What changed in this filing

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Item 1A. Risk Factors

2024-03-07 compared with 2023-03-30 · 106 added, 100 removed, 384 unchanged (35% of the section changed)

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In this ITEM 1A, unless the context otherwise clearly indicates, references to our “services” include any services, products or solutions provided, or made available, by us.

• We may experience a significant and extended reduction in the demand for our default-related services due to the continued low number of residential mortgage foreclosures and reduced supply of Real Estates Owned inventory resulting from COVID-19 foreclosure and eviction moratoriums.

• We may be subject to legal claims from customers, employees, vendors and other third parties as a result of the response to COVID-19.

• We may experience a significant and extended reduction in the demand for our default-related services due to the continued low number of residential mortgage foreclosures, extended time periods from foreclosure starts to sales, the reduction in rates of foreclosures starts converting to foreclosure sales and reduced supply of Real Estates Owned inventory resulting from loss mitigation and borrower relief measures, fiscal policies, and other relevant economic conditions.

• We earn a significant portion of our revenue in connection with providing services to two customers.

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• We depend on our ability to use services, products, data and infrastructure provided by third parties to maintain and grow our businesses.

• We may not successfully detect fraudulent activity, which could impact our services, our clients or third parties and could adversely affect our reputation and our results of operations.

• The Company’s databases contain our proprietary information, the proprietary information of third parties and personal information of our customers, consumers, vendors and employees.

Our failure to comply with applicable information management requirements or best practices or the legal rights of individuals about whom we collect or process personal information, or an unauthorized disclosure of information, could subject us to adverse publicity, investigations, fines, costly government enforcement actions or private litigation and expenses.

Our failure to comply with applicable information management requirements or best practices or the legal rights of individuals about whom we collect or process personal information, or an unauthorized disclosure or processing of information, or our failure to comply with required disclosures or notifications related to unauthorized disclosure or processing of information, could subject us to adverse publicity, investigations, fines, costly government enforcement actions or private litigation and expenses.

• Our business continuity and disaster recovery plans and other adjustments to business may not be sufficient to anticipate impacts of, or address or adequately recover from, business interruptions or a pandemic.

• The insurance underwriting loss limitation methods we use could fail.

• Under certain material agreements to which we are currently a party or into which we may enter in the future, the formation by shareholders of Altisource of a “group” with ownership of Altisource capital stock exceeding a defined percentage may give rise to a termination event or an event of default.

• The insurance underwriting loss limitation methods we use may not be effective or sufficient.

• Under certain material agreements to which we are currently a party or into which we may enter in the future, the formation by shareholders of Altisource of a “group” with beneficial ownership of a defined percentage of the combined voting power or economic interest of Altisource capital stock exceeding a defined percentage may give rise to a termination event or an event of default.

• The majority of our employees and contractors work from locations other than our facilities, which could negatively impact our control environment or productivity and create additional risks.

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If our vendor oversight activities are ineffective, we may fail to meet customer or regulatory requirements.

We may face difficulties sourcing required vendors or supplies or managing our relationships with vendors.

• We make extensive use of contractors in certain of our lines of business.

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• We may fail to adapt our services to changes in technology or in the marketplace related to mortgage servicing or origination, changing requirements of governmental authorities, GSEs and customers.

• Business expansion involves potential risks.

• Acquisitions to accelerate growth initiatives involve potential risks.

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• Developments that impact residential foreclosures or the supply, sale price or sale of REO could negatively impact us.

• Changes to real estate brokerage commission structures or rates paid for residential property transactions could negatively impact us.

• We may never pay dividends on our common stock so any returns would be limited to the potential appreciation of our stock.

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• If we are unable to generate sufficient cash flow or access the capital markets or our borrowing capacity is reduced, our liquidity and competitive position may be negatively affected.

• Our primary source of liquidity is cash flows from operations and unrestricted cash.

• Our level of debt and the variable interest rate on our term loan makes us sensitive to the effects of our current financial performance and interest rate increases;

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• Our failure to comply with the covenants or terms contained in our senior secured term loan agreements or our credit facility, including as a result of events beyond our control, could result in an event of default.

• We may be unable to extend the maturity of our loan agreements from April 2025 to April 2026 if we are unable to raise sufficient funds from the proceeds of issuances of equity interests or from junior indebtedness.

We may be unable to repay or refinance the balance of our senior secured term loan or revolving credit loan upon maturity.

• We may be unable to exercise the option to extend the maturity of our loan agreements (Amended Credit Agreement and Revolver) from April 2025 to April 2026.

We may be unable to repay or refinance the balance of our loans under the Amended Credit Agreement or Revolver upon maturity, particularly if cash from operations fails to significantly improve, assets are not readily available for sale and sold or we are unable to timely refinance on favorable terms or at all.

• We have a significant net operating loss recognized by one of our Luxembourg subsidiaries.

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Risks Related to the COVID-19 Pandemic

We may experience a significant and extended reduction in the demand for our default-related services due to the continued reduction in residential mortgage foreclosures and reduced supply of REO inventory resulting from COVID-19 foreclosure and eviction moratoriums.

The COVID-19 pandemic continues to have a profound impact on our business, our customers, and the industries in which we operate.

In response to the COVID-19 pandemic, beginning in March 2020, various governmental entities and servicers implemented unprecedented foreclosure and eviction moratoriums, forbearance programs and loss mitigation measures to help mitigate the impact to borrowers and renters.

As a result of these measures and other related actions, industry wide foreclosure initiations were 88% lower in 2021 compared to the same pre-COVID-19 period in 2019.

We may experience a significant and extended reduction in the demand for our default-related services due to the continued reduction in residential mortgage foreclosures, extended time periods from foreclosure starts to sales, the reduction in rates of foreclosure starts converting to foreclosure sales and reduced supply of REO inventory resulting from loss mitigation and borrower relief measures, fiscal policies, and other relevant economic conditions.

