Rocket Companies swung back to a GAAP net loss in the third quarter as the company finalized its first of two major purchases, the acquisition of Redfin, during the period.
The Mr. Cooper transaction, the larger of the two, did not close until Oct. 1, but included in the current results was the previously disclosed $90 million of one-time expenses related to several items, including severance. In the fourth quarter, it expects to record an additional $140 million of one-time expenses, also because of severance and the transactions.
Mr. Cooper’s results will first be included in Rocket’s fourth quarter earnings.
How Redfin and Mr. Cooper change Rocket’s operations
Because of the addition of the Redfin real estate business and the Mr. Cooper servicing operation, Rocket is now in a category by itself, Varun Krishna said on the earnings call.
“Historically, our industry has operated in silos,” Krishna said. “Companies have typically been either originators, servicers or real estate companies, each focused on a narrow slice of the client experience. Rocket breaks that mold — we are not just one part of the process; we are all of them.”
Later in the call, Krishna said it is the first time originations and servicing have been connected at such a large scale.
When interest rates fell in September, the Redfin-to-Rocket business pipeline was in force, Krishna said. Approximately 13% of its retail purchase closings came from consumers who used both companies and this should increase in the future.
“I’m really pleased with just how well the leadership teams are working together,” Krishna said. “You just can’t tell where one company starts and the other company finishes.”
During the period, Rocket lost $124 million on a GAAP basis, compared with a profit of $34 million in the second quarter but a net loss of $481 million for the third quarter of 2024.
What Rocket reported for adjusted net income
But like other mortgage companies looking to blunt the impact of some volatile items such as servicing, Rocket uses a non-GAAP measurement. It reported adjusted net income of $158 million, compared with $75 million in the second quarter and $168 million a year ago.
The 7 cents per share of adjusted net income beat street estimates by 2 cents, according to Seeking Alpha.
However, during the quarter Rocket lost $66.5 million in its servicing function on a $479.6 million negative adjustment to the fair value of its mortgage servicing rights.
For the third quarter of 2024, this was a $504.5 million loss, with a $878.3 million writedown in the fair value of MSRs.
Rocket’s third quarter volume
Closed loan volume for the quarter totaled $32.4 billion, versus $29.1 billion in the second quarter and $28.5 billion one year ago. In the same time frame, gain on sale of 280 basis points was flat with three months prior and just 2 basis points higher than the previous year.
“Net rate lock volume totaled $36 billion, up 26% quarter over quarter and 20% year over year,” said Brian Brown, chief financial officer. “This growth outpaced the broader market in both purchase and refinance, resulting in market share gains in our largest purchase and refinance quarter in over three years.”
How Redfin helped third quarter production
Attach rates from Redfin are running ahead of projections in the four months since closing.
“Since launching in July, we’ve seen the number of Redfin users going directly to home financing through the get pre-qualified button more than double, surpassing half a million by September,” said Brown. “Mortgage attach rates, which are the primary driver of revenue synergies, have climbed from 27% to 40% today.”
The early results from the Redfin acquisition reinforces Rocket’s confidence in achieving $60 million of revenue synergies during 2026 with the full run-rate realization expected in 2027, Brown said.
“Rocket has a more durable business model, grounded in three pillars, stability through recurring cash flow, a larger platform for growth and a cost advantage that creates sustainable operating leverage and superior unit economics,” he continued.
How AI will help Rocket’s servicing operations
Meanwhile, the future of mortgage servicing is agentic artificial intelligence, Krishna said.
“When you think about the use cases in servicing, a lot of it has to do with helping clients solve meaningful problems, but also handling simple tasks and automation that drive day-to-day efficiency,” he declared. “So when you think about things like managing your payments, handling things like forbearance, property taxes, dealing with issues, escalation, those are all things that we have significant opportunities to automate, personalize and add value with AI.”
