Great. Thanks, everyone, for joining us today. My name is Doug Harder. I am the mortgage finance analyst at UBS and happy to be joined up here on stage with Brian Brown, Chief Financial Officer of Rocket Companies. Brian, you've been with Rocket for 11 years. How have you seen Rocket evolve during your time at the company?
Yeah, great question. Thanks, Doug, and thanks for having me. Appreciate being here with everyone. Yeah, a lot has happened in 11 years at Rocket. We've obviously experienced a lot of growth. And for those of you that have followed the mortgage and fintech space for a while, there's been a lot of change in the space. We went through the COVID period, of course. Two years ago, Rocket got a brand new CEO, first CEO outside what we would say our family of companies, Varun Krishna. Varun joined us from Intuit. He led the consumer products group there, ran TurboTax. And that brought a lot of good clarity. A couple of things happened with that. Number one, we doubled down on our core business, our core business being mortgage and home ownership. We exited some of the ancillary businesses that we were in in that time.
And we really said, look, there is enough market share and enough TAM available in our core business to make that our priority. So that's really been, in my opinion, a really good thing. It drives the management team. It drives the execution. And now we're just laser-focused on what is most meaningful. But a couple of things haven't changed. One is our commitment to technology first. Our founder and chairman, Dan Gilbert, much before it was popular, always said, we're a technology company that happens to do mortgages. So even when I got here 11 years ago, doing mortgages by the way of technology and automation was always a priority because mortgage has been a very human capital, workflow-intensive business. And so it's just ripe to be solved with technology. So that's always been in our DNA and part of who we are in our culture.
But now we have a new leadership team and a new focus, which is really on mortgage and home ownership.
Great. And as CFO, how do you navigate the extreme changes that seem to be inherent in this industry and kind of with that cyclicality of the business?
Yeah. So first, it starts with flexibility and adaptability. When you're doing your planning and forecasting, you have to have, of course, several scenarios. You have to run it through sensitivity. I think the best way to say it is plan for the worst and hope for the best. But we've been at Rocket, we've taken a different approach because we have a really strong balance sheet. We've always retained capital levels that allow us to invest in good times and tough times, something that really hasn't been the case in mortgage. There were mortgage companies that IPO'd after Rocket in 2020 and raised some capital then. But primarily, people kept the capital in the business that was sort of required from a regulatory standpoint.
We've always looked at that a bit different because we know investing during good times and bad times allows us to win in the space.
You've talked about a couple of times now how mortgage is the core to your business. And obviously, I look at you guys coming from a mortgage lens. But you and Varun have sort of talked about, especially this year, how you guys are a home ownership company, really the only one. What do you mean by that?
Yeah. So if you think about the process of buying a home, for example, and the number of different companies you're going to interact with as part of that process, just to name a few that come to mind, you're going to work with a realtor. That realtor is going to be, generally speaking, employed by a brokerage or will be attached to a brokerage. You'll have a mortgage or financing company. You'll have a title company, sometimes a title insurance company, sometimes a different closing company. And then when you're all said and done, you're going to move to a servicing experience. And for most players in that space, that means that they're going to sell your servicing to another company. So I think just off the top of our head, Doug, we named probably five or six companies that you're going to interact with.
The problem with that is a couple of things. Number one, it's a terrible consumer experience. Each one of those companies has a different model, a different way of communicating with the consumer, a different way of acquiring the consumer. They have different fixed cost base that they have to cover. So they all have to make money. So one, it's just a terrible experience. It shouldn't feel like that. Secondly, it's extremely costly, partly because all of those companies have to get their slice of the pie. Our goal has been bringing that into one platform, one home ownership platform to serve the client's needs. If you think about Rocket through Redfin, we have a search portal. We have our own realtors. We have our own loan officers. We have our own title company.
And then one of the superpowers of Rocket is the servicing and retaining that servicing, enjoying those cash flows, but being there for when the client does their next loan. So we feel that we can reimagine that consumer experience to take friction out of the system, make it better, but also make it more cost-effective. And we believe we're in a unique position to do that because we own many of those assets along the value chain.
Obviously, it's still early in that transformation. Any feedback as to how consumers are reacting to this new unique proposition?
