Fidelity May Scrap Spinoff
Title insurance giant Fidelity National Financial has delayed - and may even scrap - the spin-off of its mortgage technology unit which includes its "service" bureau unit.
As Mortgage Servicing News went to press this month, FNF management blamed the delayed spin-off/initial public offering on a "relatively weak and unpredictable" equities market.
It also cited its just-announced $400 million acquisition of a bank technology firm, Intercept, as a reason for the delay. FNF said it wants to successfully integrate Intercept into the company before retrying the IPO. (Intercept is FNF's eighth acquisition in the financial services technology space in the past 18 months.) The title company said it will not bring the IPO to market until the first quarter of 2005 at the earliest but warned it may not "ultimately consummate" the spin-off.
Meanwhile, a source familiar with the company told Mortgage Servicing News that a top 20 residential servicer that uses the unit - Fidelity National Information Services - as its mortgage service bureau is contemplating switching systems and using Fiserv.
The servicer is believed to be HSBC Mortgage, Depew, N.Y. An HSBC spokeswoman said, "As a matter of policy we don't comment on our vendors." A Fiserv spokeswoman said she could neither confirm nor deny that it is getting HSBC as a client.
A source said the change over from Fidelity to Fiserv could occur in November. An official at FNIS in Jacksonville said he did not know anything about HSBC's plans, but referred inquiries to a New York account manager who did not return two telephone calls, one made to his cell phone.
Household International, HSBC's subprime unit, already uses Fiserv.
A spokeswoman for FNF corporate did not return telephone calls as well - about the IPO of FNIS as well as HSBC. FNF bought FNIS (then called Alltel Information Systems) for $1 billion back in January 2003, paying $794 million in cash and $275 million in FNF stock. FNIS is the largest service bureau used by residential servicing firms. The unit also sells loan origination software, processing services and other technology-related services to the mortgage banking and financial services industries.
For years Alltel Information Systems (formerly known as Computer Power Inc.) was the king of mortgage service bureaus, but in recent years its franchise has been nicked somewhat by industry consolidation, competition and some firms bringing their loan technology in-house.
Still, many of the nation's largest residential servicers use Fidelity/Alltel as its service bureau, including Wells Fargo Home Mortgage, Des Moines; Washington Mutual, Seattle; and Chase Home Mortgage, Edison, N.J.
Wells, WaMu and Chase, together service almost $2 trillion in home loans and have a combined market share of 26.49%, according to the Quarterly Data Report.
FNF first announced the IPO earlier this year. It planned to raise $500 million by spinning off the unit. About $250 million of the proceeds was to fund a dividend payment to FNF. (FNF intends to use those dividend proceeds to pay down debt.)
After the IPO (if it is completed) FNF will consist of two segments: title insurance and specialty insurance. The specialty unit will include flood insurance, home warranty and homeowners insurance.
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