Rocket Companies, Inc. Barclays 24th Annual Global Financial Services Conference

All right. So we'll kick it off. Very pleased to have Rocket here today. And joining me on stage is Brian Brown, President and Chief Financial Officer. Welcome, Brian. Thanks, Terry. Thanks for having me.

Yeah. Very happy to have you. So maybe we'll just set the table with some market questions. 2026 origination volumes have come in below expectations relative to the start of the year. What needs to happen for the housing market to become healthier and for the mortgage market to expand? And how are you thinking about the mortgage market size over the next several quarters?

Sure. Yeah. Happy to take that. Good to see some familiar faces. Thanks for the support. Yeah, I think, Terry, you've done a nice job timing this conference around some market news today, so it's probably an appropriate question to start with as we see the 10-year starting to touch a five handle. Yeah, look, there's a couple different things. I'll start with the things that I think are obvious and we know are challenges. But there's no question that there's a lot of inflation based in the system, and that's with energy or without energy. That's putting pressure on mortgage rates. I do think there's some room in spreads still to compress, but all in all, the increasing 10-year treasury is putting pressure on mortgage rates. We know that. Interestingly enough, I think just this morning, Fannie Mae came out with a new mortgage forecast for the year, assumingly incorporating a lot of this data that we are all reading and digesting today.

The interesting piece is they took their purchase assumptions of the purchase market down a bit, but it is still very close to 2025 levels in terms of the total expected amount of purchase volume to be done in the market. That feels just about right to us. While there is a lot of pressure, and I will be the first to say I would like it if rates cooperated a little bit more and inflation slowed down, I think there is still a lot to be excited about and a lot of opportunity ahead of us.

That purchase volume that I mentioned, if that stays reasonably close to 2025 levels, again, maybe not as high as we would like, but provides a ton of opportunity in the market. The other thing I don't think folks are talking about quite as much, but we have to remember that we are experiencing record equity levels in homes today. That presents a huge opportunity for Rocket. Most of you probably know this, but we are the number one home equity lender. We only do second liens, we only do second mortgages, but we are number one even when you include the home equity lending side, the revolving line. So having a product to allow consumers to tap into their most valuable asset, being the home that they own and the equity that they build up, still presents a great opportunity even in this market.

Then, of course, depending on the loan size or the amount of cash that you need to get out of your home, a cash-out refinance can still make a lot of sense for you. So overall, we would like rates to cooperate, but we also know that there are still opportunities ahead of us. Maybe just one more thing to double-click on the home buying side. I think sometimes we can look at national statistics, and those can be misleading. Because we do know that inventory is starting to pick up in certain areas, but that is offset by some really competitive markets where if you are listing your home, you are probably still getting 10 offers or 13 offers. But if you really break it down, there is some interesting geographies that are starting to show some green shoots. Nashville comes to mind, San Jose comes to mind, Seattle comes to mind.

We are seeing big inventory unlocks in these areas. So it just goes to show you that having a 50-state national platform, being scalable, you know that our business is very diversified now. So we have brokers that sit out in market in all of these markets. We have local loan officers that are feet on the street. We have a centralized loan officer base. When you add that up, we are in all 50 states, all 3,000 counties. So we get a really nice read on what is going on across the market nationally. But it also presents a bunch of opportunities, because while some markets are still hot and it is really tough on buyers, other markets actually have plenty of inventory, and it is turning into an actual buyer's market.

For all those reasons, despite rates maybe not being where we would want them to be, I am still really excited for the year ahead and into next year, because I just think it is still a big market. It is still fragmented, and even though we are the biggest player, we still have single-digit share and purchase, so there is still a lot of room to run.

Got it. That is super helpful color. What type of market environment would you say is best for Rocket? Do you prefer a more challenging market like the one we are in, where execution and scale matter more, or just a more favorable market where a rising tide lifts all boats?

Yeah. I love this question. It is a good question, and I do not want to give you a flippant answer, but we really try to build this business, particularly through the more recent acquisitions and some of the investments we made, as a have your cake and eat it too business. What I mean by that is it would be very obvious for me to be up here in front of you and say, well, a lower rate market is clearly the best market because we would love to help consumers lower their monthly payment through rate-and-term refinances, which is not too much of now. But I actually think that our house view for many years has been that rates would stay higher for longer.

In fact, I was just talking to someone in the back there, and they said something about buying Mr. Cooper and accessing that, which I am sure we will talk about. They were like, "I assume you were buying Mr. Cooper because you expected rates to go down and you wanted to take advantage of all the rate-and-term refinances." Of course, that is part of the thesis that is very important, but that was not actually why we bought Mr. Cooper. We bought Mr. Cooper because the house view is that rates would stay higher for longer. That diversification, bringing that servicing income into the mix. Now, 70% of our revenue being from less rate sensitive products, which I could not have told you if I was sitting up here five years ago or three years ago, is a big change in our business model.

Going back to our comments on the market, I actually think that this market presents enough opportunity for us to continue to grow the top line and the bottom line, which we've done very successfully over the past couple of quarters, taking share and growing EBITDA margins. But the other thing, Terry, that does get me a bit excited about this market is I think it's tougher out there for everyone else. I really do. Most of you probably follow this to some extent, but we are the only mortgage company that has less than one times leverage. We're the only mortgage company that has an investment-grade rating from Fitch. We have an investment-grade company rating from Moody's. They look a little bit more down on the industry, so we're working on that.

We're the only mortgage company with $3 billion of cash on our balance sheet, $11 billion of liquidity that we have access to. So if there's someone that is in a position to benefit from a higher rate environment, it's definitely Rocket. We've seen industry consolidation pick up at quite a rate over the past, I'll call it maybe eight months. I expect some of that to continue. I expect some of the best players like Rocket to continue to grow and take share, while many other companies in this space are struggling with free cash flow. They're struggling on their unit economic side, and they're saying all the right things in terms of how they want to bring costs out of the system. But I don't necessarily think that they have the strength and the balance sheet that Rocket does to continue to invest in the cycle.

To answer your question, I, of course, would like rates to cooperate a little bit more, but we didn't build this business for a low-rate environment. We built it for a high-rate environment without giving up the ability to capture the upside when rates move. It wasn't that long ago that we were sitting in the first quarter and rates did cooperate for a very short period of time, and that's one of the quarters that I'm most proud of because you've been able to see Rocket capitalize, pick up share, take that extra capacity without adding any fixed costs when rates cooperated. We sit here in the third quarter, they're not cooperating, and we're still growing EBITDA margins and taking share.