MIM Password Registration Portal - Basic Authentication works, but not Windows Authentication

So I am facing an issue with Password Registration Portal. If I change authentication mode from Windows to Basic, it will start working.

What could cause the issue that when Windows authentication is enabled, Password Registration Portal won't work.

Trying to access the portal, IE prompts credentials 3 times and then displays HTTP Error 401.1 Unauthorized Error page.

The page says:

Detailed Error Information:



Module
   WindowsAuthenticationModule

Notification
   AuthenticateRequest

Handler
   PageHandlerFactory-ISAPI-2.0-64

Error Code
   0x80090305



Requested URL
   http://register.universum.com:66/default.aspx

Physical Path
   C:\Program Files\Microsoft Forefront Identity Manager\2010\Password Registration Portal\default.aspx

Logon Method
   Not yet determined

Logon User
   Not yet determined