Mortgage lending giant Rocket Companies is seeing “some awesome early data” from its acquisition of real estate brokerage Redfin that bodes well for the company’s goal of boosting its market share in purchase lending by 50 percent, CEO Varun Krishna said Thursday.
In its final earnings report before two big acquisitions broaden its horizons, Rocket Companies said it boosted second-quarter loan volume by 18 percent from a year ago to $29.1 billion.
Revenue for the quarter was up 4 percent from a year ago, to $1.36 billion, but a $200 million paper writedown in the fair value of Rocket’s massive loan servicing portfolio weighed on Q2 profits, which were down 81 percent from a year ago to $34 million.
With Rocket’s acquisition of Redfin closing on July 1, the day after the quarter ended, the Detroit-based lender said it expects Q3 revenue to grow to between $1.6 billion and $1.75 billion. Rocket’s planned merger with loan servicing giant Mr. Cooper remains on track to close by the end of the year, the company said.
Krishna said Rocket has already seen a surge in leads and higher conversion rates from the Redfin deal, thanks to “cross-pollination” of leads, agent referrals and mortgage applications.
On the day the Redfin merger closed, Rocket rolled out preferred pricing for borrowers involved in deals where the buyer or seller is represented by a Redfin agent.
“In terms of the actual integration, I do want to share that I am so proud of the amount of work that was completed before and after the close, leading us to be integration-ready on day one,” Krishna said on Thursday’s earnings call.
“On Day One we had co-branding, ‘Redfin powered by Rocket.’ On Day One, we launched prequalification buttons on every home listing page,” Krishna said. “On Day One we launched a preferred pricing bundle, saving consumers money. On Day One we had the ability for Realtors to refer to Rocket — as well as the ability to create demand from Rocket to Redfin.”
Rocket funded $50.1 billion in purchase loans last year, making it the second biggest provider of financing to homebuyers with 3.9 percent market share, according to an analysis by iEmergent. The company, formerly known as Quicken Loans, has set a goal of boosting its market share in purchase lending to 6 percent.
Rocket will benefit not only from Redfin’s 2,200 in-house agents, but “an extensive partner network of thousands of [additional] agents,” Krishna said.
“We’re bringing together the Rocket Homes agent network together with the Redfin agent network, so that allows us to achieve more synthetic scale,” Krishna said. “The key thing that we also have with the Redfin experience is really traffic. It’s the relationships with 50 million consumers at the top of the funnel, and the ability to connect directly with those consumers.”
Rocket’s first Redfin client closed on a home in Colorado in just 10 days, and since July 1, “we’ve seen over 65 Redfin clients close on their dream home with Rocket Mortgage,” Krishna said.
“There’s been a nice jump at the top of the funnel” in July, Krishna said, with nearly 200,000 people clicking on the “get prequalified” button on Redfin’s site. Among those who had a Redfin account, 23 percent became a contactable lead at Rocket, “and 12 percent of all users who enter the funnel go on to start an application, taking a significant step toward home ownership.”
About 7,000 agent referrals have been sent to Rocket Mortgage, and clients referred from Rocket to Redfin are 30 percent more likely than those from other channels to upgrade to verified approval letters, he noted.
Varun Krishna
“These results, while early, highlight the art of the possible when the Redfin and Rocket platforms are fully connected together,” Krishna said. “We’re meeting our clients at their moment of intent and providing a seamless experience from home search to financing, fundamentally changing the way homes are bought, sold and financed.”
Rocket Chief Financial Officer Brian Brown said Rocket expects to achieve $200 million in total synergies from the $1.75 billion Redfin deal — $140 million on the expense side, and $60 million in revenue on revenue synergies.
“It’s early, but we are encouraged by the results we’re seeing so far,” Brown said.
Rocket executives have said that by handling every aspect of homebuying and selling — from home search to mortgage financing and title and closing — they think they can slash consumer transaction costs on the median priced home in half, to $20,000.
Rocket: Merger will cut transaction costs by $20K
Source: Rocket Companies investor presentation.
In an investor presentation, Rocket broke down transaction costs for a $430,000, median home price that included $15,000 in lender profits, $12,000 each to listing and buyer’s agent and $1,000 in title insurance.
Redfin will remain headquartered in Seattle, with CEO Glenn Kelman continuing to lead the business and reporting to Krishna.
Reflecting on the deal and changes in the real estate industry at Inman Connect San Diego Thursday, Kelman acknowledged that “there are economies of scale now in this industry.”
“It was so painful for us that Homes.com and Costar and Zillow and Realtor.com were using [their] big balance sheets to advertise so aggressively in the downturn,” Kelman told Inman founder Brad Inman. “And now you also see this consolidation of the website, the broker, the lender, where it’s so expensive to build a relationship with the consumer — it’s so much work.”
Although “there’s pressure on the agent to sell the consumer more services … I think [that] will help us give the consumer a better deal,” Kelman said.
While the “synergies” to be realized from mergers and acquisitions typically involve layoffs, Kelman sounded hopeful that the fallout from the deal will be limited.
Rocket reportedly laid off 2 percent of its workforce this month, a move the Detroit Free Press estimated affected 284 employees based on the company’s year-end 2024 headcount of 14,200.
“I think most people don’t realize what a bizarre company Rocket is,” Kelman said. “It has this deep relationship to Detroit, and almost every decision that it makes — even though lending is this cutthroat business where you want to compete on rates — their decision making, our decision making, is refracted through being the best employer, offering the best service and treating employees with dignity.”
Mr. Cooper deal on track to close in Q4
Rocket was the nation’s leading provider of refinancing in 2024, with $44.5 billion in 2024 refinancing volume accounting for 11.3 percent of that market, according to iEmergent.
Executives at the company say Rocket’s pending acquisition of loan servicing giant Mr. Cooper will help them achieve a goal of capturing 20 percent of the refinancing business. Mr. Cooper shareholders are set to vote on the merger at a Sept. 3 special meeting.
Once the $9.5 billion deal closes, Mr. Cooper Chair and CEO Jay Bray is set to become President and CEO of Rocket Mortgage.
Rocket will be collecting monthly payments on $2.1 trillion in outstanding loans from nearly 10 million homeowners — about 1 in 6 U.S. mortgages — giving it a leg up on competitors when those borrowers are ready to refinance.
“The integration planning is in full force, and our teams are meeting and collaborating closely,” Brown said on Thursday’s earnings call. “We remain on track to close the Mr. Cooper transaction in Q4.”
Loan servicing can also help lenders weather ups and downs in the business cycle — Rocket’s existing $609 billion loan servicing portfolio generates $1.6 billion in annual fee income.
Ups and downs in interest rates require loan servicers to update the fair value of their loan servicing portfolios, which can result in unusually big paper profits or losses when reporting earnings using generally accepted accounting principles (GAAP).
After adjusting for that and other factors, Rocket posted $172 million in Q2 adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), down 22 percent from a year ago.
Shares in Rocket, which in the last 12 months have traded for as little as $10.06 and as much as $21.38, closed at $14.77 Thursday and were up 5 percent in after-hours trading.
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