Rocket Mortgage plans to double its purchase market share by 2027

Rocket Companies, the parent of Rocket Mortgage, has set ambitious goals to increase market share by 2027 using its multichannel reach, its origination and servicing flywheel, and its 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 during the company’s first Investor Day event on Tuesday.

Rocket Mortgage ranked as the third-largest lender in the country during the first half of this year, per data from Inside Mortgage Finance. (IMF). Rocket originated $42.3 billion in volume during these six months, trailing only United Wholesale Mortgage ($60.7 billion) and PennyMac Financial ($48.4 billion).

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

“We’re creating exceptional digital client experiences and empowering our team members with technology and AI to make them more efficient and more scalable.”

Rocket has been leaning heavily into artificial intelligence (AI) to drive efficiency and cut costs under the leadership of CEO Varun Krishna, a veteran in the financial technology world. 

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

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 complicated loan qualification or processing questions.

“We are unique in the sense that we’re building what we consider to be an elastic technology platform,” Krishna said. “That means we can scale up without increasing our fixed costs dramatically, and that’s something that we think is also 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 plan for mergers and acquisitions (M&A), Krishna left the door open without mentioning specific plans to do so in the near future. 

“When you consider inorganic, we’re going to be very principled,“ he said. “But that $10.4 billion of liquidity is a formidable asset. It’s an asset that allows us to be opportunistic and to think about additional levers that would allow us to be successful in achieving our growth in service to the strategy that you have seen laid out together.”

Rocket plans to acquire more mortgage servicing rights (MSRs) to open up a new channel for acquiring clients. The lender has been retaining servicing rights since 2011. 

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

“Over the past few years, we’ve been testing our hypothesis that we could outpace industry recapture when we acquire the MSR inorganically, and the results have been positive,” Brown said.

“We have significant capital to selectively acquire those MSRs in high recapture potential to accelerate that origination in servicing flywheel.  We are committed to $45 billion in unpaid principal balance, or about 150,000 new clients to our servicing portfolio, and these clients are prime candidates for recapture.”

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

The Michigan-headquartered lender originated $24.6 billion in mortgages from April to June, up from $20.2 billion in Q1 2024 and up from $22.3 billion in the same period last year.

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