Senators scrutinize Rocket's Redfin, Mr. Cooper deals

Five U.S. Senators have called into question the lack of federal antitrust oversight of Rocket Companies' proposed acquisitions of Redfin and servicing powerhouse Mr. Cooper.

Lawmakers, including Sens. Elizabeth Warren, D-Mass, and Cory Booker, D-N.J.,sent a letter to the Justice Department's Antitrust Division and the Federal Trade Commission demanding to know why the agencies did not review the Rocket-Redfin merger during the pre-merger review period. They want answers from both agencies by June 17.

The senators also rang the alarm on the pending Rocket-Mr. Cooper merger, noting this will propel the Detroit-based company into becoming a "mortgage finance behemoth" with less incentive to compete for new customers.

READ MORE: Rocket's deals for Redfin, Mr. Cooper bring new growth and challenges

The addition of Redfin and Mr. Cooper will turn Rocket into a "massive housing company that threatens to reduce choice and raise prices for American families in the housing market," the lawmakers warned in their letter dated June 4.

Rocket did not immediately respond to a request for comment Thursday.

Regarding Rocket's $1.75 billion purchase of Redfin, the senators claim the mortgage shop will have the power to steer users of the real estate brokerages platform to the lenders real estate agents, "limiting business for local, independent agents and brokerages."

Another concern expressed by the lawmakers is that the purchase of the real estate brokerage might discourage Redfin users from comparison shopping for a better mortgage because they'll be steered to Rocket's financial products.

The letter notes that comparison shopping can save borrowers up to $76,410 over a 30-year mortgage.Redfin's grasp on the consumer home shopping experience is notable with nearly 50 million monthly users checking out the platform. However, those numbers are significantly lower than competitor Zillow, which has 204 million average monthly unique users.

Nonetheless, the two acquisitions will result in Rocket tripling its client base, with the company itself noting that it will soon control one in six mortgages in the U.S. The addition of Mr. Cooper's $1.56 trillion servicing portfolio and 6.7 million customers adds to Rocket's 2.8 million servicing customers, potentially creating a combined total of more than 9 million customer relationships.

"Rocket's efforts to consolidate and control the homebuying market onto a single online platform sets a dangerous precedent for consumers, the industry, and the U.S. housing market as a whole at a time when house prices and mortgage rates continue to rise," the senators wrote.Stakeholders in the mortgage industry have similarly expressed that the bundling of all homebuying services could push prices up for homeowners.

The mortgage lender's purchase of the real estate brokerage platform has also received scrutiny via litigation filed by a Redfin stockholder. Jason Morano's suit attempted to prevent a Redfin shareholder vote scheduled for June 4, one of the last steps required to close the transaction, but ultimately failed.The plaintiff sued the company, its CEO Glenn Kelman, and Rocket arguing that the brokerage omitted key details for investors — specifically, the relationship between Goldman Sachs, Redfin's financial adviser on the merger, and Rocket.

However, a Washington-based judge ruled that the shareholder vote will not be postponed, as both Rocket and Redfin released follow-up information that addressed what the suit claimed was missing: full disclosure of a discounted cash flow analysis for Redfin shareholders and the mega-lender's relationship with Goldman Sachs.