Actions taken by federal, state and local governments, GSEs and mortgage servicers in connection with the COVID-19 pandemic continue to have a profound impact on our business, our customers, and the industries in which we operate.

The Federal government’s foreclosure moratorium expired on July 1, 2021 and the CFPB’s temporary loss mitigation measures expired on December 31, 2021.

Despite the expiration of such governmental measures, new foreclosure initiations for borrowers in default continue to be lower than pre-pandemic rates.

Industrywide foreclosure initiations were 368% higher in 2022 compared to 2021, although still 45% lower than the pre-COVID-19 period in 2019.

Industrywide foreclosure sales were 39% higher in 2022 compared to 2021 (although still 67% lower than the pre-COVID-19 period in 2019).

Despite the expiration of

these and certain other governmental measures, we believe servicers are proceeding slowly with foreclosure initiations for borrowers in default.

Industrywide foreclosure starts were 4% lower in 2023 compared to 2022, and 31% lower than the same pre-COVID-19 period in 2019.

The average length of time loans in foreclosure have been delinquent extended to 34 months in 2023 from 29 months in 2019.

Industrywide foreclosure sales were 8% higher in 2023 compared to 2022, and 46% lower than the same pre-COVID-19 period in 2019.

Foreclosure sales as a percentage of foreclosure inventory has declined to 37% in 2023 from 51% in 2019.

The decline in foreclosure initiations and foreclosure sales throughout the pandemic, partially offset by the restart of the default market, significantly decreased default related referrals to us and continues to negatively impact virtually all of our default related services revenue.

We anticipate that we will continue to experience significant impacts of the COVID-19 pandemic through at least the middle of the 2024 calendar year.

Based on the expirations of the Federal government’s foreclosure and eviction moratoriums and the CFPB’s rules on temporary loss mitigation measures, we believe the demand for our Default business will grow, but our estimate may not be correct and is subject to macro and micro economic factors that could negatively impact us.

We estimate that in today’s environment it typically takes on average two years to convert foreclosure initiations to foreclosure sales and six months to market and sell the REO.

Due to this timing, we anticipate that our later stage foreclosure auction and REO asset management services will not fully benefit from the early 2022 higher foreclosure initiations until late 2023 or early 2024.

The extent and duration of the impact of the COVID-19 pandemic and governmental, mortgage servicer, mortgage investor and societal responses will depend on future developments, including the duration, cycles and severity of the pandemic, which remain highly uncertain.

We cannot predict the duration of the pandemic and future governmental and industry measures.

We anticipate that we will continue to experience significant impacts of the Relief Measures and cannot predict when those impacts may begin to abate.

Based on the expirations of certain Relief Measures, we believe the demand for our Default business will grow, but our estimate may not be correct and is subject to macro and micro economic factors that could negatively impact us.

We estimate that in today’s environment it typically takes on average two years to convert foreclosure initiations to foreclosure sales and six months to market and sell the REO, but multiple factors could impact this estimate.

The extent and duration of the impact of the Relief Measures and societal responses will depend on future developments which remain highly uncertain.

As a result, it is difficult to predict the impact on our business and the timing for the recovery of the default market, if it recovers at all.

Volatile or uncertain economic conditions caused by the COVID-19 pandemic, or its consequences, have and may continue to affect our customers and the markets we serve, causing customers to reduce, defer or eliminate spending on our services.

We may be subject to legal claims from customers, employees, vendors and other third parties as a result of the response to COVID-19, including contractual breach claims.

Interruptions caused by the pandemic and our customers’ and various governmental bodies’ responses to the pandemic could adversely impact our ability to comply with various legal and contractual obligations, including service level agreements and performance standards in our revenue agreements, order volume or other requirements in our vendor agreements, restoration obligations in our leases, and obligations to perform or use services in pre-approved locations, whether as a result of an inability to staff personnel for certain services in appropriate locations or as a result of compliance with various imposed regulations.

Some of our agreements may not contain force majeure clauses or similar provisions that would sufficiently excuse any non-performance due to the pandemic.

Accordingly, counterparties to these contracts may assert that we have breached these contracts and caused damages.

Even if our agreements contain force majeure clauses or similar provisions, parties to the agreements may dispute that such provisions are applicable to excuse our failures to perform.

In such cases, we could face additional costs, penalties, fee reductions, an exercise of termination rights, legal claims and liabilities.

The COVID-19 pandemic and its ramifications could further aggravate, accelerate, or precipitate any of the risk factors discussed below.

Volatile or uncertain economic conditions caused by the COVID-19 pandemic and its consequences, as well as governmental fiscal policies and other relevant economic conditions, have and may continue to affect our customers and the markets we serve, causing customers to reduce, defer or eliminate spending on our services.

Risks Related to Our Business and Operations

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If either party substantially reduces the scope or volume of services acquired from us, or otherwise ceases using us as a vendor, it would negatively impact our business.

For example, we could experience a reduction in scope or volume of business as a direct or indirect result of the existence or outcome of regulatory matters impacting one or more of these clients, a change in the servicing relationship between these clients, a reduction in the MSRs for which Ocwen acts as a servicer or subservicer, or a change in the contractual relationship between Altisource and Ocwen or Rithm.

For example, we could experience a reduction in scope or volume of business as a direct or indirect result of the existence or outcome of regulatory matters impacting one or more of these clients, a change in the servicing relationship between these clients, a reduction in the MSRs for which Ocwen or Rithm acts as a servicer or subservicer or controls the rights to designate service providers, or a change in the contractual relationship between Altisource and Ocwen or Rithm.

In addition, providing services to these customers affords us the opportunity to provide certain services to third parties and the loss of these customers or reduction in the quantity of services provided to these customers would also result in the loss or reduction of these additional revenue streams.

