Rocket Companies Posts Second Consecutive Quarterly Loss

Mortgage News May 15, 2023

Rocket Companies announced on Thursday that despite delivering steady outcomes in the first quarter of 2023, the company incurred a net loss of $411 million, or 16 cents per diluted share, marking its second consecutive quarterly loss.

Compared to the fourth quarter of the previous year, the latest results were an improvement, with the parent company of Rocket Mortgage reporting a net loss of $493 million, or 14 cents per diluted share. However, the loss was considerably lower than the first quarter of 2022, where the fintech reported net income of $1.04 billion, or 40 cents per diluted share.

The company recorded a net revenue of $666 million, which was 75% lower than the first quarter of the previous year, but showed a 38% increase from $481 million in the fourth quarter.

In the quarter, Rocket experienced an 11% decline in closed loan origination volume, with $16.93 billion compared to the previous quarter’s $19.03 billion. This figure was also 68.6% lower than the corresponding period the previous year. However, the company’s gain on sale margin improved to 2.39% from 2.17% in the previous quarter.

As of March 31, Rocket’s total liquidity amounted to around $8.1 billion. This included $900 million of cash reserves, $2.4 billion of corporate cash utilized for loan originations, $3.1 billion of unused lines of credit, and $1.7 billion of unused MSR lines.

Rocket Companies’ CEO, Jay Farner, reported a growth in the company’s total number of accounts to 27.6 million, an increase of 2 million from the previous quarter, mainly due to the popularity of the Rocket Money app. However, both Farner and CFO Brian Brown acknowledged the challenging housing market.

Farner also revealed an 11% increase in purchase approval letters from March to April this year, compared to the same period in 2022. Meanwhile, CFO Brian Brown highlighted the challenge of low inventory levels, with only 2.6 months of housing inventory available in March, significantly below the 20-year average. He mentioned that the company receives significant recurring revenue from mortgage servicing. Its servicing portfolio comprised more than 2.5 million clients and approximately $525 billion in UPB as of March 31.

Farner will be replaced by the vice-chairman of Rock Holdings, Bill Emerson, as an interim CEO, while the board searches for a permanent replacement.

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