FIS May See Fallout from BoA Deal

Countrywide Financial Corp. was one of the last big servicers to use entirely internal systems for automation of loan servicing data systems.

Fidelity National Information Services, which counts Bank of America among its clients, has the dominant market share among vendors who provide automation of payment processing for mortgage servicers.

Now, with Bank of America on the verge of acquiring Countrywide, there are questions about what that will mean to FIS.

FIS recently disclosed that Bank of America may "phase out" some of the services it uses from FIS. Specifically, FIS anticipates that the combined Bank of America/Countrywide may eliminate some processing and appraisal services provided by Fidelity's Lender Processing Services.

FIS said it has not received a formal notice of termination from Bank of America. However, the company did say in an SEC filing that Bank of America has informed FIS that it is "leaning toward phasing out the mortgage processing and appraisal services that LPS provides to Bank of America" and instead using internal systems for these processes. These services for Bank of America accounted for about 4% of Lender Processing Services' revenue last year and about 1.4% of FIS' consolidated revenue, the company said in its SEC filing.

If BoA's decision becomes final, FIS said it anticipates that it would take 12 to 30 months after the completion of a BoA/Countrywide merger for the mortgage processing conversion to take place.

FIS said it is in "senior-level discussions" with Bank of America about the scope of services the company will provide to BoA once the Countrywide acquisition is complete.

FIS nonetheless reaffirmed its outlook both for the company as a whole and for its Lender Processing Services unit. FIS plans to spin off its Lender Processing Services unit to shareholders.

The stock market reacted negatively to the news with shares dropping about 4% after the FIS filing was made public.

SNAPSHOT: FIS' Mortgage servicing packaging

Loans on MSP 38.5 Million

Clients 84

New clients in '07 9

Renewals in '07 17

SOURCE: FS (c) 2008 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/

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