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On August 28, 2017, Altisource, through its licensed subsidiaries, entered into the Brokerage Agreement with Rithm which extends through August 2025 (“Brokerage Agreement”).

Under this agreement and related amendments, Altisource is the

exclusive provider (with certain exceptions) of brokerage services for REO associated with the certain MSR through August 2025, irrespective of the subservicer, as long as Rithm owns such MSRs.

Under this agreement and related amendments, Altisource is the exclusive provider (with certain exceptions) of brokerage services for REO associated with the certain MSR through August 2025, irrespective of the subservicer, as long as Rithm owns such MSRs.

The Brokerage Agreement may be terminated by Rithm upon the occurrence of certain specified events.

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We rely on our proprietary technology in our Hubzu real estate marketing, Equator, Equator.com, NestRange, LOLA, REALSynergy, RentRange, Trelix TM Connect, Vendorly ® and other platforms.

Certain of our proprietary technology includes licensed open source and third-party code or may be created or maintained by using low-code or other coding techniques that contain inherent risks.

Certain of our proprietary technology includes licensed open source and third-party code or may be created or maintained by using artificial intelligence, low-code or other coding techniques that contain inherent risks.

We also leverage third-party technology to provide certain of our services, including using third-party order management and billing technology, and using third-party technology to access data or take actions, such as governmental filings, and externally hosted and managed data centers and operating environments.

Disruptions, failures, defects or inadequacies in our technology or third-party technology or related services we utilize, delays or errors in developing or maintaining our technology, or acts of vandalism, misuse or malicious use of our solutions, system attacks or the introduction of malicious code in technology we utilize, or the use of outdated or unsupported open source or third-party code may interrupt or delay our ability to provide products or services to our customers, impact our ability to satisfy performance requirements, or cause the loss, corruption or disclosure of data.

Disruptions, failures, defects or inadequacies in our technology or third-party technology or related services we utilize, delays or errors in developing or maintaining our technology, or acts of vandalism, misuse or malicious use of our solutions, system attacks or the introduction of malicious code in technology we utilize, the use of outdated or unsupported open source or third-party code, or the use of defective, compromised or insecure code may interrupt or delay our ability to provide products or services to our customers, impact our ability to satisfy performance requirements, or cause the loss, corruption or disclosure of data.

We may be a target for network hackers or others with malicious intent due to our storage and processing of consumer information as part of providing our services or as a result of operating public-facing technology platforms, including, for example, our Hubzu marketing platform.

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The failure of such third parties to provide or make available the Inputs in accordance with applicable requirements could negatively impact our ability to provide our services or perform transactions and to meet our obligations.

In addition, these third parties could cease providing or reduce the availability, type, details or other

aspects of the Inputs, and change the pricing, performance or functionality of the Inputs.

In addition, these third parties could cease providing or reduce the availability, type, details or other aspects of the Inputs, and change the pricing, performance or functionality of the Inputs.

If such Inputs become unavailable or too expensive and we are unable to obtain suitable alternatives and efficiently and effectively integrate these alternatives into our service offerings or infrastructure, we could experience service disruptions, increased costs and reduced quality of our services.

We may not successfully detect fraudulent activity, which could impact our services, our clients or third parties and could adversely affect our reputation and our results of operations.

Our provision of certain services in connection with real estate-related transactions relies upon information provided by employees and third parties, including our vendors, and upon certain technology systems.

The provisions of such services could be negatively impacted by fraudulent or incorrect information provided by employees or third parties.

Vulnerabilities in technology systems on which we rely to provide certain services could permit employees or third parties to introduce fraudulent information into those systems or otherwise compromise those systems, impacting our ability to provide services without error.

If we are not able to detect that information on which we rely to provide services is inaccurate or fraudulent, or that systems are compromised, we may take actions in providing certain services which could damage third parties or our clients.

Employees and third parties have in the past conducted, and may attempt in the future to conduct, fraudulent activity, which may result in, among others, transferring funds to fraudulent actors, paying for services which were not performed or failed to meet applicable requirements, disbursing construction funds when applicable conditions have not been satisfied, selling real estate for below market values, issuing title insurance based on fraudulent ownership documentation, underwriting mortgage applications based on fraudulent information and insuring fraudulent mortgages.

Persistent and pervasive fraudulent activity may harm our client relationships and our reputation and could result in financial loss, thereby adversely affecting our business and results of operations .

The Company’s databases contain our proprietary information, the proprietary information of third parties and personal information of our customers, consumers, vendors and employees.

Our failure to comply with applicable information management requirements or best practices or the legal rights of individuals about whom we collect or process personal information, or an unauthorized disclosure or processing of information, or our failure to comply with required disclosures or notifications related to unauthorized disclosure or processing of information, could subject us to adverse publicity, investigations, fines, costly government enforcement actions or private litigation and expenses.

As part of our business we collect, store, process, transfer and dispose in tangible and electronic forms customer, consumer, vendor and employee personal information (“PI”).

We and our vendors rely on processes that are intended to provide necessary notices regarding the collection, storage, processing and destruction of PI, and to permit subjects to exercise their legal rights concerning their PI in our possession.

If those processes are not sufficient or experience an error or other disruption, we or our vendors may fail to comply with applicable requirements concerning PI.

In addition, we rely on the security of our facilities, networks, databases, systems and processes and, in certain circumstances, third parties, such as vendors, to protect PI.

If our controls and those of our customers or vendors are not effective, are outdated or do not exist, or if we fail to detect or respond to attacks or intrusions, unauthorized parties may gain access to our networks or databases or information, or those of our customers or vendors with which we interconnect or share information, and they may be able to steal, publish, delete, or modify PI.

In addition, employees may intentionally or inadvertently cause data or security breaches that result in unauthorized release of such PI.

Further, our efforts to delete or destroy PI may not be consistent with our disclosed policies or may not be successful, resulting in the theft or unintentional disclosure of PI, including when disposing of media on which PI may be stored.