Yeah. I think one of the best examples I can give is the Redfin acquisition. And if you think about it, we've talked a lot about part of the opportunity for Rocket is when a client comes through the Redfin portal and they look for a home, they find one they like, they get connected to a realtor. And that was Redfin's legacy business. Now they can also get connected to Rocket Mortgage through that same exact experience and never have to leave the property. The Rocket Mortgage digital experience is API'd into the Redfin experience. And if any of you have been on the property recently, you can see you can get pre-approved for a mortgage right there on the site. That's one example of a huge difference. What does that mean?
That means that before we bought Redfin, the chances of a client using a Redfin realtor and then attaching to mortgage was about 25% in their historical business. Right now at Rocket, it's already up to north of 40%. We've set a goal for ourselves as part of our synergy numbers of 50%. We're exceeding that. That's just one example of consumers want that experience. Consumers don't want to then leave and go shop around at different mortgage companies. There hasn't been a process or a platform designed to allow them to stay in one place, get a really good rate, and a great experience. Now they have that.
Great. And we've sort of touched on this. But maybe just to take a little half step back, clearly 2025, you guys have been busy. And it's been kind of an impactful year, simplifying your corporate structure, the two acquisitions, which has also allowed the public float to be significantly larger. Can you just maybe talk? You talked a little bit about it, but just a little bit more of the strategic rationale for Redfin and maybe spend a little bit more time then on the Coop acquisition, which you haven't touched on yet.
Yeah, sure, of course. So I think first of all, the way we view this is acquisitions in themself or inorganic growth in itself is not a strategy. You sit down, you develop your strategy, you understand what your clients and consumers want, and then you work your way back from that. So I always look at it like, what were our challenges to executing the strategy we just talked about? One, we want to grow purchase. We want to do more in the home buying space. We know that. We only have single-digit low share in purchase. And as Dan Gilbert always said to me, I have good news and bad news for you. The bad news is you have 5% market share. The good news is you only have 5% market share. There's 95% to go out and get. But what's the challenge?
Why is that so hard to do? Well, one of the reasons it's very hard to do is the cost of acquisition. Most companies in our space are trying to acquire that consumer that's buying a house right at the time they put in an offer because that's like the best client, right, the highest intent client right at that time. The problem is everyone is trying to acquire that same client. All those companies that we just mentioned, Doug, are also brokers, realtors, title companies. They all want to acquire that client too. So we knew that we had to start building relationships with consumers looking for homes much earlier in their process and their experience. And we were investing in a property called Rocket Homes. We had a search portal. The problem with that search portal was we were getting about a million MAUs a month.
And we all see Zillow's numbers. We see Redfin's numbers at 50 million. And scaling that was going to be an uphill battle. And it was going to be an expensive battle. So enter Redfin into the equation. They have 50 million MAUs that come to the property every single month. They all have different levels of intent, right, as a user of Redfin. Sometimes I'm just on there for curiosity. And other times we have consumers that are there and they're closer to the home buying experience and they're actually looking. So being able to start building relationship with them earlier in the process is a much better cost of acquisition proposition. And by the way, we're getting to those consumers much earlier than all those other companies I mentioned that don't have that advantage. So that's one problem partly solved by the Redfin acquisition.
The other thing, and you know this, Doug, but one of Rocket's superpowers is what we call recapture on the servicing portfolio. So for those of you that haven't spent as much time following mortgage, one of the earning assets of a mortgage company is the ability to collect and process the mortgage payments on behalf of Fannie or Freddie or Ginnie. And you collect maybe 25- 30 basis points to do that. Well, it's a really nice cash earning stream. Combined, Rocket and Mr. Cooper, it's close to $5 billion of cash flow coming off that servicing book. And that's exactly how most companies thought about it. They thought about it as a really nice cash flow. You have to put some costs against it. You have to do some work. But it's a pretty high margin business. And it is great.
And we think we do that the best. But what's worth even more than the value of that servicing right is being able to do that client's next loan, or as we call it, recapture that client's next loan. Because the beauty of that is you have a servicing asset, you replace it with the next one, but you get all the economics on doing the next loan. So we are the best in the business at that. We're about 80% of the time those clients will come back to us for their next loan. The industry average is almost inverted. It's almost maybe 20%-30% of the time the client will come back to their traditional lender to do their next loan, which goes back to that bad experience problem. So if you were in my seat, you would say, well, that's great. Let's do more of it.
