Rocket hopes the $9.4 billion deal will help it capture 20 percent of all mortgage refinancing and wrest back its title as the nation’s biggest mortgage lender from rival United Wholesale Mortgage.
Mortgage lending giant Rocket Companies is one step closer to acquiring the nation’s largest mortgage servicer Wednesday after Mr. Cooper shareholders voted to approve the merger[1].
When the deal closes, Mr. Cooper shareholders will receive 11 shares of Rocket for each of their Mr. Cooper shares, plus a special cash dividend of $2 per share.
Under the terms of the merger agreement, Mr. Cooper shareholders will own about 25 percent of the combined company, and Mr. Cooper Chair and CEO Jay Bray will become president and CEO of Rocket Mortgage.
Rocket — the parent company of Rocket Mortgage, Redfin and personal finance app Rocket Money — hopes the $9.4 billion deal[2] will help it regain its title as the nation’s leading mortgage lender, snatched away by rival United Wholesale Mortgage[3] in 2022.
Rocket announced Tuesday[4] that it’s restructured nearly $3 billion in debt owed by Mr. Cooper subsidiary Nationstar Mortgage Holdings under a plan announced in June[5], and has extended the deadline for creditors to particpate to Sept. 30.
Last year, Rocket CEO Varun Krishna set a goal of growing the company’s market share in purchase lending to 8 percent by 2027 and to capture 20 percent of U.S. mortgage refinancings.
Rocket Mortgage’s $50.1 billion in 2024 purchase loan originations represented 3.9 percent of the market, and it accounted for 11.3 percent of refis with $44.5 billion in originations, according to an analysis by iEmergent[6]. According to iEmergent data, UWM’s $139.7 billion in 2024 mortgage originations represented 7.7 percent of the overall market, compared to Rocket Mortgage’s 5.4 percent market share.
Rocket’s investment in technology made its website a popular destination for homeowners seeking to refinance at historic low rates during the pandemic.
But UWM — a wholesale lender that works with independent mortgage brokers — has used competitive pricing and brokers’ ties to real estate agents to get an edge in the purchase loan business.
Rocket is hoping its acquisition of Redfin, which closed July 1, will boost its share of the purchase loan business. Rocket now offers preferred pricing for borrowers[7] involved in deals where the buyer or seller is represented by a Redfin agent, and is seeing “some awesome early data[8]” from integration of the companies’ operations, CEO Varun Krishna said in reporting second quarter earnings.
The Mr. Cooper deal should boost Rocket’s refinancing business, as it “recaptures” more homeowners when they’re ready to refi or buy their next home.
Together, Rocket and Mr. Cooper service about $2 trillion in outstanding loans, collecting monthly mortgage payments from 10 million homeowners, or about one in six U.S. mortgages.
Legislation that would place new restrictions on mortgage “trigger leads”[9] could prove to be a boon for lenders who also service their own loans (H.R. 2808, the Homebuyers Privacy Protection Act[10], is sitting on President Trump’s desk and will take effect 180 days after he signs it).
If Rocket can capture 20 percent of next year’s projected $715 billion refi market[11], that would amount to $143 billion in refinancing business — 41 percent more than the company’s $101.2 billion in total 2024 loan production.
Loan servicing can also provide a steady source of income when lending slows down. Mr. Cooper earned $332 million in Q2 pretax income[12] by collecting monthly mortgage payments from 6.4 million homeowners on behalf of lenders and investors in mortgage-backed securities (MBS).
UWM has responded to Rocket’s plans to acquire Mr. Cooper by pulling its own loan servicing[13] from the company and signing a long-term agreement with ICE Mortgage Technology[14] to bring servicing in-house.
UWM CEO Mat Ishbia thinks the wholesale lender’s embrace of AI and competitive pricing will help the independent mortgage brokers it partners with compete for borrowers. UWM boosted refinancing by 93 percent from a year ago in Q2, to $12.4 billion.
“Most people think you need to have the client in your servicing book to refinance them,” Ishbia said[15] on the company’s Q2 earnings call. “We don’t refinance any borrowers — our brokers do.”
Senate Democrats voiced concerns to antitrust regulators in June that by acquiring Redfin and Mr. Cooper, Rocket is “attempting to dominate the entire homebuying process.”
But the June 4 deadline for antitrust regulators to voice objections to Rocket’s plans to acquire Mr. Cooper came and went with no objections from the Department of Justice or the Federal Trade Commission.
Last month, Fannie Mae and Freddie Mac’s federal regulator determined the Mr. Cooper deal doesn’t pose a risk[16] to the mortgage giants, as long the merged company doesn’t handle more than 20 percent of their business.
As of June 30, Fannie and Freddie were guaranteeing payments to investors for $6.73 trillion in single-family mortgages that have been packaged into MBS.
Rocket and Mr. Cooper service $960 billion in MBS backed Fannie and Freddie, or about 15 percent of their business, BTIG analysts Eric Hagen and Jake Katsikas estimated in an Aug. 27 report.
“Every other servicer is currently below 10 percent share,” BTIG analysts said. “Having 5 percent headroom for Rocket to take additional market share is still considerable growth ($350+ billion), and in the near-term it could likely only get there with another acquisition of a top-5 servicer.”
Another area for growth is Ginnie Mae’s $2.6 trillion single-family MBS[17] portfolio, mostly comprised of loans insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA).
Get Inman’s Mortgage Brief Newsletter delivered right to your inbox. A weekly roundup of all the biggest news in the world of mortgages and closings delivered every Wednesday. Click here to subscribe.[18][19]
References
- ^ voted to approve the merger (www.businesswire.com)
- ^ $9.4 billion deal (www.inman.com)
- ^ snatched away by rival United Wholesale Mortgage (www.inman.com)
- ^ announced Tuesday (www.sec.gov)
- ^ plan announced in June (www.inman.com)
- ^ iEmergent (www.iemergent.com)
- ^ preferred pricing for borrowers (www.inman.com)
- ^ some awesome early data (www.inman.com)
- ^ new restrictions on mortgage “trigger leads” (www.inman.com)
- ^ H.R. 2808, the Homebuyers Privacy Protection Act (www.congress.gov)
- ^ projected $715 billion refi market (www.inman.com)
- ^ $332 million in Q2 pretax income (www.inman.com)
- ^ pulling its own loan servicing (www.inman.com)
- ^ long-term agreement with ICE Mortgage Technology (www.inman.com)
- ^ Ishbia said (www.inman.com)
- ^ determined the Mr. Cooper deal doesn’t pose a risk (www.inman.com)
- ^ $2.6 trillion single-family MBS (www.ginniemae.gov)
- ^ Mortgage Brief Newsletter (www.inman.com)
- ^ Click here to subscribe. (www.inman.com)
- ^ Email Matt Carter (www.inman.com)