Feds looking to block $13 billion mortgage software deal
A lawsuit would even be the newest volley from President Joe Biden’s antitrust enforcers, FTC Chair Lina Khan and Assistant Lawyer Basic for antitrust Jonathan Kanter, who’ve each pledged to rein in company consolidation. The FTC is presently difficult offers together with Microsoft’s takeover of online game big Activision Blizzard, and the DOJ is probably going to problem JetBlue’s takeover of Spirit Airways.
ICE founder and CEO Jeffrey Sprecher is a significant GOP donor. His spouse is former Georgia Republican Sen. Kelly Loeffler.
Spokespeople for ICE and Black Knight declined to remark. An FTC spokesperson declined to remark.
The ICE-Black Knight merger would convey collectively the 2 largest firms providing mortgage origination software, basically the pipe connecting brokers with lenders. The businesses have provided to promote Black Knight’s mortgage origination platform Empower, to resolve the so-called horizontal overlap between the businesses, one of many individuals stated. That isn’t sufficient, nevertheless, to allay the FTC’s issues that the merger would give the mixed firm an excessive amount of management over information and know-how within the residential mortgage market, that individual stated.
The FTC believes that simply promoting Empower although doesn’t curtail all the head-to-head competitors between the businesses, two of the individuals stated. Each firms provide a wide range of companies that function with the mortgage origination platform, together with the info analytics enterprise Optimum Blue.
Reuters previously reported that Black Knight had employed bankers to assist promote Empower.
ICE, which operates main monetary exchanges and clearinghouses, has expanded into the mortgage market in recent times. It not too long ago acquired Embody, its mortgage origination providing, by its $11 billion buy of mortgage software firm Ellie Mae in 2020. And in 2018 it accomplished its buyout of Merscorp, which operates a nationwide digital registry of U.S. mortgages.
In 2019 and 2020, Black Knight purchased a pair of firms — Compass Analytics and Optimum Blue — that present a wide range of information and analytics companies to lenders to assist them worth loans. By means of these offers it has a number one place within the software utilized by banks to worth loans.
Corporations together with the government-backed Fannie Mae and Freddie Mac in addition to monetary know-how start-ups like Roostify and Mix depend on the mortgage origination platforms from Black Knight and ICE.
In one other instance of the quickly consolidating mortgage know-how market, Roostify was purchased final week by CoreLogic, which itself fended off an earlier takeover bid by Black Knight.
“We rely on the interoperability of our platform throughout third-party functions and companies that we don’t management,” Mix says in securities filings. Whereas it doesn’t point out both Black Knight or ICE by identify, it says it depends on mortgage origination and pricing instruments that the mixed firm would dominate.
The businesses’ Surefire and Velocify companies additionally compete head-to-head within the advertising of mortgage companies from lenders.
The deal has confronted opposition from lawmakers, client teams, clients and rivals, with FTC listening to numerous issues from firms who depend on Black Knight and ICE that their entry will both be misplaced or degraded after the merger, two of the individuals stated.
The deal “would make ICE the most important mortgage companies firm within the housing ecosystem” stated Rep. Maxine Waters (D-Calif.), the highest Democrat on the Home Monetary Providers Committee. The brand new firm “may exert important market energy over mortgage pricing for customers, entry to and sale of client information, and mortgage software pricing,” she stated in a late December letter to Khan urging the FTC to block the deal.
Federal Monetary Analytics managing accomplice Karen Petrou urged the FTC to block the acquisition in an early February report, arguing that combining ICE’s “vital mortgage companies” with Black Knight would give it “unequalled energy to management the costs set on every mortgage, the phrases on which credit score is offered, the lenders provided probably the most advantageous phrases, and the extent to which house possession is offered on inexpensive, equitable phrases in rural, city and majority-minority communities.”
That report outlining Petrou’s case was funded by an nameless firm opposing the deal, however Federal Monetary Analytics stated it had full management over the ultimate product.
Zachary Warmbrodt contributed to this report.