Rocket uses Investor Day to discuss market share goals

Rocket's opportunity to double its purchase origination share by 2027 is driven by market fragmentation, company executives said during the company's first investor day on Sept. 10.

When Rocket went public in August 2020, it was at a time when the country was still dealing with the effects of the pandemic, limiting interactions with investors.

"One of the things we're most excited about sharing is our culture and letting investors interact with our actual team members, peeling back the onion a little bit and getting to what makes Rocket so special," Brian Brown, chief financial officer, said in an interview several days later. Brown was also one of the company's presenters during the event.

Currently it has a 4% market share of home purchase loans, with no competitor having more than a single digit hold on this portion of the market, CEO Varun Krishna said at the event.

"You have higher interest rates, and that's separating the wheat from the chaff," Krishna said. "Higher for longer pushes out the smaller players, leaving more market share up for grabs for scaled players like Rocket. And once rates drop, we are uniquely poised to capitalize."

Subsequent to the presentation, Rocket TPO announced the company raised its conforming loan limits in advance of the formal Federal Home Finance Agency announcement expected later this year. It is a promotion that helps to build purchase market share given rising home prices since the conforming limit was raised at the start of this year.

As banks cede mortgage business to the non-banks, Rocket believes it has an opportunity to partner with them to capture even more market share.

Brown elaborated during the interview that some of the larger banks have difficulty making money on mortgage lending. "As we all know, mortgage can be an up and down business, so they're not exactly doubling down in the mortgage space…they don't necessarily do it at scale."

However, Rocket is also not looking to compete with the banks. Through Rocket's enterprise partnerships like the one it has with Charles Schwab, it allows the bank to offer a mortgage product, Brown said. That is one way for the company to capture market share.

It is looking to get 8% of all purchase loans and 20% of refinancings by 2027; the latter is up from its current share of 12.5%.

Rocket is focused on growing both its retail and third party origination channels, wrote Bose George, an analyst at Keefe, Bruyette & Woods, in a report on the event. However, "The broker channel is already very consolidated to United Wholesale Mortgage holding 50% share, so we think growth there could be more challenging," George said

UWM's policy is not to do business with mortgage brokers who sell to Rocket. Several originators have challenged that policy in court.

Brown sees the TPO channel as another opportunity to grow market share in the purchase side, noting that it is a strong suit of mortgage brokers (as has UWM President and CEO Mat Ishbia in the past).

"We really believe we have a superpower here to help the brokers that work with Rocket, and the reason we believe that is because what we're doing is we're taking the technology and we're taking the 40 years of experience, team members and process that we had in the direct-to-consumer space, and we're starting to extend that to the broker community," Brown declared. "So we're sort of supercharging them with the tools and learnings and processes we have over the years in the direct-to-consumer space."

Another source of share growth is through its mortgage servicing rights portfolio, which it has developed not only organically but through acquisitions.

Brown noted Rocket's place among the high, if not the, highest scorer on multiple J.D. Power customer service surveys. By providing that high level of experience, Rocket is able to retain the customer when they seek their next mortgage.

When it acquires MSRs, "we're looking at it not just to service the clients," Brown said. "We're really looking at it to just try to provide them an awesome experience."

Rocket's retention rate of 85% is three times the industry average, Brown said.

Artificial intelligence technology will underlie growth in both purchase and refinance, Krishna said.

"It is going to transform our industry. I say this as a technologist, as an engineer, and is someone who has been deeply involved in this space for years," said Krishna, who joined Rocket from Intuit. "We believe in this as a company, and we're focusing on accelerating our leadership in this transformation."

The day after the Rocket investor conference, UWM announced a marketing initiative using AI called Keep, which mortgage brokers would use to send out "pre-validated" refinance offers to past clients who are now in the money.

Rocket's "AI-fueled" strategy is based on its "Super Stack," Krishna said, and has four layers. Those are Rocket's iconic brand, proprietary technology, what it said was the ability to offer unparalleled experiences and its powerful ecosystem.

Rocket's brand is the "umbrella" at the top of Super Stack, Brown added.

The brand meets the consumer where they are, it enhances trust and gives the consumer the confidence that they're going to get value from working with Rocket, Brown said.

"Then you have to have great experiences to back that up, because it doesn't matter if you have a great brand and the consumer trusts you, once they start interacting with you, it doesn't go well," Brown said. That is why the entire Rocket ecosystem is important, he added.

The AI technology should allow Rocket to achieve its growth targets while maintaining its current cost structure, both Brown and Krishna said.

During the recent downturn, Rocket did have to reduce its cost structure. At the same time, however, and what Brown said he was proudest of, was that the company kept investing in its technology.

"You can build more personalized experiences for the consumer through AI," Brown elaborated. "The second way is you can empower your team members to be more efficient using this technology."

AI technology also allows them to scale up when volume increases, he continued.