Dan Gilbert’s Rocket Companies managed $96 million in net income, or earnings, in the third quarter as rising interest rates continued to hurt the mortgage industry.
Rocket Companies, the parent company of publicly traded Rocket Mortgage, saw total revenue of $1.3 billion for the quarter, which, while down slightly from $1.4 billion last quarter, was a 58% decline from its $3.1 billion (and 1.4 billion) revenue. profit dollars) in the third quarter of 2021, before interest rates start to rise.
Rocket posted a profit of $60 million in the second quarter.
Like other lenders, Rocket continues to experience an annual decline in mortgage volume, closing $114 billion in loans so far this year through the third quarter, compared to $275 billion for the same nine-month period last year.
During an earnings call late Thursday with Wall Street analysts, CEO Jay Varner emphasized Rocket’s liquidity and “fortified balance sheet” that will allow it to ” weather the storm.”
The mortgage industry is still facing hard times. “Thirty-year fixed mortgage rates have topped 7%, the highest in decades. Housing affordability is at a 30-year low, and weak consumer confidence is leading to a rapid deterioration in the home buying market,” Varner said.
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After enjoying record profits and boom years in 2020 and 2021, this year Rocket has cut staff and cut expenses dramatically. It has made two rounds of employee purchases so far, cutting an unspecified number of positions.
During Thursday’s earnings call, Brian Brown, chief accounting officer at Rocket, described how the company was adjusting to the mortgage industry’s downturn by cutting more than $2 billion in expenses year-over-year between the third quarter of last year and the third quarter of this year. .
For the industry as a whole, Brown said, there are likely to be more job cuts ahead.
““The industry is full of loan officers who are struggling to produce,” he said. “In fact, we estimate that the industry size, per loan officer, is near an all-time low, with less than one loan per loan officer per month.
“The economy is simply not sustainable, and the capacity in the industry will continue to emerge,” he added.
Rising mortgage rates have crushed the mortgage refinancing business, a traditional major profit center for Rocket Mortgage, formerly Quicken Loans and the nation’s largest mortgage lender by volume.
High rates have also hampered existing home sales, which have fallen for eight straight months this year, according to the National Association of Realtors.
The average 30-year fixed-rate mortgage rate is 6.95% this week, according to government-backed Freddie Mac. This compares to just over 3% a year earlier. The last time mortgage rates were high was in 2002.
However, some consumers are still refinancing.
Varner, in response to an analyst’s question, said that Rocket does “a significant amount” of cash refinancing, often to clients who intend to use the money to pay off other forms of debt.
Industrywide, it has been estimated that about 90% of consumers who currently refinance “withdraw some form of cash when they do so.”
“As we watch savings fall and people spend more on their credit cards, they are getting more pressure,” Varner said. “Although, of course, it is not always, of course, the right decision for our clients to take cash out of their first mortgage. That’s why we have our home equity loan product And that’s why we have our Rocket Loan product that we’ve rolled out.”
Nationally ranked metro Detroit mortgage lenders have also cut staff this year.
Troy-based Flagstar Bank earlier this year slashed its mortgage staff by 20%, or 420 people, and last month revealed it was cutting staff an additional 7%. Flagstar recently reported that mortgage origination volume was down 45% in the third quarter compared to a year ago.
Ann Arbor-based Home Point Financial Corp recently said it would lay off 217 workers this month.
Pontiac-based Consolidated Mortgage could provide an update Friday morning on staff when it is due to report third-quarter earnings.
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