services provided to Ocwen described above, where Residential and AAMC may need assistance and support following the Separation of the Residential Asset Businesses. The Support Services Agreement will extend for two years after the date of the Separation of the Residential Asset Businesses but may be terminated earlier under certain circumstances. Payment for the services provided is based on the fully-allocated cost of providing the service.

· Tax Matters Agreement (with each of Residential and AAMC) — These agreements set out each party’s rights and obligations with respect to deficiencies and refunds, if any, of Luxembourg, United States federal, state, local or other foreign taxes for periods before and after the date of Separation of the Residential Asset Businesses and related matters such as the filing of tax returns and the conduct of Internal Revenue Service (“IRS”) and other audits. In general, under these agreements, Residential and AAMC will be responsible for taxes attributable to their businesses incurred after the separation and we will be responsible for taxes attributable to their businesses incurred prior to the separation.

· Trademark License Agreement (with each of Residential and AAMC) — These agreements grant Residential and AAMC a non-exclusive, non-transferable, non-sublicensable, royalty free license to use the name “Altisource.” The agreement has no specified term and may be terminated by either party upon 30 days written notice.

· Technology Products Services Agreement (with AAMC) — This agreement provides for Altisource’s offering of certain technology products support services to AAMC in connection with its business, for a term of 15 years, but may be terminated earlier under certain circumstances. The price of these services is based on the fully-allocated cost of providing the service.

- Definition

The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.

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-Name Statement of Financial Accounting Standard (FAS)

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+ Details

ACQUISITIONS

12 Months Ended

Dec. 31, 2012

ACQUISITIONS

ACQUISITIONS

5. ACQUISITIONS

The results of operations of the following acquisitions have been included in our consolidated results from the respective acquisition dates. The acquisitions did not have a material effect on our financial position, results of operations or cash flows.

Acquisition-related transaction costs are included in selling, general and administrative expenses in the consolidated statements of operations.

Springhouse and Tracmail

In April 2011, we acquired Springhouse, an appraisal management company that utilizes a nationwide panel of appraisers to provide real estate appraisals principally to mortgage originators, including the members of Lenders One, and real estate asset managers.

In July 2011, we acquired the assembled workforce of Tracmail, a sub-contractor in India that performs asset recovery services. Prior to acquisition, the costs paid to the sub-contractor were included in outside fees and services within cost of revenue in the consolidated financial statements.

The allocation of the purchase price for these transactions is as follows:

(in thousands)

Accounts receivable	$	289
Premises and equipment	16
Identifiable intangible assets	1,180
Goodwill	3,079
	4,564
Accounts payable and accrued expenses	(2,049		)
Total consideration	$	2,515

MPA

On February 12, 2010, we acquired all of the outstanding membership interests of MPA pursuant to a Purchase and Sale Agreement. MPA serves as the manager of Lenders One, a national alliance of independent mortgage bankers. The alliance was established in 2000 and as of December 31, 2012 consisted of 241 members.

Consideration for the transaction consisted of cash, common stock and put option agreements:

(in thousands)	Consideration

Cash	$	29,000
Common stock	23,900
Put option agreements at fair value	1,289
Working capital adjustment	835

Total consideration	$	55,024

The common stock consisted of 1.0 million shares of Altisource’s common stock valued at $24.92 per share based on the closing price of Altisource common stock on February 11, 2010. A portion of the stock consideration (0.3 million shares) was held in escrow two years from the closing date of the acquisition to secure MPA’s indemnification obligations under the Purchase and Sale Agreement. The escrowed shares were released in 2011. In addition, we entered into three put option agreements with certain of the sellers whereby each seller had the right, with respect to an aggregate of 0.5 million shares of our common stock, to put up to 25% of eligible shares each year for a total of four years at a price equal to $16.84 per share. All put agreements expired in December 2011 due to the attainment of certain Altisource share price thresholds.

Acquisition of Fee Based Businesses from Ocwen

On January 31, 2013, we entered into letters of intent with Ocwen to acquire certain fee based businesses associated with Ocwen’s acquisition of Homeward Residential and the anticipated acquisition of the ResCap servicing portfolio (see Note 23 for additional information).

- Definition

The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable).

+ References

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+ Details

ACCOUNTS RECEIVABLE, NET

12 Months Ended

Dec. 31, 2012

ACCOUNTS RECEIVABLE, NET

ACCOUNTS RECEIVABLE, NET

6. ACCOUNTS RECEIVABLE, NET

Accounts receivable, net consists of the following as of December 31:

(in thousands)	2012			2011

Billed
Third parties	$	25,950		$	13,776
Ocwen	19,817			5,245
Correspondent One	27			123
HLSS	163			5
AAMC	14			—
Other receivables	353			350
	46,324			19,499
Unbilled
Third parties	39,496			31,831
Ocwen	6,377			2,722
Correspondent One	32			—
	92,229			54,052
Allowance for doubtful accounts	(3,274		)	(2,047		)

Total	$	88,955		$	52,005

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. Based on the Company’s historical performance, the majority of unbilled fees are expected to be collected within one year.

