Rocket Companies issued the most home loans in history in the second quarter, although record-low interest rates detracted from the lender’s bottom line.
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, prompting homeowners to refinance, while the volume of mortgages for purchases nearly doubled during that period.
The Detroit-based company offers mortgage, real estate, title insurance, and auto deals. It is one of the largest mortgage lenders in the country.
Rocket Companies completed $ 83.8 billion in purchase mortgages in the second quarter, compared to $ 72.3 billion in the second quarter of 2020. The third quarter is expected to have a total loan volume of between $ 82.0 billion and $ 87, $ 0 billion expected.
Rocket Companies CEO Jay Farner said in a call to analysts on Aug. 12 that the biggest challenge was the lack of available homes and cars.
“The markets are so hot that there are significant inventory challenges in both the real estate and automotive sectors,” Farner said of the call.
The U.S. mortgage market has been searing since the Federal Reserve cut interest rates to a record low at the beginning of the pandemic. Home sales soared as buyers took advantage of cheap prices to secure more spacious, more comfortable homes to break the barriers of Covid-19.
Now, after more than a year, the demand seems to be falling. Refinances have decreased and purchase mortgages are starting to decline. In June, mortgage applications for new home purchases fell 3 percent from May, according to the Mortgage Bankers Association.
Farner adds that despite projections of a slowdown in mortgage lending, the company expects its business to perform even better later this year.
“We will gain market share this year and achieve a record origination volume,” he said.
The company also announced a new relationship with life insurance company MassMutual that enables its 9,000+ agents to assist with home loan origination through Rocket Mortgage. In addition, Rocket Companies plans to set up a new residential solar division in early 2022 iBuying program made possible by external partner companies in the coming quarters.
The goal of Rocket Companies is to have an all-in-one platform so that, for example, a Rocket Mortgage customer can also receive a property appraisal through their appraisal and title insurance branch, Amrock.
Non-bank mortgage companies like Rocket Mortgage have grown in popularity since the great recession after the banks withdrew.
Some academics and economists, along with Ginnie Mae are concerned that some non-banks may not have the capital to service mortgages if large numbers of homes are foreclosed. These critics said it was particularly problematic as these mortgage companies are the main lenders of government-backed loans such as FHA and VA mortgages. So far, these problems have not occurred.
Many of these companies, including Rocket Companies, had their best year on record during the pandemic. Rocket Companies, chaired by mortgage mogul Dan Gilbert and parent company of Quicken Loans, went public last year and rallied $ 1.8 billion.
Rocket Companies shares rose 10.2 percent to $ 19.21 on Friday.