In such circumstances, our business could be harmed and we could be liable to our customers, employees or vendors, or to regulators, consumers or other parties, as well as be subject to notification requirements or regulatory or other actions for breaching applicable laws or failing to adequately protect such information.

We and our vendors rely on processes that are intended to provide necessary notices, processes and controls regarding the collection, storage, processing and destruction of PI, and to permit subjects to exercise their legal rights concerning their PI in our possession.

If those notices, processes or controls are not sufficient, or our processes or controls experience an error or other disruption, we or our vendors may fail to comply with applicable requirements concerning PI.

In addition, we rely on the security of our facilities, networks, databases, systems, processes and controls, and, in certain circumstances, third parties, such as vendors, to protect PI.

If such facilities, networks, databases, systems, processes and controls, or those of our customers or vendors, are not effective, are outdated or compromised, or do not exist, or if we, our customers or vendors fail to detect or respond to attacks or intrusions, unauthorized parties may gain access to our networks or databases or information, or those of our customers or vendors with which we interconnect or share information, and they may be able to steal, publish, delete, or modify PI.

In addition, employees may intentionally or inadvertently process PI in an unauthorized manner or cause data or security breaches that result in unauthorized release of such PI.

Further, our efforts to process, delete or destroy PI may not be consistent with our disclosed policies or may not be successful, resulting in the theft or unintentional disclosure of PI, including when disposing of media on which PI may be stored.

In such circumstances, our business could be harmed and we could be liable to our customers, employees or vendors, or to regulators, consumers or other parties, as well as be subject to disclosure or notification requirements, and regulatory or other actions for breaching applicable laws, failing to make or provide required disclosures or notifications, or failing to adequately protect such information.

This could result in costly investigations and litigation, civil or criminal penalties, large scale remediation requirements, operational changes or other response measures, significant penalties, fines, settlements, costs, consent orders, loss of consumer confidence in our security measures and negative publicity.

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Our business continuity and disaster recovery plans and other adjustments to business may not be sufficient to anticipate impacts of, or address or adequately recover from, business interruptions or a pandemic, or may not be implemented on a timely or error free basis in response to business interruptions or a pandemic, resulting in negative operational impacts and errors.

The insurance underwriting loss limitation methods we use could fail.

The insurance underwriting loss limitation methods we use may not be effective or sufficient.

Altisource, through its subsidiary Association of Certified Mortgage Originators Risk Retention Group, Inc., provides certified loan insurance to its customers.

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Further, there is no certainty that we will be able to purchase the amount or type of reinsurance we desire in the future or that the reinsurance we desire will be available on terms we consider acceptable or with reinsurers with whom we want to do business.

Under certain material agreements to which we are currently a party or into which we may enter in the future, the formation by shareholders of Altisource of a “group” with ownership of Altisource capital stock exceeding a defined percentage may give rise to a termination event or an event of default.

Under certain material agreements to which we are currently a party or into which we may enter in the future, the formation by shareholders of Altisource of a “group” with beneficial ownership of a defined percentage of the combined voting power or economic interest of Altisource capital stock exceeding a defined percentage may give rise to a termination event or an event of default.

Under certain of our material agreements a change of control would be deemed to occur if, among other things, a “group” (as that term is used in Sections 13(d) and 14(d) of the Exchange Act) is formed by shareholders holding beneficial ownership of a defined percentage of the combined voting power or economic interest of our capital stock.

The Brokerage Agreement with Rithm’s licensed brokerage subsidiary contains a similar provision, and we may enter into material agreements in the future that

contain similar provisions.

The Brokerage Agreement with Rithm’s licensed brokerage subsidiary contains a similar provision, and we may enter into material agreements in the future that contain similar provisions.

The formation of a “group” could occur without the involvement of or input by us, and we are not in a position to prevent such an event from occurring.

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If any reduction in productivity or data privacy or cybersecurity failures or breaches or issues with our controls occurs, we may incur additional costs to address such issues and our financial condition and results may be adversely impacted.

In addition, our Remote Work Environment may result in difficulties creating and maintaining accurate records of where our employees are working from.

Such uncertainty in employee location may subject us to risks related to certain state taxes or maintaining certain state licenses.

In addition, our Remote Work Environment may result in difficulties creating and maintaining current and accurate records of where our employees are working.

Such uncertainty in employee location may subject us to risks related to taxing jurisdictions or maintaining certain licenses.

We rely on vendors for many aspects of our business.

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We could have conflicts of interest with Ocwen, Rithm, Deer Park Road Management Company L.P., or affiliates of the foregoing, and/or certain of our shareholders, members of management, employees and members of our Board of Directors, which may be resolved in a manner adverse to us.

We have significant business relationships with and provide services to Ocwen and to Rithm, and have business relationships with certain companies in which William C.

We have significant business relationships with and provide services to Ocwen and to Rithm, and we have business relationships with certain companies in which William C.

Erbey has invested.

We also have a revolving credit facility with a fund managed by Deer Park Road Management Company L.P (“Deer Park”), and Deer Park owns Altisource debt as a lender pursuant to our senior secured term loan agreement, as amended and restated with an effective date of February 14, 2023 (the “Amended Credit Agreement”).

We also have a revolving credit facility with a fund managed by Deer Park Road Management Company L.P.

(together with its affiliates and managed funds, “Deer Park”), and Deer Park owns Altisource debt as a lender pursuant to our senior secured term loan agreement, as amended and restated with an effective date of February 14, 2023 (the “Amended Credit Agreement”).

Deer Park and William C.

Erbey have disclosed that they own equity interest in Altisource representing approximately 24% and 38%, respectively, of Altisource’s outstanding common stock as of December 31, 2022.

In addition, as of February 22, 2023, Deer Park holds 466,723 warrants entitling it to purchase an equal number of shares of Altisource common stock, subject to potential reduction prior to February 14, 2024.

