As of 10 Aug 2020
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Baseball Stats
Founded:1985
Employees: 20k
Share price: $21
MarketCap: $40B
HQ - Detroit
Company description
Rocket is end to end digital mortgage platform that originates, sells MBS to investors, and services the loans.
- Origination - Faster, cheaper and higher quality borrower targeting vs others (Refi heavy) → Core biz (80% rev)
- Servicing - Client retention rates and delinquency trends are better than industry average (total servicing portfolio of $378b with 1.9M borrowers, started this biz in 2010)
- Title & Settlement services (insurance agent only)
Why we are at peak today?
- Mostly refinance business (70% vs market at 55% in 1H 2020) which increased due to int rates went to 50bps on 10yr treasury
- Gain on sale margins became too high (~5%) given spread b/w 30yr mortgage and 10yr treasury widened (from x% in '18 end, to y in '19, to z today) vs in normal times its 3.5%
- Significant marketing spend ($900M in 2019) to build brand
Not valued at rich multiples due to cyclical business and no visibility
- Biggest debate is valuing it at fintech biz vs fin only, I think the industry leans towards 'fin' only
- Priced at 8x forward earnings given cyclical industry (mortgage co's historically traded at lower multiples given their lack of biz visibility and int rate exposure)
Market / Competition
- Market size
- Market share/Competition
Detailed notes
- Key Business segments
- Costs
- Customer love
- Origination share shifted to 3rd party in last two years
Financials
Overall per loan parameters (2019)
- Co recognizes gain on sale of mortgage at rate lock vs many others do it at funding
- Rocket's GOS (gain on sale) has been >4% even in prior years (much higher than banks as there is no sharing with the broker/originator)
![https://s3-us-west-2.amazonaws.com/secure.notion-static.com/1d6a58c8-7595-486e-aaf8-010437a6e43b/Untitled.png](https://s3-us-west-2.amazonaws.com/secure.notion-static.com/1d6a58c8-7595-486e-aaf8-010437a6e43b/Untitled.png)
Total origination
Total servicing book
![https://s3-us-west-2.amazonaws.com/secure.notion-static.com/c1318aab-5028-4da9-b6d8-8003f0d9fa75/Untitled.png](https://s3-us-west-2.amazonaws.com/secure.notion-static.com/c1318aab-5028-4da9-b6d8-8003f0d9fa75/Untitled.png)
![https://s3-us-west-2.amazonaws.com/secure.notion-static.com/6df25a38-11cc-4ae6-99aa-3a99036bba61/Untitled.png](https://s3-us-west-2.amazonaws.com/secure.notion-static.com/6df25a38-11cc-4ae6-99aa-3a99036bba61/Untitled.png)
![https://s3-us-west-2.amazonaws.com/secure.notion-static.com/05a67355-a5e1-4803-bf2f-2cdcd1ce6efb/Untitled.png](https://s3-us-west-2.amazonaws.com/secure.notion-static.com/05a67355-a5e1-4803-bf2f-2cdcd1ce6efb/Untitled.png)