The benefit of Rocket Cos. 63% year-over-year drop to $1 billion
Rocket Companies Inc., the parent company of Detroit-based mortgage giant Rocket Mortgage, said on Tuesday that first-quarter profits were down about 63% year-over-year as the mortgage industry facing headwinds, including rising interest rates.
Rocket posted a net profit of about $1 billion on net revenue of nearly $2.7 billion. That’s down sharply from the first quarter of 2021, when the company reported net income of nearly $2.8 billion on revenue of $4.5 billion.
“Rocket delivered a strong performance in the first quarter and achieved our best purchase and disbursement refinance volume in the first quarter, even as rates rose rapidly,” said Jay Farner, vice president and CEO of Rocket Cos. ., in a press release.
Rocket Mortgage generated approximately $54 billion in closed mortgage volume, down nearly 58% from the same period last year. The company’s gain-on-sale margin for the quarter was 3.01%, compared to 3.74% in the first quarter of 2021.
“Now, as we move forward into the year, we will successfully weather the mortgage and real estate headwinds by protecting our margin and profitability while continuing to invest in strategic areas such as technology, partnerships and performance marketing to increase our market share and grow our business for the long term,” added Farner.
The report follows the recent announcement by Rocket Mortgage and title insurance affiliate Amrock LLC that they have offered buyouts to 8% of their workforce.
The Federal Reserve recently raised its benchmark interest rate by 0.5% and signaled that it plans to raise rates further later this year in an effort to rein in inflation. The average 30-year fixed mortgage rate was 5.54% on Monday, according to Bankrate.
Meanwhile, competitor United Wholesale Mortgage Holdings Corp. reported on Tuesday that net profit fell 47% year-over-year in the first quarter.
The Pontiac-based lender, which only provides mortgages to independent brokers, reported net income of $453.3 million on lending volume of $38.8 billion for the quarter. That was down 21% year-over-year, although the company saw a record high volume of closed buys.
At the end of the first quarter, Rocket had $2.3 billion in cash and $7.7 billion in cash. He reported mortgage servicing fees valued at $6.4 billion.
In the second quarter, Rocket expects it to have closed loan volume between $35 billion and $40 billion and gain-on-sale margins of 2.6% to 2.9%.
Writer Breana Noble contributed.