FTC Seeks to Block Deal Between Top Mortgage Loan Technology Providers
On March 9, the FTC unanimously voted to block the proposed merger between the nation’s largest provider of home mortgage loan origination systems (LOS) and other key lender software tools, and its top competitor that offers the same services. In its complaint, the FTC alleged that one company owns the country’s dominant LOS platform, while the other company owns and operates the second-largest platform. In a press release announcing the administrative complaint, the FTC stated that the deal “would drive up costs, reduce innovation, and reduce lenders’ choices for tools necessary to generate and service mortgages.”
LOS are used to manage the documents and workflow required to generate mortgages. According to the FTC, each of the companies’ LOS platforms compete directly on pricing, including offering discounts and price concessions to win or keep business from one another. In addition to competing in the LOS market, the companies compete to sell other key related services, including product pricing engines, used to calculate interest rates and pricing options. The FTC also stated that the proposal to sell one of the LOS platforms to a third-party, conditioned upon the closing of the acquisition, would not address the anticompetitive concerns in the pricing engine software market and would not replace the strong head-to-head competition between the two companies in the LOS market.
“For many Americans, buying a home is an important investment toward building financial security. This deal would reduce competition in key areas of the mortgage process, ultimately raising costs for lenders and homebuyers,” Patty Brink, acting deputy director of the FTC’s Bureau of Competition, said in a statement shortly after the complaint was announced.
Putting It Into Practice: Although the FTC’s recent antitrust enforcement in technology and healthcare sectors drive the headlines, the FTC’s action to attempt to block this deal shows its commitment to enforcing its antitrust policies across all industries, and the financial services industry is no exception. This action is also an example of federal agency scrutiny of technology service providers to the lending industry, not just the lenders themselves (we previously blogged on federal scrutiny of third parties here and here).