RISK FACTORS SUMMARY
Our business is subject to a number of risks, including risks that may prevent us from achieving our business objectives or may adversely affect our business, financial condition, results of operations, cash flows and prospects. Risks that we deem material are described under “Risk Factors” in Item 1A of this report. These risks include, but are not limited to, the following:
•The COVID-19 pandemic has resulted in additional risks that could materially adversely affect our ability to originate mortgages, our servicing operations, our liquidity and our team members.
•The success and growth of our business will depend upon our ability to adapt to and implement technological changes.
•Cyberattacks and other data and security breaches could result in serious harm to our reputation and adversely affect our business
•Our products use software, hardware and services that may be difficult to replace or cause errors or failures of our products that could adversely affect our business.
•We are, and intend to continue, developing new products and services, and our failure to accurately predict their demand or growth could have an adverse effect on our business.
•We are required to make servicing advances that can be subject to delays in recovery or may not be recoverable in certain circumstances.
•We may be required to repurchase or substitute mortgage loans or MSRs that we have sold, or indemnify purchasers of our mortgage loans or MSRs.
•Fraud could result in significant financial losses and harm to our reputation.
•Our subsidiary, Amrock, utilizes third party vendors for issuing a significant amount of title insurance policies which could adversely impact the frequency and severity of title claims.
•Our subsidiary, Rocket Loans, is a rapidly growing company that faces increased risks, uncertainties, expenses and difficulties due to its relatively limited operating history and its reliance on third party relationships and sources.
•Our Rocket Homes business model subjects us to challenges not faced by traditional brokerages.
•Negative public opinion could damage our reputation and adversely affect our earnings.
•Our risk management efforts may not be effective.
•We face intense competition that could adversely affect us.
•Our business is significantly impacted by interest rates. Changes in prevailing interest rates or U.S. monetary policies that affect interest rates may have a detrimental effect on our business.
•A disruption in the secondary home loan market, including the MBS market, could have a detrimental effect on our business.
•Regulation of title insurance rates could adversely affect our subsidiary, Amrock.
•If we cannot maintain our corporate culture, we could lose the innovation, collaboration and focus on the mission that contribute to our business.
•Our certificate of incorporation contains a provision renouncing our interest and expectancy in certain corporate opportunities.
•We are a “controlled company” within the meaning of the Exchange rules and, as a result, qualify for and intend to rely on exemptions from certain corporate governance requirements.
•The dual class structure of our common stock may adversely affect the trading market for our Class A common stock.
Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business, financial condition, results of operations and cash flows.
Item 1. Business
Overview
We are a Detroit‑based holding company consisting of tech-driven real estate, mortgage and eCommerce businesses. Our mission is to simplify the most complicated and stressful transactions in life with technology. We are committed to providing an industry-leading client experience powered by our platform. We believe our widely recognized “Rocket” brand is synonymous with providing simple, fast, and trusted digital solutions for complex transactions.
Dan Gilbert, our founder and Chairman, purposefully created a strong cultural foundation of core principles, or “ISMs”, as a cultural operating system to guide decision‑making by all our team members. At the heart of the ISMs is a simple, yet powerful, concept: “Love our team members. Love our clients.” Our team members put the ISMs into action every day. The result is an empowered and passionate team aligned in a common mission. This has led FORTUNE magazine to name us to their list of “100 Best Companies to Work For” for 17 consecutive years.
Since our inception in 1985, we have consistently demonstrated our ability to launch new consumer experiences, scale and automate operations, and extend our proprietary technologies to partners. Our flagship business, Rocket Mortgage, is the industry leader, having provided more than $1 trillion in home loans since inception. We have now expanded into complementary industries, such as real estate services, personal lending, and auto sales. With each of these businesses in gigantic and fragmented markets, we seek to reinvent and streamline the client experience leveraging the Rocket platform.
Rocket Platform
Rocket Companies is a series of connected businesses centered on delivering innovative solutions to our clients through our technology experience and scale.
•Rocket Mortgage. The nation’s largest mortgage lender, providing what we believe is the simplest and most convenient way to get a mortgage. Our digital solution utilizes automated data retrieval and advanced underwriting technology to deliver fast, tailored solutions to the palm of a client’s hand. Our clients leverage the Rocket Mortgage app to apply for mortgages, interact with our team members, upload documents, e-sign documents, receive statements, and complete monthly payments.
•Amrock. Our leading provider of title insurance services, property valuation and settlement services, leveraging proprietary technology that integrates seamlessly into the Rocket platform and processes. This provides a digital, seamless experience for our clients with speed and efficiency from their first interaction with Rocket Mortgage through closing.
•Rocket Homes. Our home search platform and real estate agent referral network, Rocket Homes provides technology-enabled services to support the home buying and selling experience.
•Rocket Auto. Our automotive retail marketplace, providing centralized and virtual car sales support to national car rental and online car purchasing platforms with substantial inventories.
