It never hurts to have a strong north star to guide your company through turbulent times.
That certainly rings true in the mortgage lending industry, which has been on a rollercoaster ride amid surging rates and persisting economic uncertainty that has dealt crippling blows to many companies in the sector.
While Rocket Mortgage hasn’t gone unscathed during the recent market shift, the Detroit-based lender has maintained its focus on the long game, adapting where needed and sticking to its own north star in the industry.
RISMedia President and CEO John Featherston and I sat down with Rocket Mortgage CEO Bob Walters who delved into how Rocket Mortgage is thriving amid market headwinds and its ongoing efforts to meet consumer needs today and tomorrow.
John Featherston: You, like many mortgage lenders, have had to reduce staff. But you took a buy-out approach as opposed to laying people off. Tell us about your approach to reducing staff.
Bob Walters: We needed to —as everyone did. The industry went from $4.5 trillion in 2020 and 2021…to a run rate of about $2 trillion or maybe less. You don’t need to be a math major to know that staffing needs are going to change. We offered people a buy-out on a voluntary basis. It was really generous, too. Dan Gilbert founded the company in 1985 and has always cared about long-term strength—building the company for the long run and caring about the people who work with us along the way.
JF: A number of your competitors have scaled back significantly with boots on the ground, but you’ve expanded into Canada. What’s behind your growth?
BW: When you make any decision, you have to start with your “why.” Why is Rocket good for consumers? Whether in the U.S. or Canada, our “why” is helping people get home financing. When I got into this business, clients had to walk into a bank office. It was intimidating, especially when you think about underserved communities where a client may walk into a bank where the bankers don’t look like you. The beauty of our technology is there isn’t an intimidation of talking about your finances while looking at someone across a desk from you. If you want to come in at 2 a.m. in your pajamas and you want to chat with someone, you can do that. When we look at our penetration into historically underserved markets, it’s substantial.
This is a big deal, and it should be a big deal for real estate agents because first-time homebuyers are the ones buying the homes of move-up buyers. If new buyers don’t come into the market, the whole ecosystem falls apart. The more we can access and increase homeownership, the greater the benefit to the people buying the homes, those selling their homes and the agents helping both of them.
A CEO of another mortgage company paid us one of the biggest compliments I’ve ever gotten. He said, “Oftentimes I hate you, but you’ve made us better. The experience that my clients have is better and some of it is because of you.” Competition is good that way. Innovation is good that way. I know we’ll bring some of that to Canada.
JF: In the next six months to a year, what are you going to do differently to help real estate agents in the purchase market?
BW: There are a few things that are really important to agents and certainly their clients.
One, they want to trust that the loan is going to close. It’s important for the buyer to get in the home and for the seller to transact. For the agent, that’s how they earn their living until the loan closes, they don’t make a nickel. They understand not every loan is going to close, but they want to know that you moved heaven and earth to try to close the loan.
Number two is that they want to know what’s happening. Anxiety comes from uncertainty. Human beings can cope with things we understand; it’s the things we don’t understand that bring us great anxiety. So transparency into the process is critical.
The third thing real estate professionals care deeply about is that they’re represented well, because their brand is on the line every single time they enter into a transaction. They want to know someone’s in their corner. Our job is to build products, services and tech and cultures that achieve those three objectives.
Maria Patterson: How is your technology solving for these objectives?
BW: There are tons of things we’re doing to build that transparency and more mobile solutions. We are becoming more of a 24/7/365 organization. That doesn’t mean we have people on staff at 3 a.m. on a Sunday, but the beautiful thing about technology is that it doesn’t get tired. If you’re able to give people answers to questions in real-time and they can access you 24/7/365, that begins to address that transparency.
JF: What are some of the biggest objections you confront in the marketplace, and how are you overcoming them?
BW: One of the things we hear a lot is, “we don’t want to work with you if you’re not local,” and I think local is a bit of code for “you don’t have the same vested interest in this transaction as somebody who is in my bowling league with me.”
We may be in Detroit and you may be in Idaho, but we do know your market. We have a lot of resources, my relationship is with you and we have the same goals. We are doing a lot of interesting things to help agents close faster and more affordably. This gives tools and resources to agents and their clients that they can’t get from the local person. We’re going to lean into that message and we are building those relationships one by one.
MP: Did the pandemic provide a silver lining in that it eroded some of that need to do business locally and in person?
BW: I don’t think any of us wanted to go through that crazy time, but it wound up being one of the biggest social experiments of all time. It’s changed society in many ways.
I like history, and one thing that’s always been true but has recently changed is that people had to be proximate to their work. It was beginning before the pandemic, but then the pandemic turbocharged it. The real estate industry saw a massive amount of it. You saw people decamp. People said “I’m going to live somewhere that I see as attractive from a lifestyle perspective because I don’t need to live in X city to be near work.” Most of us are dealing with each other technologically. That reality is helping us a lot.
JF: What does your ownership of For Sale by Owner (FSBO) mean for real estate professionals? What is Rocket’s relationship with agents in terms of business building?
BW: The number of people who transact by FSBO is quite small. Many of those do turn into leads for agents. The relationships we have with the real estate community have been net additive, providing a lot of leads that have been profitable for the network. But the most important thing in their world is getting the loan closed and providing the financing for that loan. We’ll continue to grow in that space. Those transactions are precious and that’s where we focus, especially at the mortgage company level. If you’re doing 12 transactions a year and one falls out, you just lost 8% of your income. That’s no joke. If we can provide leads that can add a closing, we just added 8% of their income. It’s a symbiotic relationship.
MP: In light of inflation and rising rates, what advice do you have for real estate brokers?
BW: I think it’s the same thing for us and for real estate brokers—at a different scale.
One, it’s important that you know your “why.” If you look at our balance sheet, you don’t see culture, you don’t see pride, you don’t see trust, you don’t see vision. That doesn’t show up, but it should. It’s as real as your accounts receivable. It is the foundation of your company and leaning in during difficult times is critical.
The second thing is to make sure you have a fortress-like balance sheet, especially cash. I had a finance professor say if you’re struggling with profitability, it’s like having a chronic disease. It’s not good, but it will take a while before it gets to you. If you’re having a problem with liquidity, it’s like a heart attack—that can take you down in a moment. We have more capital than 94% of banks in America. It’s reassuring for us, but it should also be reassuring for the people who rely on us: real estate brokers, agents, mortgage brokers and other people who work with us. We’ll be smart about our costs, but because of the aforementioned strength, we don’t have to gut the organization to respond to such a rapid change.
As far as strategic things, if you’re coming up with your strategy when things get weird, it’s too late. Of course you shift and change and think about products, but we’ll do the same things we were doing two years ago and really support agents to make their lives better because—at the end of day—they vote with their confidence every single day.