The acquisition of
But on an operating basis, ICE Mortgage Technology posted a loss for the eighth time in the last nine quarters. Using an adjusted pro forma metric that treats Black Knight as if it owned it since 2021, the company posted slightly lower operating income on both a quarter-to-quarter and year-over-year basis.
Intercontinental Exchange's mortgage segment lost $32 million for the period, compared with losses of
Using that pro forma calculation, ICE Mortgage Technology made $181 million, versus $185 million and $187 million for the prior quarters respectively.
For the entire company, its second quarter net revenues totaled a record $2.3 billion on a pro forma basis, accounting for the Black Knight transaction, Warren Gardiner, chief financial officer, said during the call.
Regarding the mortgage business, "revenue from new customers coming online was offset by attrition within our data and document automation product [which] was primarily related to [one] non-Encompass customer on our legacy platform who was not utilizing DDAs full capabilities," Gardiner said.
The DDA product was another item besides Encompass that ICE had picked up
Some legacy clients on the DDA platform don't utilize the deep the automation capabilities in line with Encompass with MSP, "they're using it in isolation, and that's where we saw the attrition happen with [the] one client that Warren referenced," Ben Jackson, Intercontinental Exchange president and ICE Mortgage Technology chair, pointed out.
On the other hand, ICE engaged with another DDA customer, Citizens Bank, and got them to switch their loan origination system provider to Encompass, which was a cross-sell win, Jackson noted.
Even with this attrition, Gardiner pointed out that JPMorgan Chase, a current DDA customer for its originations business, signed on to use the that product for servicing as well, "a win that is a testament to past investments in synergies with MSP," the servicing technology acquired with Black Knight.
The cross-sell funnel is growing and not just with Chase, as existing customers that use one product offering are signing up for others, Jackson said, adding, "It's building from clients that realize they don't need to have their own in-house bespoke systems."
While the majority of ICE Mortgage customers continue to renew at a higher subscription price, some have elected to reduce that cost. The tradeoff is that they pay higher per-transaction costs.
"As the market normalizes, the algorithm that we have is the total contract value going to go up, and that's what we're consistently targeting and executing against," Jackson said. "So we're seeing that that trend in terms of renegotiation continue, and it's been very much in line with what we've seen in past quarters."
Through the first half of this year, ICE has seen an increase in loans originated and applications submitted on Encompass. "That's the first time we've seen a year-over-year increase since early 2021, so some early signs that things are stabilizing, and I think a more stable market is going to give people a little bit more reason to start to plan for the future, and start to invest in some of these products, like a DDA," Gardiner said.
When asked about the
As an example, he pointed to a recent instance of a major bank exiting the correspondent lending business and selling those servicing rights.
"It's really an uncontrollable risk for us, but it was a temporary phenomenon that we think has played out," Jackson said. "We're also a beneficiary of these when, when they happen," such as when
At the same time, ICE has "a deep relationship" with Mr. Cooper, which uses the Encompass LOS as well as foreclosure and bankruptcy servicing technology products, Jackson said.
But
"We look forward to seeing what their plans are in the future," Jackson said.
