Gilbert's Rocket Companies reports first quarterly loss since going public

For the first time since going public in 2020, Dan Gilbert's mortgage business is seeing red.

Rocket Companies, the publicly traded corporate parent of Rocket Mortgage, reported Tuesday a net loss of $493 million in the fourth quarter on $481 million in total revenue.

It was the firm's first quarterly loss since going public in August 2020, back during the thick of a mortgage refinancing boom that was highly profitable for Rocket.

For all of 2022, Rocket Companies saw $700 million in net income or profits. That result was well below the firm's $6 billion profit in 2021 and its monster $9.4 billion profit for 2020.

Rocket's total mortgage volume was $133.1 billion for 2022, compared with $351.2 billion in 2021.

“The mortgage industry faced an extremely difficult environment in 2022," Rocket Chief Financial Officer Brian Brown said during a late afternoon earnings call. "Rapidly rising interest rates, declining consumer confidence and challenging affordability impacted demand for purchase and refinance mortgage products throughout the year.”

Rocket executives have been furiously cutting expenses as revenues have dropped, including several rounds of employee buyouts.

The firm once planned to cut $50 million to $100 million in expenses during the fourth quarter but ended up accelerating that amount to $202 million. On an annualized basis, expenses during the fourth quarter were 30% lower than the same period a year before, Brown said.

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The entire U.S. mortgage industry has been in a down cycle for the past year amid higher interest rates, slowing home sales and worries among consumers about a possible recession.

Interest rates on 30-year, fixed-rate mortgages averaged just over 3% at the start of 2022 and briefly zoomed above 7% in the fall. Last week, mortgage rates averaged 6.5%, according to Freddie Mac.

Banks and lenders did about $2.2 trillion in total mortgage originations last year, down from the $4.4 trillion in 2021, according to the Mortgage Bankers Association. For 2023, mortgage originations are forecast to total just under $1.9 trillion.

Rocket's local rival, Pontiac-based United Wholesale Mortgage, is scheduled to release its fourth-quarter earnings Wednesday morning. In the third quarter, UWM for the first time surpassed Rocket Mortgage as the nation's No. 1 mortgage lender by volume.

During Tuesday's earnings call, Rocket CEO Jay Farner said he believes his company can gain market share this year because numerous mortgage lenders, such as Wells Fargo, JPMorgan Chase and Flagstar Bank have been pulling back on their mortgage operations.

“We see a very big opportunity right now as the mortgage market seems even more fragmented than in the past, to lean in and grab that market share," Farner said.

Rocket Mortgage, formerly known as Quicken Loans, is the largest company under the Rocket Companies umbrella. Others include Rocket Homes, Rocket Auto, Truebill and title company Amrock. Rocket Companies went public in August 2020.

Farner, 49, is preparing to retire June 1. Bill Emerson, Rocket Mortgage's previous chief executive, will be Farner's interim replacement while the company's board conducts a CEO search.

Rocket shares closed down 2 cents Tuesday to $7.86.

Contact JC Reindl: 313-222-6631 or jcreindl@freepress.com. Follow him on Twitter @jcreindl.

This article originally appeared on Detroit Free Press: Gilbert's Rocket Cos. reports first quarterly loss since going public