With lending giant Rocket Mortgage, real estate brokerage Redfin and mortgage loan servicing giant Mr. Cooper now under one roof, you can understand why Rocket Companies CEO Varun Krishna is “obsessed” with AI.
The merger of three publicly traded companies with different business models creates a behemoth with more than 60 million clients and prospects that’s expected to generate more than $2 billion in revenue in the last three months of this year alone, Krishna said Thursday.
Varun Krishna
“The reason that we are so obsessed with this technology is because it helps us with every single aspect of our business,” Krishna said on the company’s third-quarter earnings call. “It helps us grow the top of the funnel. It helps us lift conversion rates. It helps us reduce production costs, and it helps us increase capture.”
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Rocket closed a $1.8 billion deal to acquire national real estate brokerage Redfin on July 1, and its $14.2 billion acquisition of mortgage servicing giant Mr. Cooper on Oct. 1.
Already adept at employing AI across a stable of brands that includes Rocket Mortgage, title and settlement services provider Amrock, and personal finance app Rocket Money, Rocket launched three new AI tools during Q3:
- Pipeline Manager Agent, aimed at helping loan officers identify and prioritize the right leads
- Rocket Pro Underwriting AI Agent, providing faster decisioning for mortgage brokers by automating document verification, e-signature compliance checks and regulatory eligibility reviews
- Purchase Agreement AI Agent, which automates county-specific reviews of purchase agreements.
“Historically, our industry has operated in silos,” Krishna said. “Companies have 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.”
Loan originators like Rocket Mortgage have traditionally shined when rates are low and they can capture market growth, he said. But it can be costly to acquire clients and build the capacity to serve them — only to see business dry up when rates rise.
Loan servicers like Mr. Cooper — who collect monthly mortgage payments from homeowners on behalf of investors who own the loans — “tend to excel in higher rate environments,” Krishna said, generating “predictable, recurring cash flows.”
But acquiring mortgage servicing rights “often requires significant capital,” he noted — Mr. Cooper took years to amass a servicing portfolio that last year surpassed $1 trillion.
Real estate companies like Redfin “excel at attracting millions of consumers to the top of the funnel, but they often fall short on monetizing that traffic, effectively lacking a comprehensive monetization engine,” Krishna said.
By bringing Rocket, Mr. Cooper and Redfin together under one roof, Rocket has built a business that thrives in any interest rate environment — and has “cracked the code on unit economics,” he said, by bringing homebuyers in through Redfin and refinancing existing homeowners serviced by Mr. Cooper.
“We are a home ownership company bringing end-to-end integration to housing at a scale the industry has never seen,” Krishna said. “Our platform is vertically integrated by design, powered by AI, and it represents the future of home buying.”
By the numbers
Rocket Chief Financial Officer Brian Brown talked numbers on Thursday’s earnings call.
Brian Brown
“Redfin’s robust lead funnel of nearly 50 million [monthly active users], the related mortgage experience, and the real estate brokerage are now fully integrated with Rocket Mortgage,” Brown said. “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.”
Mortgage attach rates — which Brown said are the “primary driver of revenue synergies” Rocket hopes to achieve — have climbed from 27 percent before the merger to 40 percent today.
That puts Rocket “well on the way” to hit its 50 percent mortgage attachment rate goal — meaning half of all Redfin clients will choose Rocket Mortgage as their lender.
On the Mr. Cooper side, “executing a seamless integration” has been a “top priority for six months leading up to our October 1 close.”
While Redfin and Rocket together have the industry’s largest purchase funnel, with 62 million monthly active visitors, Mr. Cooper and Rocket’s combined loan servicing portfolio of nearly 10 million homeowners should generate big business in refinancing, Brown said.
If rates on 30-year fixed-rate mortgages fall to 5.5 percent, 25 percent of borrowers in Rocket and Mr. Cooper’s servicing portfolio — about $300 billion in mortgages — would have an incentive to refinance, he said.
For context, last year U.S. lenders refinanced a total of $364 billion in mortgages and originated $1.3 trillion in purchase loans.
Rocket’s long-term goal is to capture 8 percent of the purchase loan market and 20 percent of refinancing, up from 3.9 percent and 11.3 percent in 2024, according to federal loan data analyzed by iEmergent.
Technology could help it achieve that goal without proportionate growth in expenses. AI not only expands Rocket’s lead funnel but improves conversion, driving even greater efficiency, Brown said.
“AI unlocks the capacity of our production team members so that we can grow origination while keeping fixed costs flat,” Brown said. “Every loan requires a licensed loan officer and a licensed underwriter. With AI, our production team members can now handle 63 percent more loans than they could just two years ago.”
While Rocket reported a $124 million Q3 net loss, mortgage originations were up 14 percent from a year ago, to $32.4 billion, and the $1.78 billion in adjusted revenue for the quarter came in above the high end of the company’s previous guidance.
With Mr. Cooper now contributing to the company’s Q4 bottom line, investors liked what they saw.
Shares in Rocket, which in the last 12 months have traded for as little as $10.06 and as much as $22.56, were up 7 percent from Thursday’s close of $15.94 in after-hours trading.
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