Intercontinental Exchange's mortgage technology business continues to report operating losses, although the first quarter results were an improvement over the comparable periods.
Servicing business drove improved results
The segment lost $27 million for the quarter, using GAAP accounting, compared with an operating loss of
It is the 10th consecutive quarter, and 11th out of the last 12 quarters in which the mortgage technology segment has an operating loss.
ICE also reports a pro forma metric that makes an assumption the company has owned Black Knight since 2021, rather than the
Using those computations as adjusted pro forma operating income, the unit made $203 million in the first quarter, up from $177 million three months prior and $185 million a year ago.
The year-over-year improvement was largely driven by the servicing business, Warren Gardiner, Intercontinental Exchange's chief financial officer said on the earnings call.
"While we benefited from $2 million of one-time revenue that we do not anticipate will repeat, growth was also driven by new customers implementing on MSP," he continued.
"Transaction revenues totaled $113 million, up slightly year-over-year, driven by revenue growth related to Encompass closed loans and applications, an increase in closing solution fees and higher default management revenues
Rocket-Mr. Cooper deal brings future headwinds
During the quarter and into April, ICE had several big wins for its platforms but also had to prepare for the loss of a large client.
Rocket Cos., when it completes
But at the end of April, United Wholesale Mortgage announced it is bringing the servicing function in-house and
A Keefe, Bruyette & Woods note after the Rocket/Mr. Cooper deal was announced said the shift to Sagent could "negatively impact ICE's servicing revenues" by approximately $30 million using a $10 per loan assumption for the 2.8-million-unit portfolio.
Taking a dig at the competition
ICE Mortgage Technology added 20 new Encompass loan origination system clients, as well as the addition of UWM, "a significant new MSP client," said Ben Jackson, Intercontinental Exchange president and chairman of ICE Mortgage Technology.
In what might be considered to be a subtle dig at Rocket/Mr. Cooper/Sagent, Jackson said over the past decade, the company looked to build a life-of-loan platform "operated by a trusted, neutral third party." He later used the phrase "our neutral platform" during the presentation and brought the topic up again during the Q&A portion of the call.
A questioner asked how ICE sees Rocket's business strategy, comparing that with what it does across the mortgage lifecycle from consumer marketing to secondary marketing and recording.
Jackson, while not directly mentioning Rocket, responded "the headline is that it's a validation of our strategy."
Gardiner added Flagstar's servicing portfolio, which
Rocket isn't leaving right away
Rocket recently signed a multiyear contract, "so in the event they even do choose to move off of MSP, just be clear that it's going to take a couple of years," Gardiner said. "And there's no change to this year's guidance as a result of any of that."
But the impact of what had been the Flagstar MSRs leaving should start to be felt by the end of 2025, he continued.
UWM also referred to ICE as "an independent, neutral and proven technology provider" in its statement on the agreement.
"They're already in our ecosystem and it was a cross-sell to bring them onto the MSP platform," Jackson added during the call.
