Rocket Companies Sees Market-Share Gains as Redfin, Mr. Cooper Synergies Build

Key Points

• Rocket Companies is targeting mortgage market-share gains despite elevated rates, with recent shares reaching 6.2% in purchase mortgages and 14.3% in refinances. Its long-term goals are 8% and 20%, respectively.
• Rocket says its business is better positioned for higher rates, with about 70% of revenue coming from less rate-sensitive products such as purchase lending, servicing, Rocket Money, Rocket Loans and home-equity products.
• Integration of Redfin and Mr. Cooper is generating benefits: Rocket has reached the $400 million annual Mr. Cooper expense-synergy target ahead of schedule, sees an additional $100 million in potential savings, and is using combined customer data to improve cross-selling and servicing recapture.

Rocket Companies NYSE: RKT President and Chief Financial Officer Brian Brown said the company sees opportunities to gain mortgage market share despite pressure from elevated interest rates, citing its diversified revenue base, national distribution network and recently integrated businesses.

Speaking at an investor conference, Brown said inflation and a rising 10-year Treasury yield have continued to pressure mortgage rates. Still, he said purchase mortgage activity could remain near 2025 levels, referencing a Fannie Mae forecast that reduced its purchase-market assumptions but kept projected volumes relatively close to the prior year.

“While there is a lot of pressure,” Brown said, “I think there is still a lot to be excited about and a lot of opportunity ahead of us.”

Housing Market Conditions Vary by Region

Brown said national housing statistics can obscure meaningful differences among local markets. While some markets remain highly competitive for buyers, he said inventory has begun to rise in several areas, including Nashville, San Jose and Seattle.

Rocket’s operations across all 50 states and 3,000 counties give it visibility into those local conditions, Brown said. The company uses a combination of brokers, local loan officers and centralized loan officers to serve different markets.

He also pointed to record home-equity levels as an opportunity, particularly for second-lien and home-equity lending. Brown said Rocket is the largest home-equity lender when both second mortgages and revolving home-equity lines are included, though he noted the company itself focuses on second liens and second mortgages.

Cash-out refinances can also remain relevant for consumers seeking to access home equity, depending on the size of the loan and the amount of cash needed, he said.

Balanced Model Designed for Higher Rates

Brown said Rocket has sought to create a business that can operate through both high- and low-rate environments. While lower rates could spur rate-and-term refinancing activity, he said the company’s acquisitions and investments were made with the expectation that rates could remain elevated for longer.

According to Brown, about 70% of Rocket’s revenue now comes from less rate-sensitive products and services, including purchase transactions, Rocket Money, servicing, Rocket Loans and home-equity-related products. He said the remaining 30% is tied more directly to rate-and-term refinancing and interest-sensitive servicing-related activities.

That compares with Rocket’s prior business mix, when Brown said rate-and-term refinancing represented roughly 70% of revenue. The current revenue composition provides more recurring cash flows in a higher-rate environment, he said.

Brown also emphasized Rocket’s balance sheet, saying the company has less than one times leverage, $3 billion of cash on its balance sheet and access to $11 billion of liquidity. He said Rocket is the only mortgage company with an investment-grade rating from Fitch and also has an investment-grade company rating from Moody’s.

Those resources could allow Rocket to continue investing while other companies in the mortgage sector contend with free-cash-flow and unit-economics pressures, Brown said. He expects industry consolidation to continue.

Affordability Initiatives and Cross-Selling

Affordability remains a significant challenge for homebuyers as mortgage payments consume a larger portion of household income than they did five years ago, Brown said. He said Rocket’s combination of home search, brokerage, lending, title, closing and servicing operations enables it to share value from multiple parts of a transaction with consumers.

Brown said consumers who use Rocket Mortgage, Redfin and a Redfin agent can receive pricing discounts of up to $6,000 or $10,000. Existing servicing customers and returning clients may qualify for savings of up to $20,000, he said.

He maintained that these incentives have not prevented the company from improving EBITDA margins because Rocket collects revenue across multiple business lines and has continued to reduce costs through integration work and other efficiencies.

Brown said artificial intelligence is also supporting Rocket’s efforts to grow capacity without proportionally increasing headcount. He said product managers, designers and business employees can now make some system configuration changes that previously required engineering resources, shortening development processes.

Rocket’s goal is to expand capacity at the same or lower fixed cost rather than relying primarily on hiring, Brown said. He added that the company is using proprietary systems and client data to support its AI efforts, including data from 60 million call logs and interactions with 9.5 million clients.

Integration Progress and Market-Share Ambitions

Brown said integrating Redfin and Mr. Cooper has been difficult but has produced operational and financial benefits. He highlighted the transfer of 2.5 million loans onto the Mr. Cooper servicing platform, which he said has created a unified data set spanning 9.5 million clients.

Rocket reported that it has reached the full $400 million annual expense-synergy target associated with Mr. Cooper more than a year ahead of plan on a run-rate basis, Brown said. The company also disclosed on its most recent earnings call that it had visibility into an additional $100 million of savings.

On the revenue side, Brown said Rocket has exceeded its expectations for improving recapture rates among Mr. Cooper customers. He said the company is focused on improving the customer experience when mortgage servicing rights are transferred, including preserving autopay and escrow arrangements, and using more personalized marketing based on customer data.

Brown said Redfin’s home-search activity can also provide signals about a servicing customer’s intent to buy or sell a home. Redfin attracts 50 million people each month searching for homes, he said.

Rocket’s purchase market share reached 6.2% and its refinance share reached 14.3% in the most recent quarter, approaching long-term targets of 8% and 20%, respectively, according to the conference discussion. Brown said the company intends to pursue those targets through a multi-channel strategy that includes direct lending, broker and wholesale relationships, correspondent activity, servicing recapture, Redfin and partnerships such as Compass.

Looking ahead, Brown said Rocket is largely through the integration process and is focused on execution. “We have to execute on them,” he said of the company’s assets and capabilities. “That is a challenge that I am willing to accept.”

About Rocket Companies (NYSE:RKT)

Rocket Companies, Inc is a Detroit-based financial technology company that provides digital platforms and services for homeownership and personal finance. Its flagship business, Rocket Mortgage, originates and services residential mortgage loans through an online application and lending process, serving borrowers across the United States.

The company also operates Rocket Homes, a real estate platform that connects consumers with real estate agents and home-buying resources; Rocket Loans, which provides personal loans; and Rocket Money, a personal finance app designed to help users manage subscriptions, budgeting and other aspects of their financial lives.

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