The Rocket Companies provided the most home loans in their history in the second quarter, even as record low interest rates drove the lender’s profits down.
The company reported net income of $ 1 billion, up from $ 3.4 billion a year earlier. Revenue also fell from $ 5 billion to $ 2.7 billion. The company said its profits fell as interest rates fell to record lows in 2020, causing homeowners to rush to refinance while mortgage purchases nearly doubled over the period.
The Detroit company provides mortgages, home listings, property rights insurance, and car listings. It is one of the largest mortgage lenders in the country.
Rocket Companies closed $ 83.8 billion in purchase mortgages in the second quarter, up from $ 72.3 billion in the second quarter of 2020. The loan is expected to be between $ 82.0 billion and $ 87.0 billion in the third quarter.
Rocket Companies CEO Jay Farner said in a telephone conversation with analysts on August 12 that the biggest problem is the lack of supply of homes and cars.
“The markets are so hot that there are serious inventory problems in both the real estate and automotive sectors,” Farner said by phone.
The US mortgage market has been hot since the Federal Reserve cut base rates to an all-time low at the start of the pandemic. Home sales rose sharply as buyers took advantage of lower rates to purchase larger, more comfortable homes to survive the isolation from Covid-19.
Now, more than a year later, demand looks set to fall. Refinancing has dropped and purchase mortgages are starting to fall. According to the Association of Mortgage Bankers, in June the number of applications for mortgages for the purchase of new homes fell by 3% compared to May.
Farner adds that despite forecasts of a slowdown in mortgage growth later this year, the company expects its business to get even better.
“This year we are looking to increase our market share and achieve record shipments,” he said.
The company also announced a new relationship with life insurance company MassMutual, allowing its more than 9,000 agents to assist with mortgage loans through Rocket Mortgage. In addition, Rocket Companies plans to launch a new solar power unit for residential buildings in early 2022. iBuying program through third party partner companies in the coming quarters.
Rocket Companies’ goal is to have a one-stop platform so that, for example, a Rocket Mortgage client can also get a property appraisal through Amrock’s title appraisal and insurance division.
Non-bank mortgage companies such as Rocket Mortgage became very popular after the great recession after the banks retreated.
Some scholars and economists, along with Jeannie Mae worried that some non-banks may not have enough capital to service mortgages if a large number of homes are foreclosed. These critics said this was particularly problematic as these mortgage companies were the main lenders for government-backed loans such as FHA and VA mortgages. So far, these problems have not arisen.
Many of these companies, including the Rocket Companies, have had the best year in pandemic history. The Rocket Companies, led by mortgage tycoon Dan Gilbert and parent company Quicken Loans, went public last year, leading to $ 1.8 billion…
Rocket Companies’ shares rose 10.2 percent on Friday to $ 19.21.