As of February 14, 2023, Deer Park owned approximately 18% of Altisource’s debt under the Amended Credit Agreement.

Certain members of our management and independent members of our Board of Directors (or entities affiliated with such Board of Directors members) have direct or beneficial equity interests in Ocwen or in Rithm, including in one instance, equity interests in Ocwen (estimated to be approximately 11%) and Altisource (approximately 24%) as well as debt of both of these parties, equity interests in Rithm (less than 1%) and equity interest in Deer Park.

Such interests and relationships could create, or appear to create, potential conflicts of interest with respect to matters potentially or actually involving or affecting us and Ocwen, Rithm, Deer Park, William C.

Erbey (directly or through trust or investment vehicles in which he has sole voting and investment power) have disclosed that they own equity interests in Altisource representing approximately 16% and 23%, respectively, of Altisource’s outstanding common stock as of December 31, 2023.

As of December 31, 2023, Deer Park owned approximately 18% of Altisource’s debt under the Amended Credit Agreement and held 292 thousand warrants received in connection with the February 2023 debt amendment.

Certain members of our management and independent members of our Board of Directors (or entities affiliated with such members of the Board of Directors) have direct or beneficial equity interests in one or more of Altisource, Ocwen and Rithm, including in one instance, equity interests in both Ocwen (estimated to be approximately 8%) and Altisource (approximately 16%) as well as debt of both of these companies.

Such interests and relationships could create, or appear to create, potential conflicts of interest with respect to matters involving or affecting us and Ocwen, Rithm, Deer Park, William C.

Erbey or their affiliates.

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There can be no assurance that any current or future measures that may be implemented to manage potential conflicts will be effective or that we will be able to manage or resolve all potential conflicts with Ocwen, Rithm, Deer Park, William C.

Erbey or their affiliates and, even if we do, that the resolution will be no less favorable to us than if we were dealing with another third-party that has none of the connections we have with Ocwen, Rithm, William C.

Erbey or Deer Park.

Erbey or their affiliates and,

even if we do, that the resolution will be no less favorable to us than if we were dealing with another third-party that has none of the connections we have with Ocwen, Rithm, Deer Park or William C.

There can be no guarantee that we will be able to continue to implement appropriate measures to manage these potential conflicts of interest.

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Our success is dependent on the efforts and abilities of members of our Board of Directors, our executive officers and other key employees, many of whom have significant experience in the real estate and mortgage, financial services and technology industries or play a substantial role in our relationship with certain customers.

In particular, we are dependent on the services of members of our Board of Directors and key executives at our corporate headquarters and personnel at each of our lines of business and support groups.

We are dependent on the services of members of our Board of Directors and key executives at our corporate headquarters and personnel at each of our lines of business and support groups.

In addition, certain members of our Board of Directors, executive officers or other key employees have relationships with certain customers or vendors that facilitate our business and operations.

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We are subject to the Foreign Corrupt Practices Act and similar anti-corruption laws in other jurisdictions, and the failure to comply with these laws could result in substantial penalties.

Furthermore, the practice of utilizing labor based in foreign countries has come under increased scrutiny in the United States.

Furthermore, the practice of utilizing labor based in foreign countries has at times come under increased scrutiny in the United States.

Governmental authorities could seek to impose financial costs or restrictions on foreign companies providing services to customers in the United States.

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We may be unable to realize sales represented by our awarded business or sales pipeline.

As part of our business and financial planning, we make assumptions about the quantity and timing of services that our customers and prospect customers will order from us.

As part of our business and financial planning, we make assumptions about the quantity and timing of services that our customers and prospective customers will order from us.

In many instances, however, our customers may not be obligated to acquire our services or may only be obligated to acquire our services to the extent the customer can make use of such services.

Our volume of sales may not materialize to the extent our customers or prospect customers elect to use providers of services other than us, or if economic or industry conditions exist such that our customers or prospect customers do not require the assumed quantity of services or reduce the fees paid for the services.

For example, economic conditions and restrictions instituted by governmental authorities, GSEs, servicers or investors may negatively impact the quantity or timing of customer demand for our services despite the existence of an agreement.

Our volume of sales may not materialize to the extent our customers or prospect customers elect to use providers of services other than us, or if economic, industry or company specific conditions exist such that our customers or prospect customers do not require the assumed quantity of services or reduce the fees paid for the services.

For example, economic conditions and restrictions instituted by governmental authorities, GSEs, servicers or investors, or the sale, consolidation or failure of current or potential customers, may negatively impact the quantity or timing of customer demand for our services despite the existence of an agreement.

Our customers may use more than one provider for given services resulting in such customers varying over time the quantity or mix of services acquired from us versus other providers.

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We are currently in the process of, and from time to time will be, developing and introducing new services and technologies and improvements to existing services and technologies.

Our future success will be significantly affected by our ability to complete our current efforts and in the future enhance, our services and technologies, and to develop and introduce new services that address the increasingly sophisticated needs of our customers and their customers, as well as our ability to reduce costs by relying on cloud architecture and other infrastructure advancements.

These efforts may include implementing new real estate auction and marketing capabilities, as well as technological and other modifications to increase efficiency and flexibility in supplying our

default-related and origination services.

These initiatives carry the risks associated with any new service development effort, including cost overruns, delays in delivery and performance effectiveness.

There can be no assurance that we will continue with our current efforts and be successful in developing, enhancing, marketing, selling and implementing new and improved services.

In addition, we may experience difficulties that could delay or prevent the successful development, enhancement, introduction and marketing of these services.

Our services and their enhancements may also not adequately meet the demands of the marketplace or governmental authorities and achieve market acceptance.

Our future success will be significantly affected by our ability to complete our current efforts and in the future enhance, our services and technologies, and to develop and introduce new services that address changes in technology or applicable marketplaces or the increasingly sophisticated needs of our customers and their customers, as well as our ability to reduce costs by relying on cloud architecture and other infrastructure advancements.

