Rocket Mortgage plans to double its purchasing market share by 2027

Rocket companiesthe parent of Rocket mortgagehas set ambitious goals to grow market share by 2027 using its multichannel reach, origination and service flywheel, and advanced technology platform.

Rocket aims to double its current market share in purchase mortgages from 4% to 8% and expand its refinance share from 12% to 20%, executives said at the company’s first Investor Day event on Tuesday.

Rocket Mortgage was the nation’s third-largest lender in the first half of this year, according to data from Within mortgage financing. (IMF). Rocket achieved volume of $42.3 billion in those six months, just one behind United Wholesale Mortgage ($60.7 billion) and PennyMac financial ($48.4 billion).

“The direct-to-consumer retail segment represents approximately half of the mortgage market, and while we are already the No. 1 player in this space, we still see significant growth potential,” said Brian Brown, chief financial officer of Rocket Companies. told investors.

“We create exceptional digital customer experiences and equip our team members with technology and AI to make them more efficient and scalable.”

Rocket relies heavily on artificial intelligence (AI) to increase efficiency and reduce costs, led by CEO Varun Krishna, a veteran of the financial technology world.

In April 2024, the Michigan-based lender rolled out Rocket Logic, the company’s proprietary loan origination system, which the company claims can automatically process nearly 90% of data points from documents in a month.

Shortly after Krishna joined Rocket in July 2023, the lender rolled out Pathfinder, an AI and machine learning-powered search engine used by mortgage bankers, brokers and underwriters to find answers to complex loan qualification or processing questions.

“We are unique in the sense that we are building what we consider an elastic technology platform,” Krishna said. “That means we can scale up without dramatically increasing our fixed costs, and we think that is very unique.

“…So the ability for us to be more efficient and handle more capacity is again something that is very unique to Rocket and gives me confidence in our organic approach.”

When asked about the possibility of Rocket’s mergers and acquisitions (M&A) plan, Krishna left the door open without mentioning any specific plans to do so in the near future.

“If you consider inorganic, we will be very principled,” he said. “But that $10.4 billion in liquidity is a formidable asset. It is an asset that allows us to be opportunistic and to think about additional levers that will allow us to successfully realize our growth in service of the strategy that you have seen mapped out together.”

Rocket plans to acquire more mortgage servicing rights (MSRs) to open a new customer acquisition channel. The lender has retained maintenance rights since 2011.

The company had an unpaid principal balance of $534.6 billion at the end of the second quarter. From April through June, Rocket added $20.8 billion of UPB to its portfolio for a total of $135 million.

“Over the past few years, we have tested our hypothesis that we could outperform the industry recapture if we acquire the MSR inorganically, and the results have been positive,” Brown said.

“We have significant capital to selectively acquire those MSRs with high recovery potential to accelerate that production in flywheel maintenance. We have committed to an unpaid principal balance of $45 billion, or approximately 150,000 new customers in our services portfolio, and these customers are prime candidates for recapture.”

In its Q2 2024 earnings report, Rocket reported GAAP net income of $178 million, lower than the prior quarter’s profit of $291 million, but higher than its Q2 2023 profit of $139 million.

The Michigan-headquartered lender originated $24.6 billion in mortgages between April and June, up from $20.2 billion in the first quarter of 2024 and up from $22.3 billion in the same period last year.

By channel, Rocket reported $13 billion in loans closed through its direct-to-consumer channel and $11.3 billion through its third-party originator (TPO) channel in the second quarter.