Rocket Cos. posts $481 million net loss in Q3

Rocket
Cos.
reported
a
$481
million
net
loss
in
the
third
quarter,
driven
by
a
massive
decline
in
the
valuation
of
mortgage
servicing
rights. 

The
stark
figure
comes
after
profits
of
$178
million
and
$114.9
million
in


the
recent
second
quarter
and


third
quarter
of
last
year,
respectively.
The
third
quarter
loss
comes
while
Rocket
reports
positive
momentum
in
adjusted
earnings,
and
its
highest
mortgage
origination
volume
since
the
first
quarter
of
2022,
according
to
executives. 

Rocket’s
adjusted
net
income
of
$166
million
was
an
improvement
from
the
$121
million
mark
in
the
second
quarter,
and
just
$7
million
in
the
year
ago
period. 

Company
CEO
Varun
Krishna,
opening
the
earnings
call
with
a
lengthy


description
of
Rocket’s
technological
advantages,
said
he
wanted
to
emphasize “optimism.” 

“It’s
always
important
to
take
the
long
view
and
put
things
in
perspective,”
he
said
in
regards
to
housing
market
conditions. 

Driving
the
top-line
loss
was
an
$878.3
million
loss
in
the
change
of
fair
value
of
MSRs,
wiping
out
$373.8
million
in
servicing
income.
In
the
second
quarter,
servicing
income
was
$241.7
million,
against
a
$112.9
million
MSR
valuation
dip;
in
the
year
ago
period,
Rocket
reported
$356.8
million
servicing
income
against
a
$12.8
million
MSR
valuation
gain.

The
Detroit
giant
recorded
$28.5
billion
in
origination
volume
in
the
third
quarter,
increases
of
15%
and
28%
from
the
quarter
and
year
ago
period.
Production
volume
grew
sequentially
in
Rocket’s
direct-to-consumer
channel
and
partner
network,
with
an
overall
gain
on
sale
margin
of
278
basis
points. 

That
overall
GOS
margin
fell
from
the
second
quarter’s
299
basis
points.
The
direct-to-consumer
and
partner
network’s
gain
on
sales
of
410
basis
points
and
147
basis
points,
respectively,
slipped
quarterly
but
were
up
annually. 

Rocket
also
claims
its
the
largest
originator
of
closed-end
second
liens
in
the
nation,
as
its
home
equity
volume
grew
78%
year-over-year. 

Chief
Financial
Officer
Brian
Brown,
in
recapping
the
company’s
financial
performance,
emphasized
the
company’s
gains
in
purchase
and
refinance
market
share.
Rocket
over
the
summer
also


acquired
MSR
portfolios
totalling
$311
million,
adding
$22.4
billion
in
unpaid
principal
balance
to
its
massive
portfolio. 

“Today,
we
have
the
capacity
to
support
$150
billion
in
origination
volume
without
adding
a
single
dollar
of
fixed
costs,”
said
Brown. 

Through
October,
Rocket
this
year
has
acquired
or
committed
to
add
over
$70
billion
in
unpaid
principal
balance,
or
220,000
new
clients.
The
company
claims
an
85%
recapture
rate. 

The
lender
and
servicer
reported
GAAP
revenue
of
$647
million
in
the
quarter,
around
half
of
its
revenues
in
the
second
quarter
and
prior
third
quarter.
Following
adjusted
revenue
of
$1.3
billion
in
the
third
quarter,
Rocket
is
projecting
between
$1.05
billion
and
$1.2
billion
for
the
fourth
quarter. 

Krishna
attributed
the
lower
fourth
quarter
projection
on
the
slower
winter
housing
market
and


elevated
interest
rates.
He
also
told
analysts
the
guidance
was
27%
greater
than
the
same
time
last
year.
Brown
said
the
company
expects
a
slight
GOS
margin
improvement
to
end
the
year.

“There’s
a
little
bit
of
conservatism
built
in
there,
and
that’s
just
typically
because
we
see
some
competitors
do
some
pricing
plays
around
the
holidays,”
he
said. 

The
company
said
its


recent
Welcome
Home
Rate
Break
promotion
led
to
a
21%
increase
in
usage
of
its
affordable
product
suite.
Consumer
interactions
with
the
firm’s
consumer-facing
generative
chat
more
than
doubled
quarterly.
Its


Logic
Synopsis
tool
for
analyzing
customer
calls
was
also
supporting
1
million
calls
weekly
at
the
end
of
October. 

Rocket
remains
well
insulated
against
any
market
turmoil,
with
$8.3
billion
in
liquidity.
Fitch
Ratings
this
month
also


upgraded
Rocket
to
BBB-,
and
executives
claim
their
firm
is
the
first
nonbank
to
achieve
an
investment
grade
rating
from
one
of
the
three
major
ratings
agencies
in
two
decades.