Rep. Maxine Waters D-Calif., the outgoing chairwoman of the House Financial Services Committee, called on the Federal Trade Commission to do a "robust review" of Intercontinental Exchange's pending acquisition of Black Knight.
While many people have spoken out against the deal, the
"I actually believe the letter from the chairwoman is a bit of a game changer," said Stevens, not the least because Waters cc'd a laundry list of Biden Administration officials — which he termed impactful — as well as current ranking member Patrick McHenry R-N.C. the likely committee chairman in the next Congress.
"I think it will force the FTC to now double down and take a closer look at this transaction," he continued. While it might not change the expected result of the review, which would call for a divestiture of some Black Knight assets in order to allow it to go through, "I'm certain it slows down a resolution to the outcome," he said.
The FTC may now call for more divestitures than just the expected sale of the Empower loan origination system or there could be an outright attempt by federal regulators to halt the transaction, he suggested.
"Time is not on the side of the transaction and I think the longer it goes the worse it plays out," Stevens said. "In this case, it seems highly probable to me that the Waters letter will slow down this process even further," allowing those in the administration that are against the transaction to double down on their opposition.
The size of an ICE Mortgage Technology-Black Knight combination is what concerns Waters most.
"If this deal closed as proposed, the resulting conglomerate could exert significant market power over loan pricing for consumers, access to and sale of consumer data, and mortgage software pricing," Waters, a California Democrat that will switch to the minority side of the table in the next session of Congress, said in a press release. "Moreover, a combined ICE and Black Knight could harm small lenders that rely on vendors for their technology needs by significantly disincentivizing responsible innovation and inhibiting vendor competition given the dominant market share of ICE."
ICE and Black Knight did not return a request for comment.
ICE Mortgage Technology owns the largest mortgage loan origination system, Encompass, as well as AllRegs, MERS and Simplifile. Black Knight operates the No. 2 LOS, Empower, along with the largest servicing platform, MSP, and the Optimal Blue product and pricing engine.
In the letter to FTC Chairwoman Lina Khan, Waters said the commission should scrutinize originations, servicing, mortgage registry, PPEs, marketing and data privacy.
Waters noted her concern about systemic risk to data privacy if one company handles more than 70% of mortgage originations and servicing.
"If it failed or was compromised, risk could cascade throughout the mortgage market," Waters said. "For example, millions of homeowners would not be able to make payments on trillions of dollars in mortgages, lenders could not process new loans, investors could not receive payments, and consumer rates would spike as bond markets sold off, leading to broad based economic risks."
Many industry rivals have spoke out about the deal, including most recently Mike Cagney, CEO of Figure Technologies, who compared the combination to what happened with
Regarding Waters' letter, Keefe, Bruyette & Woods took a milder point-of-view than other observers. "We reiterate our view that the FTC will likely sue to block the transaction, but that the deal still has a greater than 50% probability of closing when considering this," a research note said. Its thinking remains that only Empower would need to be divested.
This letter likely heightened investor concerns about the cash-and-stock transaction,
The Community Home Lenders of America, which
"CHLA applauds Chair Waters for requesting the FTC to review the ICE/Black Knight merger and realizing the negative, unintended consequences it would have on small lenders," said Scott Olson, the group's executive director, in a press statement.
This latest roadblock to the transaction comes just a month after Black Knight