The slowdown in the mortgage business is being felt by Dan Gilbert’s Rocket Companies, even as his Detroit-based mortgage lending operation remains highly profitable.
Rocket Companies, the publicly traded corporate parent of Rocket Mortgage, formerly known as Quicken Loans, had $1 billion in net income, or profit, in the first quarter, down from $2.8 billion in the same quarter last year, according to an earnings report released late Thursday.
Total revenue in the quarter was $2.7 billion, down 41% from a year earlier.
Across the industry, mortgage originations are forecast to drop 36% to $2.5 trillion this year from 2021 levels, according to the Mortgage Bankers Association, primarily because of rising interest rates and a resulting drop in mortgage refinancings.
Rocket Mortgage, the nation’s top mortgage lender by volume, has traditionally been exceptionally strong during periods of high mortgage refinancing activity.
Last month, the mortgage company began offering voluntary buyouts to about 8% of its employees, as well as those of sister title company Amrock. A precise number of buyouts being considered was not released.
The buyouts are expected to produce about $100 million in annualized cost savings for Rocket Companies, Chief Financial Officer Julie Booth said Tuesday in an earnings call. The buyout packages will be a one-time cost to the company of $50 million to $60 million, she said.
Rocket is forecasting lower mortgage volume and slimmer profit margins for the current financial quarter that ends June 30.
Rocket CEO Jay Farner said the company is coping with interest rates that are rising faster than they have in decades.
The average rate on a 30-year, fixed-rate mortgage was 5.27% last week, according to government-backed Freddie Mac, compared to under 3% a year earlier.
Rocket is now focused on doing more home purchase loans as well as cash-out refinances, which let homeowners tap their home equity to do home improvements, pay down debt or other purposes.
“Rocket Companies has always navigated successfully through turbulent times by protecting our margin and our profitability, while continuing to invest in technology and marketing to grow market share,” Farner said. “We will emerge stronger, grow market share through the cycle, and reap the benefits as the ultimate market winner.”
Rocket’s shares have been trading near their all-time low in recent weeks and closed down 8% Tuesday at $7.81.