Let's get more servicing, and that was our goal, and it is our goal, but again, similar to the story on Redfin, it's a hard thing to do too because it's a very competitive market. There's a lot of other people that are trying to acquire servicing, so we are really good at doing it through our organic business and just generating new client loans, but going out and buying it in bulk or doing it through these correspondent or other channels is challenging because it's a competitive market. Enter Mr. Cooper into the equation. Mr. Cooper is the largest servicer of mortgages in the United States. On a combined basis, we have 10 million loans that we service, so we instantly gain scale, but we gain a couple of other things. Mr. Cooper also is one of the only servicers that has a proprietary servicing system.
Most things, and you'll see this is a theme in this space, most companies have not invested, other than Rocket, Mr. Cooper, in proprietary technology. Most companies use vendors, and you've heard of ICE and people like that. They buy those technologies, and there's nothing wrong with that, but if you're going to own your own destiny and do some of the things that we want to do, having a proprietary system is an important part, so Mr. Cooper was the lowest cost servicer and the largest servicer. That's a major advantage. If you can have better economics than your competitors, it opens up a ton of option value, and then they were also pretty good at recapture. They weren't as good as Rocket, but they sat about in second place with about 50% of the time clients coming back to them to do their next loan.
So both of those things were very appealing to us, the scale. And the last thing I'll say is the management team too. If you've had a chance to follow them at all, they've been in business for a very long time. They've had success. They've had growth. And they have a very deep bench led by Jay Bray, the CEO, who is now the CEO of Rocket Mortgage. So for those reasons, again, Mr. Cooper solved the problem of being able to bring down our cost to service on a combined basis, have more access to distribution to do more recapture. I think that's why these three companies come together so well. They really do form. They solve each other's problems in some ways. And they form this really nice home ownership platform.
So, kind of laying that out, kind of seeing as Rocket is kind of doing something unique, how does that change? And how does the industry kind of respond to that from a competitive dynamic?
Yeah, it's a fair question. I think a little bit to be determined. But one of the challenges that we talked about in the beginning of this space is that there hasn't been heavy capital and investment to it. And I think there's a view out there that if rates were to stay a bit higher for longer, there's some companies out there that are challenged and aren't necessarily driving the profits and cash flows of Rocket and Mr. Cooper, for example, and even Redfin for that matter. So it's our view that there probably will be some consolidation. You've started to see it a little bit in the real estate and brokerage space. You've seen it on a smaller note in mortgages. And what we're also seeing is just not necessarily consolidation, meaning companies combining or going away, but you're definitely seeing companies in this space pull back.
The reason we know that is because we don't see them marketing. We don't see them trying to go out and acquire new clients. So they're not necessarily in a growth mode. They're in a stay and let's see what happens mode. We think that's a good opportunity for us to help more clients. Then probably thirdly, Doug, and we've talked about this, but we just also don't see banks leaning into the space as we once would. We all know the story around Wells and some of the comments there. We haven't seen banks out trying to acquire and do mortgage as a core product anymore like they once did. I think all that means that you probably end up with fewer companies in the space. I think more opportunity for Rocket.
Got it. And then just as you think about providing kind of that whole home ownership experience, as you look at kind of the new Rocket, is there anything else that's kind of missing from that ecosystem today? Not that I want to put any more integration on your plate, but just how are you thinking about the completeness of your product offering today?
We feel really good. We feel really good. Obviously, two public company acquisitions in one year, both announced in one month, as a matter of fact, does put a lot on your plate. But again, these acquisitions really fulfilled a strategy. They weren't acquisitions for acquisition's sake. We would have been doing this stuff anyways. We just couldn't have done it probably at scale as fast. So we feel really good about the asset classes that we have today and the growth opportunities. And it really comes down to just the number of consumers that we can interact with. Because again, traditionally, you're out there buying these consumers, trying to find them like everyone else is. We have 50 million right on Redfin. We have 10 million right in our own servicing portfolio.
So as we measure that, I'll call it SAM, or that opportunity against what we have today, we feel really good about our chances of growing.
Got it. Just to pivot a little bit to kind of you guys talk a lot about AI. Why is it so important to Rocket and how are you deploying that into the business?
Yeah. Well, if I think about what AI does best, it's almost hard for me to think about a better case study than a mortgage company for a couple of reasons. Number one is it's just traditionally been a human capital intensive business. It's a workflow business, right? It's almost like a manufacturing plant. But rather than manufacturing a widget, you're manufacturing data. And you're manufacturing data in a way that it gets delivered to the GSEs, to the Fannies, to the Freddies in a way, or said in our language, you're underwriting that data in a way that the GSEs will accept it, turn it into a mortgage-backed security that hopefully performs. So if you think about the use case, there's a couple of really interesting things.
