Dan Gilbert's mortgage company continues to feel the nationwide slowdown in the housing market and is tightening its belt.
Rocket Companies, the publicly traded corporate parent of Rocket Mortgage, formerly known as Quicken Loans, reported late Thursday that it had $60 million in net income, or profit, during the second quarter, down from just over $1 billion during the same quarter in 2021.
Total revenue also fell to $1.4 billion for the quarter, down from nearly $2.7 billion.
To adjust to the revenue plunge, Rocket cut expenses by about $300 million during the second quarter and is on pace to cut an additional $50 million to $150 million in the current quarter, Chief Financial Officer Julie Booth said during a late Thursday earnings call.
In April, Rocket began offering voluntary buyouts to hundreds of employees. The cost savings is largely coming from those buyouts and reductions in marketing and vendor expenses, she said.
Company officials did not say how many employees opted for the buyouts.
Rocket Companies had 26,000 total employees in the U.S. and Canada at the end of last year, according to its annual Securities and Exchange Commission report.
"We have seen a seismic shift to a smaller mortgage market," Booth said. “Purchase demand has also been affected, as consumer sentiment has declined at a record pace to levels not seen in more than a decade, and looming apprehension over the economy has driven fears of a potential recession.”
The entire mortgage industry is now in a down cycle, with mortgage originations forecast to drop 40% this year from 2021 levels, according to the Mortgage Bankers Association, because of higher mortgage rates and fewer home sales and refinancings.
Mortgage lenders across the country, including in metro Detroit, have been shedding staff since the end of the 2020-21 refinancing boom.
Rocket CEO Jay Farner said he believes the entire mortgage industry will be contracting further in the months ahead.
However, Rocket intends to keep some "excess capacity" in regard to its employee headcount so that it can later grow, he said.
"We’ll need that capacity as we move into 2023, as we grow market share again," Farner said. "It wouldn’t make a lot of sense for us to go through a significant capacity reduction, only to turn around and have to hire again four or five months later.”
Mortgage rates were on the rise throughout the second quarter and nearly reached 6% in June, but have since fallen.
The average rate this week on a 30-year, fixed-rate mortgage is 4.99%, according to government-backed Freddie Mac. That is about the same rate as in mid-April.
Meanwhile, sales of existing U.S. homes have been declining each month this year compared to last year, according to the National Association of Realtors.
Rocket Mortgage is the nation's top mortgage lender by volume. Its stock closed up 4 cents to $10.29 Thursday, but was down in after-hours trading.
Pontiac-based United Wholesale Mortgage is schedule to report its second quarter earnings Tuesday.
This article originally appeared on Detroit Free Press: Rocket Companies ekes out $60M Q2 profit, does cost cuts