Rocket enters into sub-service agreement with REIT Annaly
Rocket mortgage has entered into a deal to handle servicing and recapture activities for a portion of real estate investment trusts’ mortgage servicing rights (MSRs) Annaly Capital Managementthe companies announced on Tuesday. Terms of the deal were not disclosed.
Annaly has $75 billion in assets invested in its mortgage-backed securities (MBS), home loans and MSR strategies. It has built an MSR platform with 608,000 loans, representing $192 billion in unpaid principal (UPB) and $2.8 billion in market value as of June 30.
Meanwhile, Rocket’s servicing portfolio, including subordinated loans, had a UPB of $534.6 billion as of June 30. The nation’s largest mortgage lender serviced 2.6 million loans, generating about $1.4 billion in annual fee revenue in the second quarter.
Within mortgage financing ranked Rocket as the eighth-largest U.S. mortgage manager by its own portfolio in the second quarter of 2024. Annaly was at number 14 in the rankings.
Rocket said its recapture rate, including purchase and refinancing loans, is 85%, three times the industry average.
“Rocket is committed to the entire homeownership experience, from budgeting and credit building to home searching, financing and maintenance,” Bill Banfield, chief business officer of Rocket Companies, said in a statement. “We truly believe in building relationships with our customers that will last a lifetime – whether it’s remortgaging or repaying loans.”
“We are proud to have built one of the most sustainable and high-quality MSR portfolios in the market and this partnership will allow us to take advantage of Rocket’s industry-leading service capabilities and retention rates,” said Steve Campbell, Annaly’s president and chief operating officer officer.
Rocket is expected to begin servicing some of Annaly’s MSRs as early as December. The portfolio consists of conventional loans with a weighted average FICO score of 757 at issuance.
Executives at Detroit-based Rocket have said they will continue to invest in artificial intelligence (AI) to improve operational efficiency and grow their service portfolio.
In addition to entering into subservicing agreements, Rocket has been actively acquiring servicing assets at higher coupon rates to create refinancing and equity generation opportunities. In the second quarter, it added $20.8 billion of UPB to its portfolio for a total of $315 million.
“We retain customers for the next transaction at rates three times higher than the industry average, positioning ourselves as their lender for life and generating recurring cash flow without additional acquisition costs,” Varun Krishna, CEO and managing director of Rocket Companies, told analysts. during a second-quarter earnings call. “We will continue to expand our service portfolio.”
