Black Knight acquisition needs antitrust scrutiny: CHLA

Abstract

Given the size of both companies in loan origination system technology and Black Knight's dominance among mortgage servicing platforms, the federal government, including the Federal Trade Commission, were expected to take a hard look at the $13.1 billion agreement. "Therefore, mortgage market services dominance as a result of an ICE/Black Knight merger would have a significant detrimental impact on consumers that are buying a home or refinancing - since essential origination software and related services costs are generally passed along directly to the consumer." And it's the smaller nonbank mortgage lenders that are particularly vulnerable because they "Lack the loan volume and economies of scale to develop their own proprietary software products or to negotiate on fair terms with a dominant services provider over rates and terms," the letter said. A combined ICE/Black Knight would also have less competitive pressure to innovate and develop new products and services, to the detriment of consumers, according to the CHLA. The association is also worried about the concentration of personal information about consumers in one organization. "Even a short transition or changeover period to a new services provider could shut down mortgage loan closings for a lender, which would be very costly and could harm the lender's reputation for execution."The letter also calls on the FTC and the Consumer Financial Protection Bureau to look at the deal. Purchasing LOS services from this group "Puts smaller IMBs in the undesirable position of going hat in hand to their direct mortgage competitors to try to buy such services," the letter states. "This raises concerns that the merger will create synergies to engage in anticompetitive practices with regard to tying software and systems between mortgage origination and servicing," the CHLA explained. Any redundancies are limited because the loan origination systems serve different market segments while ICE does not offer a mortgage servicing platform, they noted.