Here's What Rocket Is Doing About the Mortgage Meltdown
The mortgage business is a feast-and-famine affair. The COVID-19 pandemic pushed the Federal Reserve to lower rates, which triggered an enormous refinancing boom. This gave the mortgage industry two fabulous years, in 2020 and 2021. The reckoning came in 2022, when the Fed began an aggressive campaign of higher rates in an effort to curb rising inflation. This caused mortgage origination volume to collapse. Rocket (NYSE: RKT) was hurt by this decline and has been taking steps to reduce its reliance on mortgage banking.
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Rocket is best known for its tag line: "Push Button, Get Mortgage." If you look at the different business models for mortgage banks, Rocket follows the retail model, which means it generally finds its own customers and assembles the mortgage loan itself. Another model is correspondent, whereby a lender buys completed loans from smaller originators. This is the model for Mr. Cooper (NASDAQ: COOP). Finally, there is the broker model, in which the originator partners with brokers, who find the loans. This is the model for UWM Corp (NYSE: UWMC).
Source Fool.com
