Having completed the $12 billion acquisition of Black Knight, Intercontinental Exchange (ICE) is confident in evolving into a true life-of-loan platform: powering origination to final settlement, all in one unified digital ecosystem, executives said during its conference call with analysts.
“By integrating Black Knight servicing, and robust data and analytics offering with ICE’s industry leading loan origination data and document automation platform, as well as our closing and consumer engagement solutions, we have a combined platform that provides a true life of loan offering that will drive transparency and efficiencies across the workflow,” Ben Jackson, president and chair of ICE Mortgage Technology, told analysts on Thursday morning.
Since ICE announced plans to acquire Black Knight in May 2022, the firm went through a bumpy 16-month-period facing antitrust concerns from the Federal Trade Commission (FTC), lawmakers and trade groups.
FTC sued ICE earlier this year alleging the two top mortgage technology providers would drive up costs, reduce innovation and limit lenders’ choices for mortgage origination tools.
In an effort to save the merger deal, the two companies agreed to sell Black Knight’s Empower loan origination system and product and pricing engine (PPE) unit Optimal Blue to a subsidiary of Canada’s Constellation Software.
Under the agreement between the FTC and the two mortgage tech providers, ICE completed the sale of Black Knight’s Optimal Blue and Empower in September.
ICE affirmed that Optimal Blue is still available to its customers, who are the largest consumers of Optimal Blue Solutions.
In parallel, ICE plans to develop its own PPE to provide additional options to lenders and partners, ultimately lowering the cost for the consumer.
“We plan to maintain and invest in our own product and pricing engine, further strengthening the mortgage ecosystem by providing additional options and greater efficiencies to lenders, servicers and partners. Ultimately, lowering acquisition costs for lenders and enabling those savings to be passed to the consumer,” Jackson said.
With Black Knight part of ICE now, executives expect the integration of data and technology across the mortgage workflow to enable greater automation, in turn reducing friction and lower cost to originate a home mortgage for every party involved.
“By combining data on the consumer’s payment history, and loan balance with our rich analytical solutions, such as our valuations and AllRegs – which is an industry leading product availability and eligibility database – our servicing customers will be able to identify opportunities to proactively offer more efficient loan solutions to help lower costs and meet consumers needs,” Jackson noted.
Other opportunities ICE acknowledged include developing innovative analytics that help lenders connect with potential buyers in historically underserved markets and identify minority bias in the home valuation process.
Financials
In terms of financials, ICE expects net revenue synergies of up to $125 million by 2028 largely through cross-sell opportunities across the platform and ICE’s expanded customer base.
ICE executives said they’ve identified north of $300 million worth of opportunities for the company to go after which includes cross-selling data and document automation platform to the entire Black Knight’s MSP mortgage servicing system.
“There’s a little north of 100 [MSP clients] and we believe that 40 of those are not on Encompass today. That represents roughly 15 to 20% market share of annual loan volume that we think we’re going to have a great opportunity,” Jackson said.
For example, JPMorgan Chase, one of the largest servicing customers of Black Knight, is implementing ICE’s data and document automation platform to both its retail and correspondent channels, replacing its in-house legacy infrastructure, executives noted.
ICE expects Backnight to contribute approximately $85 million to $90 million of net revenues, and roughly 50 million to $55 million of adjusted operating expenses to Q3 results.
Full year 2023 ICE Mortgage Technology (IMT) revenues including the legacy IMT business and pro forma for Black Knight are expected to be between $2.05 billion and $2.07 billion.
“With Black Knight, ICE is well positioned to improve the execution and subsequent settlement and servicing of US home mortgages, the major credit exposure for most US consumers,” said Jeff Sprecher, chair and CEO of ICE.
