Rocket Cos. lost $493 million in the fourth quarter, but management emphasized its long term goals and its recent expense reductions while also hinting at a new credit card product that could help further its lead generation in home loans.
"Profitability is a priority and you can see it in the expense numbers, but we're not here to sacrifice long-term results," said Brian Brown, chief financial officer on the earnings call.
Between the third and fourth quarters, Rocket reduced its total expenses by $202 million, beating its initial expectations of between $50 million and $100 million.
Those results were in line with Fitch Ratings expectations based on current industry trends.
Rocket's fourth quarter expense reduction efforts that topped the company's own expectations "should set them up to be better positioned for the remainder of 2023," said Shampa Bhattacharya, Fitch director, in a statement. "We anticipate Rocket to take incremental actions if the right-sizing effort undertaken so far proves to be insufficient, with the goal of being profitable in 2023."
Rocket conducted
The loss was announced shortly after the company revealed plans
"I believe now is the right time to step aside so I can spend more time with my family while the company continues on its journey executing on these transformational strategies," Farner said on the call about leaving the company.
Rocket's loss compares with net income of $96 million
Full year net income of $700 million was well below the $6.07 billion earned in 2021. This year's results include a $1.2 billion positive mark-to-market adjustment to its mortgage servicing rights.
Rocket Mortgage originated $19.0 billion in the period, at a 217 basis point margin. That margin was hurt by higher than expected demand for
Production was down from $25.6 billion in the third quarter and $75.9 billion for the fourth quarter of 2021. For all of 2022, Rocket originated $133.1 billion, compared with $351.2 billion the prior year. Margins fell to 282 basis points from 313 basis points.
The company looks to structure its costs around the production revenue, but in any particular quarter, that is not what it focuses on, Brown said, returning to the big-picture theme.
"As we think about capacity, we feel like we're in a good spot right now, we feel like we're ready for the home buying season," Brown continued. "If that doesn't cooperate, or if the macroeconomic backdrop doesn't do what we expect it to do, there are other levers that we can pull."
But a company can only cut capacity so much and not affect its lead flow, which is why it's important to have a marketing plan to bring in those leads, Farner said. Its
For the first quarter, Rocket expects adjusted revenue of between $700 million to $850 million. "It's worth noting that since the start of the first quarter through today, we have seen gain on sale margins improved by more than 20 basis points compared to fourth quarter levels, primarily due to a shift in promotional products," said Brown, who added that quarter-to-quarter origination volume is also higher so far this period.
When tossed a softball question about "irrational pricing" in the third party originations space, Farner ran with it.
Mortgage brokers are price sensitive and they will jump from partner to partner based on that.
"That's the superpower of a mortgage broker, the ability to pick and choose who they work with, to give themselves an advantage," said Farner. "And as you know, we stand firmly behind providing that superpower so we're onboarding new TPO partners all the time and we think that's the right way to approach that market."
Earlier this month, in the latest lob in its war with United Wholesale Mortgage, Rocket brought out
In the third quarter, UWM replaced Rocket as the No. 1 mortgage volume generator.
