Rocket Cos., a Detroit-based fintech platform company consisting of Rocket Mortgage, Rocket Homes, Rocket Loans, and Rocket Money, reports that with new programs and cost cutting, the companies generated total revenue of $1.2 billion and GAAP net income of $115 million in the third quarter that ended Sept. 30.
“I am very proud of our team for delivering strong results against a challenging economic backdrop,” says Varun Krishna, CEO of Rocket Cos. “In today’s climate, innovation is essential. With the incredible amount of data in our ecosystem, paired with the transformative power of AI, Rocket is uniquely positioned to disrupt the industry. We’re just getting started and can’t wait to show you what we are building to revolutionize homeownership.”
Rocket Mortgage generated $22.2 billion in mortgage origination closed loan volume. The gain on sale margin was 2.76 percent, the third consecutive quarter of gain on sale margin increase.
Rocket gained purchase market share in the quarter, both year-over-year and quarter-over-quarter. The company reported that total liquidity was approximately $8.7 billion, as of Sept. 30, which includes $1.0 billion of cash on-hand, $2.8 billion of corporate cash used to self-fund loan originations, $3.3 billion of undrawn lines of credit, and $1.7 billion of undrawn Mortgage Servicing Rights (MSR) lines.
Third quarter figures showed that its servicing book unpaid principal balance, which includes subserviced loans, was $506 billion as of Sept. 30. The servicing portfolio includes 2.4 million loans serviced.
The portfolio generates approximately $1.4 billion of recurring servicing fee income on an annualized basis. During the quarter, the company acquired mortgage servicing rights on certain agency loans for a total consideration of $103 million.
The MSR acquisition added $6.2 billion of unpaid principal balance for loans with a weighted average coupon well above that of our current portfolio, providing a refinance opportunity when rates decline.
The company also reported that Rocket Mortgage net client retention rate was 97 percent for the 12 months ended Sept. 30. There is a strong correlation between this metric and client lifetime value. Company officials believe its net client retention rate is unmatched among mortgage companies and on par with some of the best performing subscription business models in the world.
In other news, the company reported that since launching in April, BUY+, the Rocket-exclusive collaboration between Rocket Mortgage and Rocket Homes, the 50-state home search platform and real estate agent referral network, has continued to exceed expectations, as it saw attachment rate, defined as clients who use both Rocket Mortgage and Rocket Homes, nearly double.
BUY+ helps clients save thousands of dollars in upfront costs if they work with a Rocket Homes Partner Real Estate Agent and obtain financing with Rocket Mortgage.
Furthermore, ONE+, the company’s 1 percent down home loan program, has gained traction since our launch in May, with closing volume and loan units more than tripling from June to September. ONE+ increases access to home ownership for low-to-moderate-income Americans facing home affordability challenges.
And the company’s home equity loan product continued to grow, as volume more than doubled in the third quarter, compared to the beginning of this year. Rocket’s home equity loan product enables homeowners to tap record levels of home equity without affecting the lower rate on their first lien mortgage, a particularly compelling value proposition in the current market environment.
In August of this year, Rocket delivered 20 percent faster purchase turn times and reduced manual touches by more than 20 percent, compared to the same time last year. This scale of data assets provides a strong foundation to automate routine and complex tasks, enhance productivity and operational efficiency, and transform the client experience through generative AI.
In October, the company unveiled enhancements to its Pathfinder tool, a proprietary AI and machine learning-powered search engine that helps loan officers easily obtain answers to complex underwriting qualification or loan processing questions.
Current testing of an AI chat interface within Pathfinder has shown a 69 percent improvement in speed to resolutions compared to the existing process. Building on this success, Rocket is enhancing the Pathfinder experience by integrating large language models (LLM) to encompass over 3,300 new loan scenarios.
Pathfinder, trained on 400,000 pieces of content and 75,000 daily data points, is utilized by more than 40,000 mortgage professionals, generating 1.5 million monthly page views and automated actions. Launched in 2020, Pathfinder, an industry-first tool, has continually evolved, incorporating a machine learning framework, custom Google AI search, and now, generative AI.
And Lendesk Technologies, Rocket’s Canadian technology services company offering a suite of products to digitize the Canadian mortgage experience, launched Lender Spotlight AI Assistant, a tool that helps brokers easily and seamlessly obtain accurate answers from a database of over 7,000 mortgage policies.
Executives also expect annualized cost savings of approximately $200 million, the high end of the original $150 to $200 million range, because of company-wide prioritization and cost reduction efforts across expense categories, including a voluntary career transition program conducted in July. These cost savings will take full quarter effect in the fourth quarter.
As to the fourth quarter 2023 outlook, the company expects adjusted revenue of between $650 million to $800 million.
