Rocket’s struggle to adapt to highly volatile market conditions

last year, rocket mortgage, America’s top mortgage lenders have benefited greatly from record-low mortgage rates — they’re piling up More than double Lender’s refi volume.

But with interest rates rising rapidly above the 7% level, the Detroit-based lender is trying to buy mortgages and convince customers to refinance cash out. So we are currently in a difficult situation. voluntary acquisition The Wall Street Journal reported in detail Published on Tuesday.

Rocket is expected to post a loss in the third quarter for the first time since going public in August 2020, losing the title of largest originator to rivals. United Wholesale Mortgageaccording to fact set When Inside Mortgage Finance.

The IMF expects rockets to come roughly in the middle of the $23 billion and $28 billion range projected in the third quarter. UWM surpassed this figure, and he is expected to generate $30 billion this quarter. Rocket mortgage originations fell 36%, $34.5 billion in the Second quarter From the previous quarter as interest rates soared.

Here’s a breakdown of the journal’s in-depth analysis of Rocket’s current challenges.

Relationships with real estate agents

In 2020-2021, all mortgage lenders enjoyed the easy payoff of refinancing, considered a relatively easy source of income. But when refinancing dried up, one of Rocket’s main obstacles to refinancing was the lack of relationships with bankers and real estate agents that brought business to lenders.

Many real estate agents prefer to work with local lenders they know and tend to only send to Rocket clients who couldn’t qualify elsewhere, says Katie, a former Rocket banker. Glover told the WSJ.

Glover spent months crafting mortgages last year with a team meant to establish relationships with real estate agents.

Rocket says the lender has more than 100,000 agents and has been using the service for two years, allowing them to check the status of their clients’ loans and obtain contact information for team members. WSJ reports.

cash outrific, new product

In a high-buying market, Rocket became the preferred mortgage provider exclusively for Santander Bank customers in August. In September,inflation busterThis will reduce a homebuyer’s monthly mortgage payment by 1 percentage point during the first year of the loan. Lenders, including UWM, have deployed similar outright interest rate purchases in a skyrocketing interest rate environment. This gives borrowers respite from high inflation and Affordability Challenge.

Rocket is also focused on providing homeowners with a cash-out refice, taking advantage of record home wealth levels that surged during the pandemic.

Refinancing can reduce your monthly mortgage payments, but interest rates are higher these days, extending the term of your loan, which can increase your total interest cost. Once you have your refinance, if you miss a payment, you are at risk of foreclosure as your home acts as collateral for your cash-out refinance.

Colin Wyzgoski, a former banker at Rocket, said he was instructed to tell his clients that it doesn’t matter if interest rates are high because they can refinance again when interest rates go down. common sales strategy for many lenders). Wisgoski told the WSJ that he was instructed to look through the financial records of potential customers to find future expenses.

“It’s a generic ARP,” said Wyzgoski, referring to a sales tactic internally called “Approve, React, Turn.”

State and federal regulations require homeowners to take advantage of refinancing, but these regulations give borrowers flexibility in deciding what’s beneficial. Bob Walters, his CEO of Rocket Mortgage, said customers can decide what’s right for their finances.

Wisgosky resigned in August after taking time off due to work stress.

strained workforce

Lenders have proposed multiple voluntary acquisitions this year, but the remaining employees reportedly faced intense pressure to bring in the business. (This is not uncommon in the industry, given declining origination volumes.)

An internal email obtained by the journal contained the following note:

Another email to Rocket’s mortgage banker reads, “You’re surrounded by success,” referring to the refinancing banker who made more than $50,000 from 44 loans in February. .

“FIRE UP AND GRAB IT!” said the memo.

Lockett told the Journal it made the change by increasing hourly wages for new bankers and per-loan fees for veteran bankers. The average banker will work up to seven hours less per week this year than he did in 2021, and sales targets have also been lowered, the company said.

“If they’re doing well, I encourage them to come in to make more sales,” Amanda Womack, a former Rocket employee, told the WSJ. “When it’s bad, they invite you to join because you’re not making money for the company.”

Womack joined Rocket in early 2021 but left the lender in July.

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