What we realized from Quicken's IPO registration

If Quicken Loans' parent company, Rock Holdings, withdraws its proposed IPO, analysts say this could be the first of many mortgage lenders to follow.

"We see this IPO as positive for the mortgage banking industry because it highlights the current strong operating environment," said a report by Keefe, Bruyette & Woods, written by Bose George, Thomas McJoynt-Griffith, and Eric Hagen.

"If this IPO is successful, we could see further IPOs in the industry. Many of the leading mortgage lenders are privately held, including United Wholesale [mortgage], Freedom Mortgage, Caliber Home Loans and LoanDepot," the analysts write.

KBW declined to comment on the IPO announcement, as did several non-bank lenders and industry analysts that National Mortgage News contacted.

Quicken has not returned a request for further comments.

Only a handful of non-bank mortgage lenders are currently publicly traded, including Ocwen, PennyMac, Impac, Mr. Cooper, New Residential and Redwood Trust, and commercial mortgage lender Walker & Dunlop.

When the IPO is completed, the listed company Rocket Cos. Called with RKT as a ticker symbol.

Rock Holdings is currently the sole owner of Rocket Cos., Which was founded earlier this year as part of a restructuring. Rock Holdings remains the company's main owner after the IPO. A recently founded company, RKT Holdings, will be the direct parent of Quicken Loans and other related companies, including the title company Amrock.

As provided for in the filing of the Securities and Exchange Commission, it will be published in Rocket Cos. There are four classes of common stock, with Quicken Loans chairman Dan Gilbert holding a stake in the various companies that represents 79% of the company's voting equity.

Before the IPO, Rocket Cos. The sole managing member of RKT Holdings. Both Gilbert and Rocket Cos. Will be involved in RKT Holdings.

With the filing, all speculations that Quicken Loans raised capital for liquidity purposes or to expand the company were dispelled.

"We intend to use all of the net proceeds from this offering to purchase a number of [RKT] Holdings Units and Class D common shares of [Rock Holdings Inc.]. We do not intend to use them." All income from this offering to purchase [RKT] holding units and D Class ordinary shares from Dan Gilbert, "said the filing.

Another section of the filing states: "We do not intend to use the proceeds from this offer to fund the growth of our business."

In March, as the number of cases of corona viruses increased, along with expectations of a large number of forbearances related to the CARES law, reports found that Quicken could have liquidity problems due to the required advances of principal and interest payments to investors .

However, the submission showed that the company was not in danger, although it contained a note of caution.

As of June 30, Quicken had approximately 98,000 customers with forbearance plans, or 5.1% of its service portfolio. In comparison, the Mortgage Bankers Association reported that in the week ending June 28, 8.39% of the total mortgages were included in a forbearance plan.

"We are able to use prepayments and mortgage repayments from other customers to fund these capital and interest advances before we transfer these funds to the agencies," the filing said. "So far, we have been able to use these disbursements to fund all required capital and interest advances, and we have not had to use corporate money or resort to facilities to meet forbearance capital and interest advances.

"While these advances can be substantial with a higher degree of forbearance, we believe we are very well positioned in terms of liquidity. As of May 31, we had $ 2.6 billion in cash and were undrawn lines of credit taken of $ 1.22 billion. "

Quicken is currently in talks with its lenders about additional pre-financing.

"Although the above-mentioned forbearance activity has not yet had a material impact on our cash flows, we expect service advances to increase over time and believe they could become material," the filing said.

In the registration is a net profit of $ 97.7 million for Rocket Cos. Listed in the first quarter compared to a net loss of $ 299 million for the same period in 2019.

In the first quarter of 2019, Quicken saw a decrease in the fair value of its mortgage service rights by $ 321 million due to valuation assumptions, resulting in a net loss for the period.

The year-over-year change in the first quarter was due to a $ 1.1 billion increase in loan sales from higher origination volume in 2020. Other income also increased $ 112.1 million, primarily due to revenue from property insurance services through property valuation and settlement services, which was also driven by the increase in origination volume. However, this was offset by a $ 991.3 million decrease in the fair value of its MSRs.

Rocket Cos earned for 2019 as a whole. $ 893.8 million, compared to $ 612.9 million in 2018 and $ 770.7 million in 2018.

The first quarter generated $ 51.7 billion, of which $ 31.8 billion was direct to consumers and $ 19.9 billion from third parties. That was more than double production in the first quarter of 2019 of $ 22.3 billion.

Wells Fargo, who has recently dueled with Quicken as the country's best creator, earned $ 48 billion in the first quarter of this year and $ 33 billion in the same period in 2019.

The profit margin was 3.25% in the first quarter after 2.64% in the previous year.

Quicken's origins in 2019 were $ 145.2 billion, compared to $ 83.1 billion in 2018 and $ 85.5 billion in 2017. Wells Fargo's volume in 2019 was $ 204 billion USD.

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