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Rocket posts net loss in third quarter

Online Niel November 13, 2024

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

The net loss, which came on net income of $647 million, is a sharp reversal from net income of $115 million on net income of $1.2 billion reported by the Detroit company in the same quarter with a year ago. Rocket reported second-quarter net income of $178 million on net revenue of $1.3 billion

The loss is due in part to an $878 million write-down in the fair value of Rocket’s portfolio of mortgage rights, the firm reported. When value declines, often due to changes in interest rates or market conditions, it can affect profits.

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 rose to $1.32 billion, up from $1 billion year over year.

“I am so pleased to share that we expanded both our acquisition and refinancing market share year-over-year in the third quarter,” said Varun Krishna, CEO and director of Rocket Companies, in a earnings call on Tuesday afternoon. “We delivered adjusted revenue of $1,323,000,000, topping our guidance and accelerating growth compared to Q2.

“Net rate lock volume increased 43% year-over-year due to significant refinancing activity alongside increased purchase volume. Our adjusted EBITDA margins were 22%, three times higher than in Q3 2023. We also reported adjusted earnings per diluted share. eight cents. These numbers are a direct result of one basic thing – our execution is continuously refining every aspect of our sales and operational processes 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 Rocket Superstack, which he says combines its ecosystem, multi-channel experiences, proprietary AI-based technology and its iconic brand.

“We have proven that no matter what the market brings, we will lead a bright future by helping more Americans achieve the dream of owning a home,” he said.

Rocket Mortgage reported Tuesday that it originated $28.5 billion in closed loan volume, up 28 percent from the same period last year. Profit margin on sales was 2.78%, up 2 basis points from the same period last year.

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

The company said that from January to October 2024, it acquired or committed to add more than $70 billion in outstanding principal balance to its services portfolio, a 15 percent increase over the end of 2023. The expansion adds 220,000 customers us, which the company says could be potential candidates for home purchases, home equity loans and refinances.

Krishna said he is optimistic despite the challenges facing the real estate market. He said that while inflation has eased and the Federal Reserve cut its key interest rate in September for the first time in four years, mortgage rates have not followed suit, rising along with Treasury yields. Last week, mortgage buyer Freddie Mac said the average 30-year rate rose to 6.79%

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

“Although the housing market is difficult, we are seeing signs of rejuvenation,” he said. “The 30-year fixed mortgage rate is down from nearly 8 percent a year ago. This is helping to improve affordability and opening up opportunities to refinance to lower monthly payments, plus housing stock has increased from 3.4 months to 4.3 months, showing a 26% improvement.”

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

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