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Mortgage technology provider InterContinental Exchange Inc. continues to capitalize on last year’s $11.8 billion acquisition of Black Knight by signing new customers at a breakneck pace to gain a bigger share of the company’s estimated $14 billion annual market.
Several deals announced this week show how executives at Intercontinental Exchange (ICE) envision the Black Knight deal will attract more lenders, creating synergies in what the company is now touting as an “end-to-end mortgage technology ecosystem.”
To satisfy antitrust regulators, ICE agreed to sell Black Knight’s Empower loan origination system (LOS) and Optimal Blue marketplace platform to a subsidiary of Canadian software giant Constellation Software.
But ICE can afford to divest these assets because it already has competing products, including the popular Encompass LOS and Encompass products and pricing services. One of the main draws of the Black Knight deal is that it gives the company new capabilities to provide technology to mortgage servicers that collect payments from borrowers.
Now, a technology provider that helps lenders manage every step of the process — from accepting applications, underwriting and closing loans, to collecting repayments from borrowers and selling loans on the secondary market — ICE can claim Covers 85% of U.S. mortgages. Somehow.
By acquiring Black Knight, ICE can not only provide an end-to-end technology platform to new customers, but also cross-sell additional services to existing customers for whom ICE only handles certain aspects of the mortgage process.
This week, for example, ICE announced it has signed on long-time Encompass user Lennar Mortgage as a customer MSP loan service systemacquired by ICE from Black Knight.
Lennar Mortgage, a subsidiary of the homebuilder of the same name, is a “temporary servicer” that collects mortgage payments from borrowers until the loans it originates are bundled and sold to investors on the secondary market.
“There are clear benefits to leveraging the deep integration between Encompass and MSPs,” Laura Escobar, president of Lennar Mortgage, said in a report. statement.
Laura Escobar
“Our loan servicing is delivered in-house on short notice, which means risk management, regulatory compliance and customer-facing capabilities need to be executed from minute one,” Escobar said. “It also means we need to be able to move loans from origination to servicing quickly and seamlessly, and then to their final destination just as easily.”
ICE also announced this week that Fifth Third Bank will move its mortgage origination and servicing operations to the Encompass and MSP platforms.
Fifth Third Bank signed an agreement in 2016 to use the full suite of services offered by Black Knight, including Empower, and said it will also integrate “multiple ICE data and analytics solutions” to help reduce risk, identify opportunities and gain support insights. Data-driven decisions.
Jay Plum
“ICE’s approach to modernizing housing finance through integrated technology and seamless data sharing aligns perfectly with what we seek to achieve for our clients,” Fifth Third Bank executive Jay Plum said in a note. statement. “Our shared vision is to provide customers with a smooth, simple and convenient experience from the beginning of their mortgage journey through to their long-term servicing experience.”
In addition to signing new customers and cross-selling new services to existing customers, ICE continues to invest in its technology.
This week, ICE announced the addition of a mortgage insurance center to Encompass, allowing lenders to help homebuyers purchase private mortgage insurance with less than 20% down from all six major providers: Arch MI, Enact, Essent, MGIC , National MI and Radian .
Tim Bowler
“With all major MI providers available at launch, we are opening the door for lenders to efficiently participate and order mortgage insurance through a single interface,” said Tim Bowler, president of ICE Mortgage Technology, in a press release. . ” statement.
The deals announced this week are just a sample of what ICE has done since the Black Knight deal closed on September 5.
In the final three months of 2023, the company signed 37 new Encompass customers and four new MSP customers, setting up its largest Encompass and MSP sales since 2018, the company said during its fourth-quarter earnings call. A strong year.
ICE previously found that it could achieve $125 million in revenue synergies over five years by cross-selling Encompass to service customers, cross-selling MSPs to Encompass customers, and cross-selling ancillary products and data solutions to users of both platforms. In just five months, ICE signed $30 million in deals.
Ben Jackson
ICE President Ben Jackson said the company believes the Black Knight acquisition will pay off given that rising interest rates will drag the number of mortgages in 2023 to the lowest level since 1991, a “generation low” and lenders eager to modernize their processes. . during a conference call on February 8.
“The demand we’re seeing across our entire platform gives us confidence that we can grow the business, which is currently $2.1 billion in revenue and is only a fraction of the $14 billion addressable market that’s in the early stages of analog-to-digital conversion,” Jackson said.
ICE Chief Financial Officer Warren Gardiner said that in terms of expenses, ICE expects “annualized savings of approximately $135 million by the end of 2024, which is higher than our original forecast of approximately $100 million by the end of the year.”
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