One, you know what the end product needs to be because you have guidelines that tell you, I will accept loans that have this LTV, and I won't accept loans that have this LTV. I will accept loans that have this DTI, and I won't accept loans that have this DTI, so what a great use case because you have the answer to the test. Now, collecting the data and information and packaging it in a way that I can submit it is a challenge, but that's what AI is really, really good at. So that's number one, and then the question we get a lot, Doug, is, well, that's great, Brian, but then why can't everyone else do it, and I do think it will impact everyone in the business, but I don't think it'll impact everyone equally.
Because the other thing that's really important when you're talking about AI, even if we were to go out tomorrow and try to build an LLM, all the LLMs competing today, their advantage is usually the data that they have and what the model's trained on. And that's, again, where you bring Rocket and Redfin and Mr. Cooper together. And we're talking 30 TB, 30 TB of proprietary data that we can train these models on. And so if you use a few examples, 60 million call logs that we have and client interactions that we've saved, we can train this model on to make our sales teams more effective. Millions and millions of loans that have been delivered to the GSE and underwritten that we now have historical performance on that we can train the underwriting models on to know that, hey, it's not just DTI and LTV.
These other factors matter. And then the third thing that I think we have a major advantage on is something we talked about before. If we were a traditional company in this space, we're likely using outsourced systems. We're likely buying the systems that everyone else is buying. And that's great. But we own these systems. These are proprietary loan origination systems, a proprietary servicing system. So we're not waiting on other product roadmaps to API in new technology. We're building our own product roadmaps. We own our own destiny. Owning the proprietary system makes a big difference in terms of the speed at which you can launch and ship new products, at least in our humble opinion. So we think we have a major advantage because of the data. And we think we have a major advantage because we're one of the only companies that built its own systems.
But thirdly, the actual business in the industry is ripe for disruption because it's so fragmented, because it's so data intensive, and it's so human capital intensive. And we're seeing the fruits of that every single day. Because the way we look at it, in mortgage, every transaction today, if it's going to be eligible for Fannie or Freddie, still requires a licensed loan officer and a licensed or certified underwriter. So those are your pinch points. Those two roles, that's your pinch points because you need a sign-off on every single loan. So when we wake up and we obsess over this stuff, it's how to make those roles more efficient.
And the way to make those roles more efficient is solve all the challenges that can be solved with AI and technology, and then allow those loan officers and allow those underwriters to do what they do best, which is, if you're a loan officer, to talk to clients and have empathy and sales techniques. And if you're an underwriter, only working exceptions, only working the really hard stuff. So the easy stuff should be done for them, and it just shows up. So that's why we're so interested in it. That's why we're investing. But that's also why we're seeing a lot of fruits of that labor.
Got it. And you kind of touched on this here. But as we think about the impact on your business, should we be thinking about it on kind of a cost side? Should we be thinking on a revenue side? How are you looking? And what metrics should we be looking at to kind of measure the success?
Yeah. It's a good question. So I think it's both. But I think on the cost side, it's definitely more visible. And a good way to measure that is the number of loans per team member that we do. And again, that goes down to finding all the things that these folks do that isn't a good use of their time and continuing to eliminate those roles or eliminate those functions so that they can do the things that they do best. And we're seeing that today. So that comes out in a couple of ways. It comes out in increased capacity, meaning you can do more loans per person. And then, of course, you're driving and bringing option value too. If the market doesn't cooperate or if the capacity gains come faster than our estimate of what we can do, there's obviously a major cost play.
But on the top line in revenue, this is important too. Because again, going back just as an example to those loan officers, their time is extremely valuable. So you want them interacting with clients at the right time when the client is ready to be engaged and has high intent. That's when you want a loan officer. You don't want a loan officer working a pipeline of low intent clients and wasting time. So using AI to work that conversion funnel and do some of the things that you would do for lower engaged clients with technology and telling loan officers and identifying loan officers when clients become more engaged or become higher intent and using AI to tell them, this is the next best action you should take, loan officers.
Just as a quick example, when we started this journey a couple of years ago, we started having some AI technology look back at historical sales data and said, what was successful and what was not? And one of the big things is texting your client. That seems obvious, right? But texting them at the right time with the right information. And at first, AI was saying, this is your next best action. Text the client, right? Then AI said, we analyzed all the text messages, ones that worked well and one that didn't. Then it said, text your client this information because this works. And now AI is doing the texting for you. So you're actually not even doing anything. So just in a quick example of the evolution. But that, Doug, is mostly a top line play right there.