A summary of the allowance for doubtful accounts, net of recoveries, for the years ended December 31, 2012, 2011 and 2010 is as follows:

	(in thousands)

Balance, January 1, 2010	$	696
Bad debt expense	1,735
Recoveries	(106		)
Write-offs	(193		)
Balance, December 31, 2010	$	2,132
Bad debt expense	967
Recoveries	(54		)
Write-offs	(998		)
Balance, December 31, 2011	$	2,047
Bad debt expense	3,049
Recoveries	(21		)
Write-offs	(1,801		)
Balance, December 31, 2012	$	3,274

PREPAID EXPENSES AND OTHER CURRENT ASSETS

12 Months Ended

Dec. 31, 2012

PREPAID EXPENSES AND OTHER CURRENT ASSETS

PREPAID EXPENSES AND OTHER CURRENT ASSETS

7. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following as of December 31:

(in thousands)	2012		2011

Maintenance agreements, current portion	$	3,636	$	1,903
Income taxes receivable	1,814		—
Prepaid software license fees	453		1,445
Prepaid insurance	464		544
Prepaid facility costs	59		72
Other prepaid expenses	664		247
Cash held for clients	447		759
Other current assets	81		32

Total	$	7,618	$	5,002

PREMISES AND EQUIPMENT, NET

12 Months Ended

Dec. 31, 2012

PREMISES AND EQUIPMENT, NET

PREMISES AND EQUIPMENT, NET

8. PREMISES AND EQUIPMENT, NET

Premises and equipment, net, which include amounts recorded under capital leases, consists of the following as of December 31:

(in thousands)	2012			2011

Computer hardware and software	$	68,329		$	39,452
Office equipment and other	15,592			15,068
Furniture and fixtures	5,344			4,299
Leasehold improvements	12,982			7,014
	102,247			65,833
Less: Accumulated depreciation and amortization	(51,848		)	(40,233		)

Total	$	50,399		$	25,600

Depreciation and amortization expense, inclusive of capital lease obligations, amounted to $12.8 million, $8.4 million and $7.2 million for 2012, 2011 and 2010, 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 consolidated statements of operations.

- Definition

The entire disclosure for long-lived, physical assets that are used in the normal conduct of business to produce goods and services and not intended for resale. Examples include land, buildings, machinery and equipment, and other types of furniture and equipment including, but not limited to, office equipment, furniture and fixtures, and computer equipment and software. This disclosure may include property plant and equipment accounting policies and methodology, a schedule of property, plant and equipment gross, additions, deletions, transfers and other changes, depreciation, depletion and amortization expense, net, accumulated depreciation, depletion and amortization expense and useful lives, income statement disclosures, assets held for sale and public utility disclosures.

+ References+ Details

GOODWILL AND INTANGIBLE ASSETS, NET

12 Months Ended

Dec. 31, 2012

GOODWILL AND INTANGIBLE ASSETS, NET

GOODWILL AND INTANGIBLE ASSETS, NET

9. GOODWILL AND INTANGIBLE ASSETS, NET

Goodwill

Goodwill relates to the acquisitions of MPA, Springhouse, Tracmail and the company that developed the predecessor to our REALTrans® vendor management platform. Changes in goodwill during the years ended December 31, 2012 and 2011 are summarized below:

	Mortgage		Financial			Technology
(in thousands)	Services		Services			Services		Total

Gross value at January 1, 2011	$	10,218	$	13,544		$	1,618	$	25,380
Accumulated amortization of tax-deductible goodwill (a)	—		(10,728		)	—		(10,728		)
Accumulated impairment losses	—		(2,816		)	—		(2,816		)
Balance, January 1, 2011	10,218		—			1,618		11,836
Acquisition of Springhouse	701		—			—		701
Acquisition of Tracmail	—		2,378			—		2,378

Balance, December 31, 2011 and 2012	$	10,919	$	2,378		$	1,618	$	14,915

(a) See description under intangible assets, net section below.

Intangible Assets, Net

Intangible assets relate to our acquisitions of MPA (see Note 5) and Nationwide Credit, Inc (“NCI®”). No impairment charges were taken during the periods presented.

Intangible assets, net consist of the following as of December 31, 2012 and 2011:

	Weighted average estimated useful life	Gross carrying amount				Accumulated amortization						Net book value
(dollars in thousands)	(years)	2012		2011		2012			2011			2012		2011

Definite-lived intangible assets
Trademarks	16	$	10,614	$	10,614	$	(4,060	)	$	(3,353	)	$	6,554	$	7,261
Customer lists	19	38,366		38,366		(18,567		)(a)	(13,010		)	19,799		25,356
Operating agreement	20	35,000		35,000		(5,104		)	(3,354		)	29,896		31,646
Non-compete agreement	4	1,300		1,300		(963		)	(613		)	337		687
Total		$	85,280	$	85,280	$	(28,694	)	$	(20,330	)	$	56,586	$	64,950

(a) Prior to our acquisition of Nationwide Credit, Inc. (“NCI®”) in 2007, NCI completed an acquisition which created tax-deductible goodwill that amortizes for tax purposes over time. When we acquired NCI in 2007, we recorded a lesser amount of goodwill for financial reporting purposes than what had previously been recorded at NCI for tax purposes. This difference between the amount of goodwill recorded for financial reporting purposes and the amount recorded for taxes is referred to as “Component 2” goodwill and resulted in our recording periodic reductions first to ou