These efforts may include implementing new real estate auction and marketing capabilities, as well as technological and other modifications to increase efficiency and flexibility in supplying our default-related and origination services.

These initiatives carry the risks associated with any new technology or service development effort, including cost overruns, delays in delivery and performance effectiveness.

There can be no assurance that we will continue with our current efforts and be successful in developing, enhancing, marketing, selling and implementing new and improved technology or services.

In addition, we may experience difficulties that could delay or prevent the successful development, enhancement, introduction and marketing of technologies or services.

Our technology and services and their enhancements may also not adequately meet the demands of the marketplace or governmental authorities and achieve market acceptance.

Customers of our default-related services and origination services may seek to reduce the number of service providers employed through vendor consolidation, insourcing (providing the services itself) or by other means.

Such changes could reduce the demand for our services or control over the prices we are able to charge for our services.

Business expansion involves potential risks.

Entry into new business sectors, expansion beyond our core services, and organic growth initiatives may not result in the anticipated benefits, may take longer or be more costly than expected, which may adversely affect our financial results, ability to conduct investments in other businesses, reputation and growth prospects.

We may not accurately identify market needs.

New products and services may not function as intended or achieve anticipated rates of market adoption or commercial success.

Because of the obligations to maintain a minimum cash threshold in the Cooperative Brokerage Agreement and restrictions in our Amended Credit Agreement, we may not be able to provide adequate funding to new initiatives.

Newly-developed businesses, products, services or initiatives may have lower or negative margins.

Growth related investments may increase our costs and lower our margins in the short term and potentially over longer periods.

We may not be able to recoup our investments in such initiatives or achieve anticipated financial returns, and such initiatives may negatively impact our ability to identify or pursue other potential opportunities.

Acquisitions to accelerate growth initiatives involve potential risks.

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In the future, we may consider acquisitions of or merger with other businesses that we believe could complement our business, offer us greater access in our current markets or offer us greater access and expertise in other asset types and markets that are related to ours, but we do not currently serve.

Our ability to pursue additional acquisitions in the future depends on our access to sufficient capital (equity and/or debt) to fund the acquisition and subsequent integration.

Our ability to pursue additional acquisitions in the future depends on our access to sufficient capital (equity

and/or debt) to fund the acquisition and subsequent integration.

Because of the obligations to maintain a minimum cash threshold in the Cooperative Brokerage Agreement and restrictions in our Amended Credit Agreement, we may not be able to secure adequate capital as needed on terms that are acceptable to us, or at all.

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Reductions in the rates of residential mortgage delinquencies, defaults, foreclosures and REO would likely reduce demand for our services related to non-judicial foreclosures, inspecting, maintaining, valuing, marketing and selling such assets.

If faced with an extended period of decline in demand for and revenue from certain of our services as a result of economic conditions or due to government, GSE, servicer or investor restrictions related to loan delinquencies and foreclosures, including moratoriums on foreclosures and mortgage payment forbearance plans, we may be unable to sufficiently adjust our cost structure, in our operations that provide such impacted services or at the corporate level, to avoid negative impacts to net revenue or profits.

If faced with an extended period of decline in demand for and revenue from certain of our services as a result of economic conditions, borrower loss mitigation or relief measures, or due to government, GSE, servicer or investor restrictions related to loan delinquencies and foreclosures, including moratoriums on foreclosures and mortgage payment forbearance plans, we may

be unable to sufficiently adjust our cost structure, in our operations that provide such impacted services or at the corporate level, to avoid negative impacts to net revenue or profits.

We also may be unable to maintain our ability to offer such services in the future.

The expiration dates of certain requirements that impact demand for our services may be indefinite or extended in the future making it difficult to predict when such requirements may end.

The expiration dates of certain requirements, loss mitigation or relief measures that impact demand for our services may be indefinite or extended in the future making it difficult to predict when such requirements or measures may end.

In response to such conditions, we may be required to modify or suspend such operations which could negatively impact our ability to timely respond to an increase in demand for such services or to provide such services in the future, or which could cause us to incur significant expense to restart or scale such services in response to an increase in demand.

Developments that impact residential foreclosures or the supply, sale price or sale of REO could negatively affect demand for certain of our default-related services and negatively impact our ability to meet certain contractual performance metrics.

Reduction in residential foreclosures or the supply or sales of REO in the United States could reduce the demand for and volume of certain of our services, including foreclosure trustee, foreclosure auction, REO asset management, REO property inspection and preservation, real estate brokerage, real estate auction and marketing services, as well as sales of REO, especially in cases where more desirable properties are sold at foreclosure auctions and do not convert to REO.

For example, we anticipate that the continuing impact of foreclosure and eviction moratoriums and residential mortgage loss mitigation requirements will extend the period of reduced foreclosure sales and supply of foreclosure auctions and REO we receive from our customers through the middle of 2024 compared to historical levels.

Due to this timing, we anticipate that our later stage foreclosure auction and REO asset management services will not fully benefit from the 2022 higher foreclosure initiations until late 2023 or early 2024, but it is possible that this estimate will not materialize at the level anticipated or at all.

Reduction in residential foreclosures or the supply or sales of REO in the United States could reduce the demand for and volume of certain of our services, including foreclosure trustee, foreclosure auction, REO asset management, REO property inspection and preservation, real estate brokerage, real estate auction and marketing services, as well as sales of REO, especially in cases where more loans are resolved prior to foreclosure or sold at foreclosure auctions and therefore do not convert to REO.

The reduced supply of REO or sales of REO could also impact our ability to meet certain contractually required service metrics, including those metrics tied to satisfying certain conversion percentage requirements as the size of the applicable population declines and the population of REO that remains is often the most difficult to sell.

