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Intercontinental Exchange on Track to Automate Mortgage Work

Zacks Equity Research

Intercontinental Exchange, Inc. ICE recently unveiled that MERSCORP Holdings, Inc. (“MERS”), which is part of ICE Mortgage Services, has teamed up with Federal Home Loan Bank (“FHLBank”) System. Notably, Intercontinental Exchange acquired MERS completely in 2018.

The 11 FHLBanks have been catering to nearly 6,900 member financial institutions across the United States by providing steady source of funds for housing finance, community lending and asset-liability management.

It has to be noted that these members primarily use residential mortgage loans, and government and agency securities as collateral.

Deal in Details

The main motive behind the partnership with MERS is to facilitate faster acceptance of eNotes as eligible and pledged collateral by FHLBanks. In order to do so, member financial institutions will integrate with the MERS eRegistry and work closely with their respective FHLBanks.

While the integration is likely to be completed in third-quarter 2020 per some FHLBanks, the rest anticipates to be fully integrated in the fourth quarter that might continue into the next year.

Moreover, digitization of the mortgage manufacturing process is a necessary and well-timed one since the mortgage industry has been grappling with a document-centric and manual production chain for a long time. MERS as a partner also seems to be apt for enabling faster adoption of digitally executed mortgages as it has been backing eMortgage adoption for quite some time.

Consistent Efforts Bode Well

Intercontinental Exchange has been making every effort to expand presence and automate the mortgage marketplace through acquisitions. The company has invested about $11.5 billion in its strategy to automate the mortgage workflow.

Its recent buyout of Ellie Mae this month is a testament to the same. Notably, the buyout of Ellie Mae marks the company’s third acquisition for expanding its mortgage services division. Other two buyouts include the MERS in 2018 and Simplifile in 2019.

The company operates MERS and Simplifile through ICE Mortgage Services. These initiatives have enhanced the company’s suite of mortgage products, which have fetched mortgage services revenues of $98 million, soaring 104.2% year over year in the first half of 2020 primarily driven by Simplifile buyout.

Price Performance

Shares of this company have gained 12% in a year’s time compared with the industry’s growth of 1.2%. The company’s peers, namely, MarketAxess Holdings Inc. MKTX have rallied 35.7% in a year’s time, while that of CME Group Inc. CME and Cboe Global Markets, Inc. CBOEhave lost 19.5% and 25.4%, respectively, in the same time period.


The stock carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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