Tuesday, 25 April 2017

Rocket Mortgage: Shooting for The Moon or Failure to Launch

Written by Jaymi Naciri Posted On Wednesday, 08 March 2017 20:38

We saw the commercial during the Super Bowl. The one that explained, "Here's what we were thinking: What if we did for mortgages what the internet did for buying music, and plane tickets and shoes?" That talked about turning "an intimidating process" into "an easy one." That said you could get a mortgage on your phone. It was what many called mortgage's "iPhone moment," for obvious reasons.

But, a little over a year after that eye-opening - and eyebrow-raising - moment from Rocket Mortgage, the fully digital arm of Quicken Loans, how's it going?

Pretty well, apparently.

The 3...2...1...launch of Rocket Mortgage resulted in "a traffic spike of ‘thousands of people' in the minutes following the ad," said CNN Money. And in the time since? "One year after Quicken Loans' Rocket Mortgage Super Bowl ad ignited a nationwide conversation about the power of the American homebuyer, the largest FinTech lender funded $7 billion of its record $96 billion in total closed loan volume in 2016 through Rocket Mortgage," the online lender said. "In just 11 months Rocket Mortgage's closed volume alone would already rank as a top-30 national mortgage lender, among the nearly 50,000 banks, credit unions, brokers and mortgage companies in the United States."

That accounted for more than "$7 billion through its proprietary online engine. As the country's second-largest overall home lender, Quicken closed more than $96 billion in 2016, setting an all-time company record."

How did that happen?

At a time when the industry was desperate for greater participation from millennials in the real estate market, Rocket Mortgage spoke their language. "You mean, I can get a mortgage right here on my phone? Interesting."

Subsequent Rocket Mortgage commercials have featured young and young-ish folks of varying ethnicities, plus one showcasing a Vulcan couple and another pandering to college students. Language focuses on appealing ideas like, "Skip the bank, skip the paperwork, and go completely online," and focuses on the hassle of conventional routes by offering "a mortgage solution in minutes."

It's pretty clear who they're talking to, and, in fact, "According to Quicken, the growth of Rocket Mortgage comes from its appeal to a "new generation" of homebuyers," said HousingWire. "Per Quicken's data, 80% of Rocket Mortgage users were first-time homebuyers, while two-thirds of Rocket Mortgage customers used the platform for a home purchase mortgage, rather than a refinance."

Those numbers aren't surprising considering millennials are precisely who Rocket Mortgage was going after with their pointed language, promise to streamline loans, and, especially, shorten the process (by up to 12 days, they say). Breaking down those numbers a bit further reveals that "of the first-time buyers that used Rocket Mortgage, 43% were 35 years of age or younger, while 57% were over the age of 35," they said. That second part is surprising, especially since many of these people still remember the last real estate crash and may still not be over it.


experian.com

Danger ahead?

It's that fear of repeating the same mistakes that led to a bit of a post-Super Bowl panic a little more than a year ago. That same CNN Money article was titled "Quicken's 'Rocket Mortgage' Super Bowl ad sparks backlash," (and, BTW, they were hardly alone in their uneasiness).

"The 60-second spot didn't sit well with everyone. Some viewers took to Twitter to express concerns that the ad was promoting a lending environment similar to the years leading up to the housing crash and the Great Recession," they said. The article printed one tweet that said, "Rocket Mortgage: explaining the 2008 financial crisis in one commercial," another that thanked Rocket Mortgage for "thinking the '08 housing crisis needed a sequel," and one more from the The Consumer Financial Protection Bureau: "When it comes to #mortgages, take your time, ask questions and #knowbeforeyouowe."

Quicken's Twitter response: "We just saw that the current mortgage process was slow and confusing. So we fixed it."

Chances are, the same tweet could, and would, go out today, what with numbers that can only be described as impressive. Whether they stay at or around that level remains to be seen. Some argue that "nonbanks" or "shadow banks" like Quicken serve people with low to moderate incomes or lower credit scores whom the big banks shun," said the New York Times.

Others express concern because of that fact that they're "focusing on the riskier end of the mortgage market, (which) may be revving up the same parts of the engine that resulted in defaults and foreclosures in the past."

So far, there aren't any red flags surrounding defaults, and, as RISMedia points out, "Rocket Mortgage has followed through on one of its cornerstone goals: to get would-be buyers off the fence and into the market."

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