Is Quicken really considering an IPO? It won't say
There are a number of reasons why Quicken Loans might consider going public at this time, but so far, the firm is playing its cards close to the chest.
After a CNBC report claimed that the company was planning an initial public offering, Quicken issued a statement that did not confirm or deny the story.
"Given our continued growth, market leadership and strong financial performance, we are frequent targets of rumor and speculation. If, and when, there is news to report, it will come directly from us," said a spokesman from Rocket Mortgage, a subsidiary of Quicken Loans.
Why would Quicken launch an IPO now? Recent reporting has indicated that Quicken could need a capital infusion to handle servicer advances required for borrowers in forbearance because of the pandemic.
However, forbearance requests have slowed in recent weeks with the percentage of forborne loans well below what some had projected.
Furthermore, Quicken Loans was among the mortgage companies with the highest core profitability in the first quarter, according to a Moody's report.
"Companies with stronger origination franchises, such as Freedom, PennyMac and Quicken, had the highest core profitability during the first quarter. With rates remaining low, we expect the refinance boom and strong core profitability to continue throughout 2020," the Moody's report said.
The Moody's profitability calculation, however, does not take into account mortgage servicing rights write-downs.
Among other reasons why the company might be considering an IPO is the health of company founder Dan Gilbert.
Last May, Gilbert suffered a stroke, although he has since recovered and is back at work. An IPO could be part of his estate planning.
Currently there are just a handful of publicly traded mortgage lenders, including Ocwen, PennyMac, Impac, Mr. Cooper, New Residential and Redwood Trust, along with commercial mortgage banker Walker & Dunlop.
In the past, there were quite a few publicly traded independents, including the largest mortgage banker before the Great Recession, Countrywide Financial Corp. But between the 1998 Russian debt crisis and the 2008 financial meltdown, many of those companies closed their doors or sold at distressed prices, primarily because they were non-prime lenders.
Ditech was a more recent public company failure.
One of the prominent public mortgage firms of the '90s was Rock Financial, the original iteration of Quicken Loans. It was acquired by Intuit and rebranded back in 1999. Gilbert repurchased Quicken Loans slightly less than three years later.