(Bloomberg) – Rocket Companies Inc., one of the nation’s largest mortgage lenders, reported a 277% increase in quarterly earnings, punctuating a record year as the mortgage lender took advantage of the US housing boom.
The company released adjusted revenue that exceeded estimates. And with a tenfold increase in net income last year to $ 9.4 billion, Rocket declared a special dividend of $ 1.11 per share, according to a statement on Thursday. The shares rose up to 7.8%, to $ 21.46 at the end of the session.
“We have successfully driven growth in all segments of our business,” said Rocket CEO Jay Farner in the statement.
The pandemic housing boom gave the mortgage sector a big boost, which recorded record lending and earnings in 2020 as rates fell to historic lows. Much of this was thanks to the Federal Reserve, which controlled borrowing costs and bought mortgage bonds as part of its attempt to stimulate the economy.
But profitability may have peaked. Rocket reported a 4.41% profit margin on newly originated loans in the last quarter, well above the company’s November estimate of 3.8% to 4.1%. He told investors on Thursday that new loan margins are expected to be around 3.6% to 3.9% this quarter.
Mortgage lenders have been warning investors in recent weeks that profitability will not increase this year. UWM Holdings Corp., the parent company of United Wholesale Mortgage, said profits from new loans this quarter could drop by up to a third over the fourth quarter of last year.
Meanwhile, Cooper Group Inc. said this week that its earnings from mortgage sales – lenders generally sell the loans they originate – will be virtually stable this quarter.
Read more: In a Flash, US yields reach 1.6%, wreaking havoc on markets
US mortgage rates have soared this week to the highest level in six months, threatening to extinguish the mortgage rally. And with Treasury yields rising, borrowing costs may continue to rise.
This could dissuade more Americans from trying to refinance debt, while rising home prices are putting property out of reach for many.
Mortgage orders fell to a nine-month low last week, while pending home sales last month fell to a six-month low.
(Updates the stock price.)
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