Intercontinental Exchange Gets Closer to Acquiring Black Knight

Monday was supposed to be the start of the Federal Trade Commission’s lawsuit to block Intercontinental Exchange’s acquisition of Black Knight, which has integrated technology, data, and analytics for home purchase and mortgage processing.

It wasn’t, as the FTC dropped the lawsuit on August 7, as multiple outlets reported. The agency’s concern was that ICE — the major global financial infrastructure and data firm — would “drive up costs, reduce innovation, and reduce lenders’ choices for tools necessary to generate and service mortgages,” as Axios reported. There was also the assumption that costs for consumers could rise as a result.

The two companies are still negotiating, and a deal isn’t assured, but that is chilly comfort for many in the home mortgage industry.

“They’re definitely going to be a major player,” Patrick Moley, an analyst at Piper Sandler, told the Financial Times. “When you combine ICE’s expertise in electronification of fixed income and capital markets, and an outdated mortgage industry, it is a good business over the long term if they can succeed in reducing some frictions in the industry.”

It wouldn’t be the first move into the mortgage financial industry that the company made. In 2018, it acquired Merscorp, which owned and operated the MERS System, which “tracks changes in mortgage servicing rights and beneficial ownership interests in loans secured by residential real estate,” as the company explains on its website.

In 2019, it added Simplifile, which connects lenders, settlement agents, and counties. Then in 2020 it was Ellie Mae, a cloud provider for the mortgage industry; and in 2021, risQ to extend geospatial and climate data to mortgage-backed securities trading.

But, as the FT noted, there is still opposition to the deal in the U.S. because ICE could make it difficult for many firms to switch to other software. As often happens in technology, network effects provide an advantage to incumbents because businesses go to where they can more easily undertake transactions.

The Community Home Lenders of America (CHLA) has made clear its strong opposition to any deal between the two companies, even with a planned divestiture. CHLA has publicly written the reason as being “since ICE continues to engage in anti-competitive actions that hurt lenders and consumers, which would be greenlighted if the purchase is approved” and that a current lack of a “process to monitor and curtail ICE anti-competitive actions, either as a part of an agreement with the FTC or through CFPB monitoring and use of statutory authorities to prevent anti-consumer actions.”

GlobeSt.com has reached out to ICE for a response but did not receive one by publication.