The proposed merger between Black Knight and Intercontinental Exchange (ICE) has had its ups and downs since it was announced last year. First it was blocked early in 2023, with the Federal Trade Commission (FTC) voicing concerns that ICE’s resulting market share would effectively give it control over the costs of mortgage originations for consumers.
After the merger was blocked and the FTC filed a temporary restraining order and preliminary injunction with a federal district court, Black Knight announced it would sell its Empower LOS (loan origination system) product. Another statement from Black Knight and ICE revealed they also agree to sell Black Knight’s PPE Optimal Blue (product pricing and eligibility engine), contingent on the Empower sale and the acquisition.
When this second sale was announced, the FTC withdrew its complaint from court and stated it would allow the merger. Now, Ranking Member of the House Financial Services Committee Maxine Waters (D-Calif.) has written to Lina Khan, FTC chair, voicing concerns about the decision.
“As our nation continues to grapple with crisis-level housing affordability and supply issues, it is vital that the federal government does not create conditions that exacerbate these challenges,” the representative wrote. “In addition to potentially creating a housing finance conglomerate that would dwarf all other players in the industry, I remain concerned that this merger has the potential to harm consumers by displacing competing products and businesses that help mitigate rising loan origination and servicing costs, thereby pushing the dream of homeownership further out of reach for families across the country.”
Waters supported her concerns with statements made by ICE Chief Financial Officer Warren Gardiner in an earnings call about ICE’s ability to “capture value” across its platforms. She noted the 1,000 percent increase in the New York Stock Exchange’s data prices over the five years after ICE’s acquisition as evidence of the company’s pricing trends.
The other company in the proposed merger, Waters said, is being sued by Penny Mac for “monopolistic, predatory, and anticompetitive tactics and excessive pricing.”
“These price-setting trends should not be taken lightly,” Waters said.
She requested the FTC keep certain actions in mind as it negotiates any agreement with Black Knight and ICE. These included requiring the merging parties to establish a diverse and inclusive community and stakeholder advisory board; requiring the ICE-Black Knight conglomerate to engage in technical assistance, partnerships, and other activities to support smaller industry players, especially diverse and mission-driven community lenders like community development financial institutions and minority depository institutions; and ensuring the ICE-Black Knight conglomerate is helping to advance fairness and equity in the market.
Waters also made suggestions about installing anti-trust protections like prohibiting ICE and Black Knight from including non-compete clauses and other contractual provisions that would prevent Constellation Software (the anticipated purchaser of Black Knight’s Empower LOS and the owner of the subsidiary who is slotted to purchase Optimal Blue) from integrating or merging with other third parties in the mortgage technology market.
“This is especially true as I understand that Black Knight may not have held a fair and open bidding process and may be selling Empower and Optimal Blue to Constellation Software Inc. at below market values,” she noted.
She also asked the FTC to account for how the products are bundled and sold in the market, so that the sale includes all the necessary elements to keep Constellation Software Inc. fully independent and competitive.
“There is no doubt that the combined technology services business of ICE and Black Knight’s, even with planned divestitures, will affect the pricing of mortgage loans and mortgage servicing rights in profound ways,” Waters said. “I urge the FTC to give these suggestions full and fair consideration to avoid additional pricing pressures on a market that is already facing serious consolidation, access, and affordability concerns that affect upward economic mobility for families across the country and exacerbate the U.S. racial wealth and homeownership gaps.”