Rocket Companies Inc., one of the country's largest mortgage lenders, posted a 277% increase in quarterly earnings, a record year as the home loan specialist drove the US housing rally.
The company had adjusted sales that exceeded estimates. And with net income up tenfold last year to $ 9.4 billion, Rocket announced a special dividend of $ 1.11 per share on Thursday, according to a statement. The shares even rose 7.8% in late trading to $ 21.46.
"We have successfully driven growth in every segment of our business," said Jay Farner, Rocket's chief executive officer, in the statement.
The pandemic real estate boom gave a big boost to the mortgage industry, which saw record levels of loans and profits in 2020 as interest rates fell to all-time lows. Much of this was thanks to the Federal Reserve, which kept borrowing costs under control and bought mortgage bonds to stimulate the economy.
However, profitability may have peaked. Rocket reported a 4.41% margin on new borrowing last quarter, well above the company's November estimate of 3.8% to 4.1%. On Thursday, investors were told that new loan margins should be between 3.6% and 3.9% this quarter.
Mortgage lenders have warned investors over the past few weeks that profitability will not rise this year. UWM Holdings Corp., the parent company of United Wholesale Mortgage, said new loan earnings this quarter could decrease by as much as a third from the fourth quarter last year.
Mr. Cooper Group Inc., meanwhile, said this week that its profits from mortgage sales – lenders generally sell the loans they make – will be roughly unchanged this quarter.
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US mortgage rates this week rose to their highest level in six months and threatened to wipe out the mortgage rally. And as government bond yields rise, the cost of borrowing could continue to rise.
That could deter more Americans from refinancing debt, while rising home prices put property out of reach for many.
Mortgage applications fell to a nine-month low last week, while home sales fell to a six-month low last month.