With the mortgage industry in flux, Rocket Companies Inc., the parent of Rocket Mortgage and several other mortgage and finance companies, felt the sting of a changing lending environment, which showed in its latest earnings report.
The Detroit-based company saw a sharp drop in its profits in the second quarter of 2022 after earning $1.4 billion—down 52% from the same quarter last year when it raked in $2.7 billion. The company tallied a $60 million profit for the quarter compared to the $1 billion it made in the first three months of 2020.
According to company executives, the performance indicated the rapidly shifting mortgage industry, which has faced volatile mortgage rates and declining consumer sentiment that climbed to nearly 6% in June.
Rocket Mortgage saw its mortgage origination closed loan volume drop from $83.76 billion in Q2 last year to $34.5 billion this year.
“In this time of flux, we have taken proactive steps to optimize our core mortgage operations by improving lead capture and allocation, launching new products, signing new partnerships, and aligning our resources internally,” said Rocket Company’s CEO and vice chairman Jay Farner in a Thursday earnings call.
While the lending industry is poised for further changes that could strain business, Farner indicated that Rocket is adapting its mortgage operations to the current market environment while also focusing on “managing the business with discipline.”
During Rocket’s first quarter earnings call, the company indicated that it would implement “significant cost reduction measures” during the second quarter. Based on Rocket’s Q2 report, the company exceeded the reduction by $100 million, reducing expenses by $300 million from Q1 to Q2.
The accelerated reduction was primarily tied to “the challenging macro environment,” according to Rocket Companies CFO Julie Booth, who expects the reductions to continue in the third quarter.
She telegraphed to investors that Rocket’s expected expense reduction was between $50 million and $150 million from Q2 to Q3.
“Looking ahead into Q3, we expect our core mortgage business to continue to face headwinds,” she said, adding that the company expects closed loan volume to range from $23 billion to $28 billion—down nearly $10 billion from Q2.
Farner struck a confident and optimistic tone during the call despite the anticipated headwinds, highlighting Rocket’s ongoing efforts and investment into “revolutionizing” the company’s platform and unifying its business under the “Rocket umbrella.”
In a Thursday press release, Rocket Companies highlighted that it deployed more than 2,000 team members—across technology, product strategy, data intelligence, and marketing functions—to expand and accelerate the build-out of Rocket’s engagement and services platforms.
In August, Truebill—acquired in December 2021—will rebrand to Rocket Money, while the company announced in July that it would do the same with its Canadian digital mortgage company Edison Financial—which will rebrand to Rocket Mortgage in Canada in August.
“These two rebranding initiatives leverage our continued investments in the trusted Rocket brand and draw our businesses closer together,” Farner said.
Rocket also signed a new agreement to originate mortgages for Santander in July. According to a Rocket press release, the deal is slated to bring 2 million U.S. clients to Rocket Mortgage.
Stepping beyond the mortgage market, Farner highlights the performances of Rocket Homes and Rocket Solar, which experienced growth during the quarter.
The former—Rocket’s home search platform and real estate agent referral network—grew overall real estate transactions by 25% in the second quarter compared to Q2 last year. Farner also noted that Rocket Homes experienced nearly a 60% increase in web traffic YoY, with almost 3 million unique visitors per month.
Rocket Solar continued its national expansion in June and is now available in 42 metropolitan areas, including Arizona, Florida, and South Carolina. Starting in August, Rocket Solar will be working with Rocket Loans to provide solar financing options for our clients.
“Consequently, the Rocket flywheel is poised to spin faster than ever as we enter 2023,” Farner said.