As executives at The Rocket Companies (NYSE: RKT) experience first-hand, it’s a tough time to be in the mortgage business.
But with profits plummeting amid skyrocketing interest rates, inflation and sluggish consumer confidence, executives at Detroit-based Rocket Mortgage parent and other consumer financial services firms are optimistic that their companies can withstand a recession. He said he remains focused on creating
And they are down.
Rocket Companies reported a net profit (net profit) of $60 million on Thursday. That was down more than 94% from the second quarter of last year — where pandemic-era lowest interest rates fueled a mortgage boom — in the second quarter of this year, compared with $2.7 billion in the same period last year. is a dollar.
Mortgage originations fell by more than half to $34.5 billion from $88.5 billion in the second quarter of last year. In the outlook for the next quarter, the decline continues, with completed loans expected to fall from $23 billion to $28 billion.
To put the challenges reported by Rocket on Thursday in a broader context, the overall U.S. mortgage market is expected to drop from about $4 trillion last year to just under $2.7 trillion this year, to about $2.25 trillion in 2023. The dollar is projected to fall. Based on data from the Mortgage Bankers Association, a Washington, DC-based trade group.
But with these challenges, CEO Jay Farner says senior executives at the company are working around the clock to diversify the company away from just mortgages.
“I’ve never seen anything like it before in my 27 years at the organization,” Farner told analysts on Thursday afternoon’s earnings call after the company’s report was released. “The work we do, and no one else does, truly differentiates the company and pushes it far beyond just being a mortgage lender.”
To that end, Farner points to a series of recently announced initiatives. These initiatives, some unique to the mortgage sector and some not, will help weather the storm, he said.
Among those initiatives:
- news early this week Rocket Companies’ early solar financing initiative paired with its personal lending arm, Rocket Loans, to provide consumers with financing for the installation of solar energy infrastructure.
- Expansion into the Canadian mortgage market, headquartered across the Detroit River in Windsor; announced Early this month.
- of Acquired for $1.3 billion Late last year, personal finance app TrueBill was renamed Rocket Money. Paid Premium His member user numbers surpassed 2 million in July, more than doubling year-on-year, according to the company, and the brand launched its first credit card in beta last quarter. was launched.
- Rocket Companies reports two new industry partnerships, including Q2, a financial technology company based in Austin, Texas. This allows Rocket to work with local banks and credit unions to provide mortgages without having to manage its own mortgage operations. Additionally, the company says it is working with financial giant Santander, which provides Rocket Mortgage services to approximately 2 million clients.
Farner said the company has devoted more than 2,000 of its roughly 26,000 employees to such efforts.
“You often have to put a lot of effort into something other than your core mortgage[business]to grow the platform as a whole and grow your mortgages,” said Farner. \
“That’s what you see what we’re doing now. We’re taking those resources and salaries and accelerating that engagement component of our platform,” the CEO continued. “So going into 2023, we expect the mortgage market to still be quite challenging, but we want to be able to lower our (business) acquisition costs and actually spend more on marketing and grow our market share. to.”
Despite the significant challenges facing the company, Rocket Companies’ earnings report shows a company with a strong balance sheet, with total liquidity of approximately $7.3 billion, including more than $900 million in cash. increase.
Farner said additional M&A is still possible, specifically “services that can be added to drive revenue.”