Could Rocket be the No. 1 originator in the second quarter?

The second quarter likely ended with Rocket regaining the No. 1 spot among mortgage originators from United Wholesale Mortgage, an industry prognosticator says.

Second quarter volume is expected to increase by 3% quarter-to-quarter for five companies BTIG analyst Douglas Harter covers: loanDepot, PennyMac Financial Services, Rithm, Rocket and UWM Holdings. The consensus gain is for 6%.

The estimates, part of BTIG analyst Douglas Harter's second-quarter earnings preview, offer an early look at how the industry's biggest lenders and the government-sponsored enterprises likely fared as mortgage rates rose during the quarter, with earnings season set to begin in the coming weeks.   

Fair value hits at the GSEs

When the government-sponsored enterprises report their second quarter results, both Fannie Mae and Freddie Mac should take negative fair value marks for their mortgage portfolios, BTIG said in its industry earnings preview.

This is a result of increased exposure to mortgage rates at the same time those are rising, Harter said.

Each of the GSEs reported a decline in the balance of their retained portfolios at the end of May. Fannie's declined to $172.18 billion from $174.84 billion one month prior, while Freddie's dropped to $132.22 billion from $141.81 billion.

But this was much higher than one year prior, at $84.62 billion for Fannie and $93.86 billion for Freddie, as both had been adding, in large measure due to President Trump's call for the GSEs to purchase mortgage-backed securities.

The slowing portfolio growth comes with "benign credit quality," Harter said.

He added that "on the more important topic of exit from conservatorship, we do not expect any updates along with earnings."

Volume forecasts at five nonbank lenders

In his origination volume estimates, Harter is 10% lower on Pennymac's versus consensus for the second quarter. This compared with 1% lower for loanDepot, 2% lower for United Wholesale Mortgage and 3% lower for Rithm.

But for Rocket, his estimate is actually 2% higher than the consensus.

As a result, while the consensus gives Rocket a slight edge in expected volume, BTIG forecasts a bigger gap.

For Rocket, he predicts $48.15 billion (consensus is $46.99 billion), while for UWM it's $45.39 billion, while the consensus estimate for UWM is $46.55 billion.

The BTIG estimate for Pennymac is for $35.99 billion, versus a consensus of $39.8 billion.

In the first quarter, UWM did $44.9 billion; Rocket, $44.7 billion; and Pennymac, $37 billion in volume.

For the nonbank mortgage sector as a whole, rates remain the biggest driver, with second quarter earnings and third quarter guidance showing lower origination volume.

"The more balanced business models will benefit from the positive servicing impact of higher rates," Harter said.

Rithm remains the top pick

Rithm, which going into 2026 was identified by the BTIG analyst providing coverage at the time, Eric Hagen, as one its favorite stocks, remains its "top pick based on this balanced business model and attractive valuation," Harter said.

In June, Harter reduced his price target for Rithm to $13 per share from $16.

For the most part, the mid-June update incorporated the expected effect of higher mortgage rates into non-bank earnings.

But in the new report, Harter raised his estimate on Onity because of a faster than expected slowdown in MSR prepayment speeds, and the resulting reduction in portfolio amortization.

For the second quarter, Harter expects $2.08 per share, up from his prior and the consensus estimate of 53 cents. The full year was increased to $5.60 per share from $1.50. The 2027 estimate for Onity was raised to $10.10 from $5.60.

On the other hand, Harter reduced PennyMac Financial Services' estimates because its near-term origination volumes were down based on lower than expected MBS issuance.

"Our new estimates show an 11% return on equity for the final three quarters of 2026 before trending back towards the mid-teens level over the following year," the report said.

BTIG now expects Pennymac to earn $2.06 in the second quarter, versus its prior estimate of $2.47 per share. The full year was cut to $9.15 from $10.50.

How will UWM respond to leverage concerns

UWM's high levels of leverage, which were cited by industry analysts and erstwhile takeover target Two Harbors Investment, are expected by Harter to increase to 3.25 times from 3.18 times. However, the level of MSR sales it does is "the key wildcard on the magnitude of the increase," he said.

"Our full-year forecast calls for leverage to stabilize in the low-to mid-3s before improving in 2027; MSR sales are a key assumption in this forecast," Harter said.

UWM's management to address the dividend on the earnings call, with BTIG's base case is a 50% reduction to 5 cents a share for the third quarter.

For the nonbanks, "Given the timing differences we expect both funded volume and lock volume (which drives revenue) to be lower than MBS issuance; for our coverage we expect lock volume to be down 1% in the quarter," Harter said. "For reference, the Optimal Blue lock volume index was down 3% for the quarter."

In his June report, which came out before the latest Optimal Blue release, Harter had projected a 6% decline for the quarter, but on a month-to-month basis lock activity increased 10%, reducing the drop off to just 2.61%. 

Gain-on-sale performance

Gain-on-sale margins for these nonbanks should be "modestly higher" for the quarter, based on what he termed as a "positive mix shift" for this metric towards second-lien production instead of refinancings. BTIG is also lower than the consensus outlook in this area as well.

For the five companies, Harter has a 170 basis point estimate for the second quarter, versus the consensus 173 basis points. The biggest variations come from loanDepot, where he is 20 basis points lower; and Rithm, 19 basis points lower.