Posted on 10/31/2022 12:44:57 PM PDT by Red Badger
America’s largest home lender harnessed a generation of low rates to refinance millions of mortgages. Its effort to switch focus is a challenge.
The mortgage industry turned from feast to famine faster than America’s largest home lender anticipated.
Rocket Mortgage harnessed a generation of low rates to refinance millions of homeowners. Last year, it racked up more than double the refi volume of any other lender, accounting for more than $1 of every $10 lent out during a boom for the mortgage industry.
Now the Federal Reserve’s efforts to fight inflation have sent mortgage rates soaring. And refinancing, the driver of Rocket’s business, no longer makes sense for many homeowners.
With mortgage rates now above 7%, just 133,000 U.S. homeowners can save money by refinancing at today’s rates, down from a peak of over 19 million in late 2020, according to Black Knight Inc., BKI 0.53%increase; green up pointing triangle a mortgage technology and data provider. Refinancing accounted for some 82% of the total dollar volume of Rocket’s loans last year, according to Inside Mortgage Finance, an industry research firm.
Rocket has switched its focus, selling mortgages on new purchases and pitching customers on refinancing packages that allow them to pull cash out of their homes. It is also trying to get smaller—shrinking its ranks through a mix of buyouts and attrition, rather than the layoffs that have become commonplace at its competitors.
(Excerpt) Read more at wsj.com ...
Huntsville is a great area—but interest rate rises are blood-thirsty—and realtors are often the last ones to process the bad news.
come on, my first mortgage was 10%
Mine was 10% also. But 10% simple, owner financed. Much more reasonable than a compound rate.
He has about a 50 percent chance of being correct ... like everyone else ...
They make a fixed amount off each loan. Originating fee, closing costs …. So volume is everything to those companies. Very few are after the loan for the long term. In 2010 my loan was wanted as a long term hold by my lender. I have no reason why, maybe a good risk reward …., anyway I was putting 20% down but the home vs land value caused many lenders to just denied the discussion. My loan has never been sold so idk why. I digress. Rocket loans makes $ of the loan process and then sells the loan. No one makes there mortgage payment out to them. So no volume = no money. Their model was refinancing. No one refis from 3 or 4 percent to 7. Hence they are dead.
I will miss their Super Bowl ads. The Jason Momoa ad for them is a classic.
https://www.youtube.com/watch?v=zTEGPytXfY8
Someone who understands business. What are you doing here?
Mine was 6.75%...............
In the old days the mortgage originators also made money with the yield spread premiums.
The way that worked was that the rate the borrower paid was a little bit higher than the rate that the purchasers of the mortgage backed securities received.
The net present value of the difference was pocketed by the mortgage originator. This was a “secret” hidden from borrowers—at one point I know Congress tried to ban it—don’t know if they were successful or not.
Correct
Yep
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