Got it, and then just I want to shift towards your growth potential. Your Investor Day last year, you laid out some market share goals that would achieve pretty rapid growth, that would assume pretty rapid growth from here, just specifically going up to 8% on purchase and up to 20% on refi. Can you just talk about kind of what drives you to get from where we are today to those goals?
Yeah. Well, again, the nice thing is we still have single-digit share. So there's a lot to go for. We're not running up against the ceiling. But the couple of things that give me personally a lot of conviction are going back to some of the things we said. Number one, on the recapture side of the house, there's still room to grow, especially on the Cooper book, but even on the Rocket book, especially in the purchase side of recapture. And now we have 10 million clients. So that gives me a lot of conviction that we will increase the recapture rate. That comes with share gains. I think the Redfin, the ability to build those relationships with 50 million people and have a reason to interact with them on a monthly and daily basis. We have a brokerage.
We have realtors who know that Rocket Mortgage is the best option for their clients, and we have technology and API built in. It gives me a lot of conviction too, and then going back to a couple of other things. One, last year, you noticed that we did a brand recall or restage. And the focus was, after we did a lot of brand survey and information, who our brand resonated with. While it had great brand awareness and resonated with many hundreds of millions of consumers, it wasn't all the consumers that were fitting the demographics of consumers that would be buying homes, so that was a big initiative last year, and we're starting to reap some of those benefits.
And then some of the things are just, again, when you have 50 million clients and 10 million clients in your servicing, getting that conversion funnel as perfected as you can. Because increasing conversion by one or two or three percentage points in that funnel makes a significant difference on your revenue. It makes a significant difference on the cost side of the house because you're focusing on the clients that are actually going to convert, and obviously that turns into share gains too, so we have a lot of opportunity in front of us on the share side.
Got it. And as you think about share, you guys operate multi-channel business, the direct-to-consumer, where we've been spending most of our time, but also the partner channel. And then with Coop, you have correspondent as well. How important are those partner channels? And kind of how do you manage the conflicts of operating multiple channels?
Yeah. The way I look at the multiple channel aspect of our business is really option value. There's a couple of ways to think about it, but the way I think about it, and I think where you're headed, Doug, is Rocket was built as a direct-to-consumer business. There's no question about it, and we think we do that the best. And then we also have a broker business, or as we call it, a TPO or wholesale business, where we work through brokers. And a couple of things come to mind. One is, again, going back to our share comments, there's plenty of mortgages and plenty of growth opportunity in both channels. You don't actually get as much conflict as you might think. What it really comes down to for us is the experience that the consumer is looking for.
If the consumer is the type that wants to come to a digital property, fill out an application, and go through a digital experience all the way to get their rate locked and do that in, I don't know, 10 or 12 minutes, then coming to the direct-to-consumer channel is the best experience for that client. But if the client is looking for more of a relationship experience, looking for someone that maybe lives in their local community, then the broker experience is a great experience for them. And they're going to get that. And I should say, as it relates to the broker experience, we believe in choice. We believe these brokers should consider Rocket as an option. And we think we're a great option for them. But they have other options too. And we empower that.
The other channels, I would say, Doug, the way I think about correspondent or Cooper did a lot of co-issue before, those are really MSR growth channels, right? Those are a way to be opportunistic and grow your MSR, your servicing book, and the reason that I like those channels is because those are things you can either put your foot on the gas or take your foot off the gas, and we should do really well in those channels because if you think about the act of acquiring an MSR and trying to fair value that asset and say, what can I pay for it, well, we should theoretically be able to pay the most but have the best returns because we do so well on that recapture assumption, right? We do so well on doing that client's next loan.
Now, what we know is that we do the best on the client's next loan when we've done their first loan. No surprise there, right? Because they get to experience the Rocket experience. And then they go to the servicing experience. And they like what they see. And they come back to us. And industry-wide, we know correspondent's lower. But we also know that Rocket and Cooper combined have some of the best recapture even on those correspondent loans. So the way I think about those channels is it's opportunistic. It's option value. We can put our foot on the gas. We can take it off depending on what we're seeing on those recapture rates. But as I think about the main growth opportunities in taking share, I think it's direct-to-consumer and that partner channel.
Great. And unfortunately, it looks like we are out of time. So I can't continue this. But thank you for joining us. It's been a pleasure.
Thanks for having me, Doug. Appreciate it.