Kroll Factual Data Inc.'s purchase of a midsize provider of merged credit reports positions the Kroll Inc. mortgage screening subsidiary to sell such reports and other settlement services to home lenders.
Before buying Credit Network Trust of Framingham, Mass., Kroll Factual Data was the second-largest provider of credit reports on mortgage customers, according to its president, James Donnan. The reports are based on merged data from the major bureaus, Equifax, TransUnion, and Experian.
The Loveland, Colo., unit of the New York risk consulting company paid $20.5 million in cash for Credit Network's assets. The sale closed March 1 and was announced Tuesday.
Besides sheer scale, which increases negotiating power with the credit bureaus, buying Credit Network gives Factual Data a platform from which to sell its other settlement services to lenders, its executives said.
Factual Data has focused more on selling credit reports to mortgage brokers than to lenders.
But brokers usually do not order many of the services Factual Data offers, such as flood zone determinations, fraud protection, and electronic appraisals, Mr. Donnan said.
Credit Network's lender clients do. Its core big-lender clients include J.P. Morgan Chase & Co.'s Chase Manhattan Mortgage Corp., Quicken Loans Inc., and Centex Corp.'s CTX Mortgage Corp.
Dave Vinson, Factual Data's chief sales officer, called it a "huge synergy" to have "a very good delivery platform for all of our other settlement service products."
Last year Credit Network sold about 2 million merged credit reports, while Factual Data sold about 10.5 million. The combined company will have nearly 16,000 active clients in any month, Mr. Donnan said.
The top mortgage credit report provider, First American Corp. of Santa Ana, Calif., sold 30 million credit reports last year, a majority of which were for mortgage transactions, a spokeswoman said.
(Factual Data also sells services like fraud protection to securitizers, which need to check the loans they put into pools, in part to fulfill Patriot Act requirements designed to prevent money laundering. In addition, it provides background screening on companies and on individuals for landlords and employers.)
Richard J. Downing, Credit Network's president, said it wanted to combine with another company so it could offer lenders guaranteed mortgage packages, as envisioned in the proposed reforms to Real Estate Settlement Procedures Act enforcement.
Credit Network has about 600 clients in all, concentrated in the Northeast. Its 300 main customers send their orders from more than 5,000 locations, Mr. Downing said.
Kroll acquired Factual Data last August. The deal for Credit Network is Factual Data's 47th - and one of its largest - since it went public in 1998. Credit Network will be merged into the unit, part of Kroll's background-screening group.
Kroll said it expects Credit Network to increase revenue by $16.3 million this year. The company boosted its 2004 earnings guidance by 3 cents a share, to a range of $1.49 to $1.53.
Most analysts raised their estimates accordingly. However, a Tuesday report from Janney Montgomery Scott LLC, which also raised its forecast by 3 cents, said the business could be hurt by an expected falloff in refinancing.
Credit Network, "like Factual Data, has been benefiting significantly from the boom in mortgage refinancing, which may decline during the next few years if interest rates rise," the report said.
