First-quarter mortgage revenue dip flags a 2019 challenge for Equifax

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First-quarter operating revenue in Equifax's Mortgage Solutions unit was the lowest it's been for the fiscal period since 2016, and the company anticipates declines in this division will remain a concern.

"We expect the revenue headwind from the mortgage mix shift to continue for the remainder of 2019," CEO Mark Begor said during the company's earnings call.

The division's revenue was more than $32 million in the first quarter. In addition to being down 23% year-over year, it also was down 18% on a consecutive quarter basis.

Higher mortgage rates compared with the same period in 2018 contributed to the year-over-year reduction in the division's revenue. But a drop in rates since they peaked in November helped to mitigate the decline in Mortgage Solutions revenue from the fourth quarter.

In addition to rate activity, a shift in the channel through which more mortgage customers are coming to Equifax contributed to lower revenue in the division. More have been coming to the company through resellers.

Also contributing to a broader net loss attributable to Equifax of almost $556 million was a $690 million charge related to litigation and potential fines from its 2017 cybersecurity incident. During the first quarter of last year, the net income attributable to Equifax was almost $91 million.

"While this charge represents our current estimate to resolve many of the significant issues facing the company, we expect to incur additional losses associated with the other claims and litigation related to the 2017 incident," Begor said. "We will continue to work with all parties to bring these matters to closure as soon as possible, while balancing the needs of our company, employees, customers and shareholders."

Equifax plays a key role in the mortgage industry as one of the three companies that provide consumer credit data. It also is one of the providers of data validations for employment and income that lenders and the government-sponsored enterprises use in underwriting.

The company's Workforce Solutions division generated more than $228 million during the first quarter, representing an increase of 8% year-over-year. Within that division, verification services revenue was up 16% year-to-year at nearly $149 million, and employer services revenue was down 4% at almost $80 million.

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Earnings Cyber security Underwriting GSEs Data and information management Equifax