The mortgage banking business is a feast-or-famine affair. After feasting on easy refinance activity during the COVID-19 pandemic, originators are starving as origination activity has been cut in half this year. Since rates have increased, few homeowners have a financial incentive to refinance, and a combination of soaring house prices and rising rates have impacted home affordability. Rocket (NYSE: RKT) recently announced its second-quarter earnings, and mortgage activity took a sizable hit. Here is how the company is responding to it.
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Rocket describes itself as a fintech, and in many ways it is. However, mortgage origination is its primary business. During Q2, total origination fell 59% on a year-over-year basis to $34.5 billion. Earnings per share on the quarter fell from $0.40 a year ago to $0.02. The company is focusing on expense reduction and building its other lines of business. If investors focus only on the mortgage origination part, they will miss a lot of what is going on behind the scenes.
For further details see:
Here's Why Rocket Is Taking Steps to Diversify Its Business