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If we fail to satisfy applicable performance metrics or perform in a manner satisfactory to our customers, such customers may reduce the services they acquire from us or otherwise terminate us as a service provider.

Changes to real estate brokerage commission structures or rates paid for residential property transactions could negatively impact us.

Changes to real estate brokerage commission structures or rates paid for residential property transactions as a result of litigation, claims, settlements, governmental regulations or other reasons, which reduce real estate brokerage compensation or limit commission sharing or cooperative commissions amongst among brokerages or brokers, could negatively impact the value of commissions to which we are entitled or receive and could negatively impact certain contractual obligations.

Risks Related to Our Common Stock

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We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate we will declare or pay any cash dividends for the foreseeable future.

In addition, the terms of any future debt

agreements may preclude us from paying dividends.

In addition, the terms of applicable debt agreements may preclude us from paying dividends.

Any return to stockholders will therefore be limited to the potential appreciation of their stock.

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As a smaller reporting company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies.

These provisions include, among other things, scaled disclosure requirements, including simplified executive compensation disclosures in our filings, exemption from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that an independent registered accounting firm provide an attestation report on the effectiveness of internal control over financial reporting and certain other decreased disclosure obligations in our SEC filings.

independent registered accounting firm provide an attestation report on the effectiveness of internal control over financial reporting and certain other decreased disclosure obligations in our SEC filings.

We intend to continue to take advantage of certain of the scaled disclosure requirements of smaller reporting companies.

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If we are required to file a new registration statement on another form, we may incur additional costs and be subject to delays due to review by the SEC.

As of January 23, 2024, our public float (i.e., the aggregate market value of our outstanding equity securities held by non-affiliates) was approximately $48.8 million, based on 15.3 million shares of outstanding common stock held by non-affiliates and on the closing price of $3.20 per share of our common stock as reported on Nasdaq on January 23, 2024 (a date within 60 days of the date hereof), as calculated in accordance with General Instruction I.B.6 of Form S-3.

In addition, during the 12 calendar month period that ends on the date of this filing of this Annual Report on Form 10-K, we had offered and sold $20.1 million of our common stock pursuant to the prospectus supplement dated September 7, 2023.

After giving effect to the $16.3 million offering limit imposed by General Instruction I.B.6 of Form S-3, and after deducting the shares we sold within the preceding 12 months, as of the date of filing this Annual Report, we may sell $0 shares of our common stock at this time under our shelf registration statement.

The market price and trading volume of our stock may be volatile.

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We may issue new shares of common stock or other forms of securities which could dilute the economic and voting interests of current shareholders.

We may issue warrants and holders of outstanding warrants may exercise their warrant rights to acquire

Company securities, which actions would dilute the economic and voting interests of current shareholders.

We may fail to make sufficient prepayments of our existing term loans under the Amended Credit Agreement in advance of the applicable deadline to reduce the number of shares of common stock which could be acquired by the holders of warrants issued in connection with the Amended Credit Agreement, which would dilute the economic and voting interests of current shareholders.

We may issue warrants and holders of outstanding warrants may exercise their warrant rights to acquire Company securities, which actions would dilute the economic and voting interests of current shareholders.

Risks Related to Financing, Our Indebtedness and Capital Structure

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An extended period of reduced demand for all or certain of our default-related services could negatively impact our cash flow such that we may need to use unrestricted cash on hand to satisfy our obligations, which would reduce our cash balance negatively impacting our liquidity.

If the limitations on foreclosures and evictions, and the forbearance plans, instituted by governmental authorities, GSEs, servicers or investors in response to the COVID-19 pandemic are reimposed, this could lengthen the period of reduced demand for our default-related services, negatively impacting our liquidity.

In addition, our liquidity would be adversely affected by any inability to access the capital markets, volatility in the capital markets, unforeseen outflows of cash, funding for contingencies and increased regulatory liquidity requirements.

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A reduction in our ability to borrow funds to support our operations or a reduction in cash flow would also reduce our ability to pursue our business strategy to diversify and grow our customer base.

Our primary source of liquidity is cash flows from operations and unrestricted cash.

Our level of debt and the variable interest rate on our term loan makes us sensitive to the effects of our current financial performance and interest rate increases;

our level of debt and provisions in our Amended Credit Agreement and revolving credit facility could limit our ability to react to changes in the economy or our industry.

Our term loans under the Amended Credit Agreement make us more vulnerable to changes in our results of operations because a portion of our cash flows from operations is dedicated to servicing our debt and is not available for other purposes.

Our term loans under the Amended Credit Agreement, and the revolving credit facility (amended with an effective date of February 14, 2023 (the “Revolver”)), are secured by virtually all of our assets and from time to time may trade at a substantial discount to face value.

Our term loans under the Amended Credit Agreement make us more vulnerable to changes in our results of operations because a portion of our cash flows from operations and current cash on the balance sheet is dedicated to servicing our debt and is not available for other purposes.

Our term loans under the Amended Credit Agreement, and the Revolver (amended with an effective date of February 14, 2023) are secured by virtually all of our assets.

From time to time, our debt under the Amended Credit Agreement may trade at a substantial discount to face value.

Our ability to raise additional debt is limited, and in many circumstances is subject to lender approval and could require modification of certain of the loan agreements.

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Our ability to make payments on our indebtedness depends on our ability to generate cash in the future.

As a result of the foreclosure and eviction moratoriums related to the COVID-19 pandemic, and declining origination volumes in the recent rising interest rate environment, our cash flows were and remain severely impacted.

There can be no assurance that we will be able to achieve pre-COVID-19 levels of revenues and cash flows (adjusted for businesses sold or discontinued).

As a result of the low default, foreclosure and REO levels and declining origination volumes in the recent rising interest rate environment, our cash flows were and remain severely impacted.

There can be no assurance that we will be able to achieve historical levels of revenues and cash flows (adjusted for businesses sold or discontinued).

