Highly effective Home Monetary Providers Committee Chairwoman Maxine Waters needs regulators to intently scrutinize the proposed $13 billion buy of Black Knight by Intercontinental Alternate (ICE).
In a letter despatched to the Federal Commerce Fee (FTC) this week, the California Democrat raised issues in regards to the merger, which might make ICE the largest mortgage companies firm within the housing ecosystem.
“Specifically, I’m involved in regards to the unfavorable outcomes which may be handed on to customers, comparable to larger costs, if such consolidation had been to result in decreased competitors,” Waters wrote in a letter to FTC Commissioner Lina Kahn. “Right now, ICE and Black Knight every play a dominant position within the expertise market that powers America’s mortgage originations (greater than $2 trillion per yr), servicing ($12 trillion in loans excellent), shopper charge pricing, registry and shopper information repository, and shopper information and advertising and marketing actions.”
If ICE had been to shut the deal, it could be capable of exert “vital market energy over mortgage pricing for customers, entry to and sale of shopper information, and mortgage pricing software program,” she wrote. “Furthermore, a mixed ICE and Black Knight might hurt small lenders that depend on distributors for his or her expertise wants by considerably disincentivizing accountable innovation and inhibiting vendor competitors given the dominant market share of ICE.”
Waters mentioned that ICE, which owns the New York Inventory Alternate, has juiced costs earlier than.
“If this deal closed as proposed, the ensuing conglomerate might exert vital market energy over mortgage pricing for customers, entry to and sale of shopper information, and mortgage software program pricing. Furthermore, a mixed ICE and Black Knight might hurt small lenders that depend on distributors for his or her expertise wants by considerably disincentivizing accountable innovation and inhibiting vendor competitors given the dominant market share of ICE.”
“For instance, since being acquired by ICE in 2013, information costs on NYSE elevated over 1,000% in simply over 5 years,” Waters mentioned.
She broke out six areas of concern, together with mortgage originations, writing that ICE’s Embody LOS has 50% market share whereas Black Knight’s Empower LOS has about 10 to fifteen% market share.
“What assurances could be offered that lenders, particularly small and mid-size corporations, is not going to face onerous pricing will increase or extended service delays if the deal is authorised?” she requested, including that corporations usually move prices on to customers.
Waters additionally pointed to antitrust complaints filed in opposition to Black Knight, whose mortgage servicing platform has roughly 65% of the $12 trillion U.S. servicing market. (Black Knight has disputed the claims and alleged that PennyMac tried to repeat their platform.)
“Given these allegations and Black Knight’s vital servicing market share, how will Black Knight’s MSP system interface with mortgage origination methods not owned by ICE? What claims could also be made to servicer and shopper information?” she requested.
In a analysis memo on Thursday, analysts at Keefe, Bruyette & Woods mentioned the letter doesn’t “spotlight something very incremental to our present views across the anti-trust threat” surrounding the deal.
“Specifically, Chairwoman Waters highlights the numerous mixed market share of ICE and BKI’s mortgage origination methods as a high space of concern, which inserts with our pondering that BKI’s Empower is more likely to be divested (which we estimate represents solely a mid- to high-single-digit p.c of BKI’s earnings and isn’t a strategically essential a part of the platform for ICE),” KBW’s Ryan Tomasello wrote. “We reiterate our view that the FTC will possible sue to dam the transaction, however that the deal nonetheless has a larger than 50% likelihood of closing when contemplating this.”
A number of outstanding voices within the mortgage trade, together with former FHA Commissioner Dave Stevens, have spoken out in opposition to the deal, arguing it could be dangerous if a lot shopper information had been owned by one firm.
In an op-ed printed on HousingWire in July, ICE Chairman Joe Tyrrell outlined the explanations he says the deal ought to proceed. Amongst them? Modernization of the mortgage servicing platform and higher integration throughout options to remove pointless friction.
Tyrrell argued that the acquisition was not about market share however “fixing actual issues” within the trade. He mentioned they supply prospects the choice of choosing multi-year agreements with built-in value projections. Most prospects choose 4 or 5 yr phrases, and mentioned Black Knight is analogous in its pricing construction.
Tyrrell mentioned the deal wouldn’t damage competitors however in reality spur innovation.
“ICE is normally the primary firm that the majority start-ups method to create consciousness of their choices and get assist distributing their merchandise,” Tyrrell argued. “Within the final 12 months alone, we’ve built-in and launched 67 new accomplice options to our shoppers, with a lot of these coming from new start-ups. We should not have any unique relationships with these corporations, as they accomplice with many LOS corporations.”