•Rocket Loans. Our asset‑light, online‑based personal loans business that focuses on high quality, prime borrowers, by leveraging a user-friendly platform and dedication to client-experience.
•Core Digital Media. Top digital social and display advertiser in the mortgage, insurance and education sectors. Core Digital Media enables growth for our broader platform by offering marketing insights and lead generation technology.
•Nexsys. Our fintech company providing a suite of essential tech solutions for mortgage origination and closing processes through digitization and automation.
•Lendesk. Our Canadian technology services company offering a suite of products to digitize and simplify the Canadian mortgage experience, including a point of sale system for mortgage professionals and a loan origination system for private lenders.
•Edison Financial. Our Windsor, Canada based digital mortgage startup to serve the needs of consumers across Canada in partnership with the country's leading broker channel lenders.
Segments
Our business is organized into two segments which promote client acquisition into our platform, Direct to Consumer and Partner Network. Direct to Consumer consists of performance marketing and direct engagement through our Rocket Mortgage App, and Partner Network is our growing segment of partnerships with premier consumer-focused organizations, brokers and mortgage professionals who leverage our platform and scale to provide mortgage solutions to their clients.
In the Direct-to-Consumer segment, clients have the ability to interact with the Rocket Mortgage app and/or with our Rocket Cloud Force, consisting of sales team members across our platform. We market to potential clients in this segment through various performance marketing channels. The Direct-to-Consumer segment derives revenue from originating, closing, selling and servicing predominantly agency-conforming loans, which are pooled and sold to the secondary market. This also includes providing title insurance services, appraisals and settlement services to these clients as part of the Company’s end-to-end mortgage origination experience. Servicing activities are fully allocated to the Direct-to-Consumer segment as they are viewed as an extension of the client experience with the primary objective being to establish and maintain positive, regular touchpoints with our clients, which positions the Company to have high retention and to recapture the clients’ next refinance or purchase mortgage transaction. These activities position the Company to be the natural choice for clients’ next refinance, purchase, personal loan, and auto transactions.
The Rocket Professional platform supports our Partner Network, where we leverage our superior client service and widely recognized brand to grow marketing and influencer relationships, and our mortgage broker partnerships through Rocket Pro Third Party Originations ("TPO"). Our marketing partnerships consist of well-known consumer-focused companies that find value in our award-winning client experience and want to offer their clients mortgage solutions with our trusted, widely recognized brand. These organizations connect their clients directly to us through marketing channels and a referral process. Our influencer partnerships are typically with companies that employ licensed mortgage professionals that find value in our client experience, technology and efficient mortgage process, where mortgages may not be their primary offering. We also enable clients to start the mortgage process through the Rocket platform in the way that works best for them, including through a local mortgage broker. Rocket Pro TPO works exclusively with mortgage brokers, community banks and credit unions. Rocket Pro TPO’s partners provide the face-to-face service their clients desire, while tapping into the expertise, technology and award-winning process of Rocket Mortgage.
With our ability to seamlessly connect with partner organizations, we provide end‑to‑end mortgage fulfillment services to our partners. Revenues in the Partner Network segment are generated primarily from the gain on sale of loans, which includes loan origination fees, revenues from sales of loans into the secondary market, as well as the fair value of originated MSRs and hedging gains and losses. Additionally, there are no performance marketing costs associated with this segment.
Technology
Our technology platform allows us to scale profitably and support life’s most complex transactions for our customers. We drive continuous innovations to our fully-integrated digital products and infrastructure, providing a seamless and efficient experience for our team members, clients and partners. We have found that the most powerful approach to improving the client experience is to identify the pain points in the process and create scalable technology driven solutions for each one. The result is an unmatched client experience that has earned us recognition as #1 for Mortgage Origination by J.D. Power for the past 11 years - every year we have been eligible for the award.
Our leadership and approximately 3,100 technology and product strategy team members focus on technology along three axes. First, we leverage advanced algorithms and decision trees along with intuitive front‑end design to provide an exceptional client interface and service. Second, we use technology and analytics to automate as many steps of our operations as possible to increase our team members’ productivity, minimize process lags and errors, and ultimately drive significant improvement in client outcomes on a massive scale. Third, we develop our technology with a view to offer it to external partners in a seamless manner, enabling further growth of our platform.
At the core of our platform is an advanced engine that enables the data-intensive modeling, modification and management of complex loan processes and business rules. We have turned the complicated and regulatory‑heavy process into a series of client‑friendly questions and requests. We closely monitor the performance of any new initiatives with tangible data and metrics, including days to close, team member efficiency and client satisfaction. We have strategically developed our technology in modules to facilitate agile enhancements. This enables us to effectively scale during market expansion, efficiently onboard partners, and grow into new client segments and channels, with less time and investment than our competitors. This process partitioning has allowed us to identify many areas that could be automated. These automated processes produce true objectivity and greatly reduce human error. Our system has been designed to integrate across business functions, continuously monitoring in‑progress transactions and leveraging our proprietary, data‑driven, decision engine to recommend the most efficient task for each team member.