If we do not generate sufficient cash flows and do not have sufficient cash on hand to meet our debt service and working capital requirements, we may need to seek additional financing, raise equity or sell assets, and our ability to take these actions may be limited by the terms of the Amended Credit Agreement, Revolver or the market.

We may not be able to refinance our existing indebtedness when it becomes due or obtain alternative financing on terms that are acceptable to us, or at all.

Without any such financing,

we could be forced to sell assets or reduce costs under unfavorable circumstances to make up for any shortfall in our payment obligations.

Without any such financing, we could be forced to sell assets or reduce costs under unfavorable circumstances to make up for any shortfall in our payment obligations.

Even if necessary, we may not be able to sell assets or reduce costs quickly enough or for sufficient amounts to enable us to meet our obligations.

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Our assets or cash flows may not be sufficient to fully repay borrowings under our outstanding Amended Credit Agreement and Revolver if accelerated upon an event of default and we may not be able to refinance or restructure the payments on the borrowings under the Amended Credit Agreement and Revolver.

We may be unable to extend the maturity of our Amended Credit Agreement and Revolver from April 2025 to April 2026 if we are unable to raise sufficient funds from the proceeds of issuances of equity interests or from junior indebtedness.

We may be unable to exercise the option to extend the maturity of our Amended Credit Agreement and Revolver from April 2025 to April 2026.

Our loan agreements require us to repay the outstanding balance due in April 2025, with an option to extend to April 2026 if we make par paydowns from the proceeds of issuances of equity interests or from junior indebtedness totaling at least $30 million on or before February 13, 2024, and there is no continuing default of the loan agreements.

We made a paydown in the amount of $20 million in February 2023, leaving an additional paydown of $10 million required on or before February 13, 2024 to be able to extend the maturity date of our debt to April 2026.

There can be no assurance that we will be able to generate proceeds of at least $10 million from equity issuances or junior indebtedness within the applicable timeframe to pay down the debt to qualify for the one-year term extension.

We satisfied the $30 million paydown requirement through a par paydown in the amount of $20 million in February 2023 and an additional par paydown of $10 million in September 2023 each from the proceeds of equity issuances, providing us with the option to be able to extend the maturity date of our debt to April 2026.

However, there can be no assurance that we will be permitted under our Amended Credit Agreement and Revolver to exercise the option to extend the maturity of our Amended Credit Agreement and Revolver to April 2026.

If our cash from operations fails to significantly improve, there can be no assurance that our cash balances and other assets readily available for sale and sold would be sufficient to fully repay borrowings under our outstanding Amended Credit Agreement and Revolver upon maturity, or that we will be able to refinance the remaining portion of the debt sufficiently prior to the due date or on terms acceptable to us.

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is unable to generate sufficient pretax income by 2034, the Company may not be able to fully utilize this deferred tax asset.

In addition, changes in our structure or operations could prevent us from fully realizing some or all of the benefit of such deferred tax asset.

addition, changes in our structure or operations could prevent us from fully realizing some or all of the benefit of such deferred tax asset.

We have significant investments in goodwill and intangible assets recorded as a result of prior acquisitions and an impairment of these assets would require a write-down that would reduce our net income.

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We, or our services, may fail or be perceived as failing to comply with applicable legal requirements.

Our business and the business of our customers are subject to extensive scrutiny and regulation by federal, state and local governmental authorities including the FTC, the CFPB, the SEC, HUD and state and local agencies, including those which license or oversee certain of our auction, real estate brokerage, mortgage services, trustee services, residential mortgage origination services and insurance services, as well as collection and use of personal information.

Our business and the business of our customers are subject to extensive scrutiny and regulation by federal, state and local governmental authorities including the FTC, the CFPB, the SEC, HUD and state and local agencies, including those which license or oversee certain of our auction, real estate brokerage, mortgage services, trustee services, residential mortgage origination services, title insurance and other insurance services, as well as collection and use of personal information.

We also must comply with a number of federal, state and local consumer protection laws.

We are also subject to various foreign laws and regulations based on our operations or the location of our affiliates as well, including those pertaining to data protection, such as the GDPR.

We are subject to various foreign laws and regulations based on our operations or the location of our affiliates as well, including those pertaining to data protection, such as the GDPR.

These foreign, federal, state and local requirements can and do change as statutes and regulations are enacted, promulgated or amended.

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sanctions laws administered and maintained by the US government, including restrictions or prohibitions on transactions with, or on dealing in funds transfers to/ from certain embargoed jurisdictions (currently, Iran, North Korea, Syria, Cuba, and the Crimea, so-called- Donetsk People’s Republic, and so-called Luhansk People’s Republic regions of Ukraine).

We have recently implemented internet protocol (“IP”) address blocking and screening mechanisms to promote compliance with US sanctions rules and regulations, although the blocking and screening mechanisms may not be able to completely block all unwanted IP access.

We have implemented internet protocol (“IP”) address blocking and screening mechanisms to promote compliance with US sanctions rules and regulations, although the blocking and screening mechanisms may not be able to completely block all unwanted IP access.

A determination that we have failed to comply with US sanctions,

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We operate as a title insurance agent through one or more subsidiaries.

As a title insurance agent, we are contractually required by insurance underwriters to make Financial Crimes Enforcement Network Currency Transaction Report filings with the U.S.

As a title insurance agent, we are contractually required by certain insurance underwriters to make Financial Crimes Enforcement Network Currency Transaction Report filings with the U.S.

Department of the Treasury in connection with cash real estate transactions in specified United States jurisdictions which satisfy certain requirements (the “Filing Requirements”).

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Even if we believe our tax estimates are reasonable, the final determination of any tax audits or litigation could be materially different from our historical tax provisions and accruals, which could have an adverse effect on our results of operations or cash flows in the period or periods for which a determination is made.

UNRESOLVED STAFF COMMENTS

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors