Home loan giant boosts Q1 mortgage production by 7 percent, to $21.6 billion, says Redfin and Mr. Cooper acquisitions remain on track to close this year.
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Home loan giant Rocket Companies boosted first-quarter mortgage production by 7 percent to $21.6 billion, but posted a $212 million net loss Thursday that largely reflects paper writedowns of the value of the company’s mortgage servicing rights portfolio.
Investors in Rocket — which is poised for future growth through its plans to acquire real estate brokerage Redfin and Mr. Cooper, the nation’s largest loan servicer — took the loss for the quarter in stride.
The drop in mortgage rates during the first quarter prompted Rocket executives to trim $449 million from the fair value of the company’s mortgage servicing rights (MSRs) — an accounting move other lenders who service their loans are also having to make.
Shares in Rocket, which in the last 12 months have traded for as little as $10.06 and as much as $21.38, closed at $11.65 before earnings were released Thursday. Shares initially fell 2 percent in after-hours trading before rebounding.
A fintech platform that includes mortgage, real estate search, title insurance and personal finance businesses, Rocket generated $1.296 billion in adjusted revenue, up 11 percent from a year ago. Rocket executives said they expect Q2 adjusted revenue of $1.175 billion to $1.325 billion.
Rocket’s home equity loan offering “hit another record quarter, as homeowners looked to access their equity without affecting their first-lien mortgage rate,” the company said; plans to acquire Redfin for $1.75 billion are expected to close in Q2 or Q3.
Rocket’s plans to acquire Mr. Cooper for $9.4 billion remain on track to close in the fourth quarter, the company said. In April, Rocket Mortgage extended an existing $1.15 billion revolving credit facility, which will be upsized to $2.25 billion following the closing of the Mr. Cooper acquisition.
While the spring homebuying season usually generates an increase in mortgage purchase applications from March to April, volatility in stock and bond markets fueled by uncertainty over tariffs drove mortgage rates up and consumer confidence down, Rocket CEO Varun Krishna said.
Varun Krishna
“We saw weekly purchase applications actually decline by double digits throughout April, which the industry hasn’t experienced since 2009 during the great financial crisis,” Krishna said. “While the short-term headwinds are shaping consumer behavior, certainly it also reinforces our conviction for who we are and where we’re going in this environment.”
An integrated homeownership platform “becomes an essential pursuit, whether clients are searching financing or servicing their home, we believe Rocket must be built to meet them where they are and take them where they need to go. Providing more value across the entire chain is the best way to both grow our share and enable a better experience.”
Krishna said the Redfin and Mr. Cooper acquisitions “are fundamentally about three things — strengthening our business model, fueling our platform with data and ecosystem partners to power Rocket’s AI, and building an elevated client experience.”
Integration is “a top priority” for Rocket’s leadership team, he said, which over the past several weeks has been working closely with leaders at Redfin and Mr. Cooper.
Brian Brown
Thanks to investments in AI and other technology, Rocket announced in September that it could support $150 billion in annual mortgage originations without adding even $1 of additional fixed costs, Rocket Chief Financial Officer Brian Brown said.
Rocket’s capacity to scale without adding costs “continues to grow every day and is now well north of $150 billion,” Brown said.
“AI and automation continue to significantly enhance productivity and provide levers to scale efficiently,” Brown said. “If the housing market and rate environment doesn’t cooperate, we have the ability to turn that excess capacity into cost savings in the second half of this year.”
The “option value” associated with Rocket’s excess capacity “is a luxury that we believe only Rocket has, and is a direct result of the significant power of the investments over the past decade,” Brown said.
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