With rising mortgage rates drastically curtailing lending, Rocket Mortgage saw third-quarter mortgage originations plummet by 73 percent from a year ago, to $23.7 billion.

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The parent company of the nation’s largest mortgage lender, Rocket Mortgage, saw third quarter profits nearly evaporate as revenue fell faster than the company could cut expenses.

Rocket Cos. reported $96 million in net income Thursday, down 93 percent from year ago, as revenue fell 58 percent to $1.295 billion. Expenses at Rocket — which has been slimming its payroll through attrition and voluntary buyouts — were down 30 percent from a year ago, to $1.188 billion.

With rising mortgage rates drastically curtailing refinancings and also denting purchase lending, Rocket Mortgage saw third-quarter mortgage originations plummet by 73 percent from a year ago, to $23.7 billion.

On the bright side, Rocket boosted its loan servicing portfolio by 2 percent, with 2.5 million borrowers making payments on $531 billion in outstanding mortgage debt. The servicing portfolio generates more than $1.4 billion in recurring income a year, the company said.

The company managed to boost liquidity by $1.5 billion, to $8.8 billion, which included $4 billion in cash and $3.1 billion in undrawn lines of credit. Rocket Cos. CEO Jay Farner framed the challenges rising mortgage rates pose for the industry as a whole as an opportunity.

Jay Farner

“This period of change and reset in the mortgage industry creates significant opportunity for Rocket,” Farner said in a statement. “The company operates from a position of strength, which is clear from our $8.8 billion of liquidity and differentiated competitive advantages in brand, technology, data insights, client experience and client engagement.”

Rocket said it expects fourth quarter adjusted revenue of between $600 million to $750 million, closed loan volume of between $17 billion and $22 billion.

During the past year, shares in Rocket have traded for as little as $5.97 and as much as $18.13. Shares in Rocket, which closed at $6.51 before Thursday’s earnings release, were down 7 percent in after hours trading.

Rocket has been working to reposition itself as a fintech this year, with Farner outlining a goal of unlocking “the lifetime value of the client” by cross marketing products and services offered by other companies under the Rocket umbrella.

While providing home loans through Rocket Mortgage is Rocket’s biggest business, it also helps consumers line up real estate services, personal loans, used cars and rooftop solar systems through subsidiaries Rocket Homes, Rocket Loans, Rocket Auto and Rocket Solar.

The latest example of that effort is the launch of a “Rocket Rewards” loyalty program that, in addition to providing up to $10,000 in savings on purchase mortgage closing costs, will be expanded to provide discounts on other “ecosystem” offerings including personal loans and solar panels.

“We are actively investing in the Rocket Platform to attract more consumers, lift conversion and lower client acquisition cost,” Farner said Thursday. “This week, we launched Rocket Rewards, our new loyalty program and a key component of our platform. We expect our new offerings and investments to unlock the true growth potential and scale of Rocket.”

During the third quarter, Rocket:

  • Rebranded its personal finance app, Truebill, as Rocket Money, and offered free premium accounts to Rocket Mortgage customers
  • Rolled out home equity loans for debt consolidation
  • Increased Rocket Mortgage’s conforming loan limit to $715,000 ahead of an official increase
  • Signed a deal with Santander Bank to be the exclusive preferred mortgage provider for the bank’s nearly 2 million customers
  • Integrated Rocket Mortgage’s digital mortgage application into Q2’s online banking platform for banks and credit unions
  • Appointed a new CFO (Brian Brown) and general counsel (Tina John)
  • Rebranded its Canadian mortgage subsidiary, Edison Financial, as Rocket Mortgage

More recently, Rocket has:

  • Announced a conventional loan option for purchasing or refinancing a manufactured home
  • Rolled out a branded client portal for correspondent lenders that lets homebuyers apply for loans, review documents and e-sign disclosures and closing documents

Editor’s note: This story has been updated to correct that while Rocket Cos. reported a $166 million third quarter adjusted net loss, it reported $96 million in GAAP net income (Generally Accepted Accounting Principles). 

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Email Matt Carter

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