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Rocket posts net loss in third quarter

Umito November 13, 2024

Rocket Companies slumped to a net loss of $481 million in the third quarter despite a year-over-year increase in the volume of closed loans, the parent company of mortgage giant Rocket Mortgage reported Tuesday.

The net loss, which corresponds to net sales of $647 million, represents a sharp reversal from the $115 million in net income on $1.2 billion in net sales that the company based in Detroit had declared in the same quarter a year ago. Rocket reported second-quarter net income of $178 million on net revenue of $1.3 billion.

The loss was partly due to an $878 million reduction in the fair value of Rocket’s mortgage servicing rights portfolio, the company reported. When the value declines, often due to changes in interest rates or market conditions, it can impact earnings.

The company reported adjusted net income of $166 million for the third quarter, compared to $7 million in the same quarter last year. Adjusted revenue increased to $1.32 billion from $1 billion year-over-year.

“I am very pleased to announce that we increased our purchase and refinance market share year-over-year in the third quarter,” said Varun Krishna, CEO and director of Rocket Companies, during a conference call Tuesday afternoon. “We generated adjusted revenue of $1,323,000,000, exceeding the high end of our guidance and accelerating growth compared to the second quarter.

“Net rate lock volume jumped 43% year-over-year, driven by significant refinancing activity alongside growth in purchase volume. Our adjusted EBITDA margins were 22%, three times higher than the third quarter of 2023. We also reported adjusted earnings per diluted share. of eight hundred. These numbers are a direct result of one fundamental thing: execution. Our team members continually refine every aspect of our business and operational processes, marketing, and product technology to fight for every inch of progress.

Krishna said the company’s results highlight the strength and resilience of what he calls the Rocket Superstack, which he said combines its ecosystem, multi-channel experiences, proprietary AI-based technology and its iconic brand.

“We have demonstrated that regardless of what the market brings, we will build a bright future by helping more Americans realize their dream of homeownership,” he said.

Rocket Mortgage reported Tuesday that it generated $28.5 billion in closed loan origination volume, up 28% from the same period last year. The capital gain margin on sales amounted to 2.78%, up 2 basis points compared to the same period last year.

In the third quarter, Rocket Companies said it acquired $311 million of mortgage servicing rights portfolios, adding $22.4 billion in outstanding principal balance with a higher average coupon, creating refinancing opportunities as rates are falling.

The company said that from January to October 2024, it acquired or committed to adding more than $70 billion in outstanding capital balance to its managed portfolio, an increase of 15% from the end of 2023. The expansion adds 220,000 new customers, which the company says. could be possible candidates for home purchases, home equity loans and refinancing.

Krishna said he was optimistic despite the challenges facing the real estate market. He added that although inflation has eased and the Federal Reserve lowered its key interest rate in September for the first time in four years, mortgage rates have not followed suit, but rather have increased along with Treasury yields. Last week, mortgage buyer Freddie Mac said the average 30-year rate had reached 6.79%.

“In my experience, it’s always important to take a long-term view and put things in perspective,” Krishna said.

“Even though the real estate market is difficult, we are seeing signs of rejuvenation,” he said. “The 30-year fixed mortgage rate has declined from nearly 8% a year ago. This helps improve purchase affordability and opens up refinancing opportunities to reduce monthly payments, and housing inventory increased from 3.4 months to 4.3 months, showing a rate of 26%. improvement.”

Last week, Pontiac-based United Wholesale Mortgage reported third-quarter net income of $31.9 million, down from $301 million in the third quarter of 2023.

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