What Would Rocket Mortgage Do?
What Would Rocket Mortgage Do?
4 Pretty Simple Strategies that Will Help You Survive Gain Market Share in the Current Mortgage Market Transition.
Most mortgage lenders are in their bunkers trying to figure out how to survive a market transition that seems to be a dramatic reset of unknown duration and outcome.
But, the future is not necessarily as mysterious as it might seem as we face the headwinds of inflation, rising rates, and a cooling housing market.
A recipe for success in this market hit me as I read through the latest Rocket Companies Q2 results call transcript.
What would Rocket Mortgage do?
And how can I translate that into a strategy for any size lender?
I think analyzing the strategies of a company that took significant market share, zooming to #1 from #11, in the last mortgage and financial market correction is a wise endeavor.
So, get out your pen and a legal pad and jot down this strategic plan I gleaned from the call and have translated for you into an actionable plan for the next 3-6 months.
Should I lay off people? Not so fast. Strategically redeploy smart, talented people you worked so hard to recruit over the last year and you will desperately need them again in 4-5 months.
Mortgage Lender laying off thousands has been the top headline over the last few months.
Immediately, massive layoffs have been the traditional Step 1 in any mortgage market transition. Cut a few thousand employees immediately, and sort out the collateral damage later.
Rocket cleverly disguises this move in a redeployment of 2000 people into other roles within the “family of companies.”
Most of you probably don’t have the luxury to redeploy resources into other roles. Still, if you have the financial resources and runway, I would consider a far more surgical approach considering this statement from Jay Farner, CEO and Vice Chairman of Rocket Companies referencing the excess capacity in their overall mortgage headcount.
“We’ll need that capacity as we move into 2023 as we grow market share again. It wouldn’t make sense to go through significant capacity reduction only to turn around and have to hire again in 4-5 months later.”
I highlighted two important concepts here. First, they see this as an opportunity to “grow market share again,” as they did the last time. Second, they are only expecting this transition to last 4-5 months with a return to growth in early 2023.
Both of these sentiments I cover in my previous note, Is your business ready for a recession? Here are the two high points from that memo:
Recessions historically average about 6 months
Recessions (while everyone is running scared and inefficient) are a great time to grab market share by staying aggressive.
Strategically retain your best people. Redeploy them into other productive roles.
Put their expertise to work, making your sales, marketing, and operational activities more efficient and streamlined. Have them help you gain identical expense reductions by seeking out and surgically cutting non-personnel expenses.
Position yourself into innovative lending products growing in consumer and market demand.
Rocket is clearly making bets on consumers leveraging their historically high home equity levels, highlighting new initiatives in home equity lending and solar (obviously, another indirect home equity lending opportunity).
We are seeing similar trends in wholesale lenders’ increasing diverse loan programs.
Get these programs and adjust your lead generation campaigns and lead buying to bring you the increasing consumer demand for these more innovative lending products, many focused on a more sophisticated and still strong borrower, real estate investors.
My agency, Kaleidico, generates these kinds of loan program-specific mortgage leads. Take a look at our Mortgage Leads on Demand programs.
Invest in technology, consumer-direct, your engagement platform. There are many names, but they’re all online, and overwhelming need to cater to people using their mobile devices.
This is a favorite contrarian position that Quicken Loans and now Rocket Mortgage have exploited to beat the pants off of competitors for two and half decades.
The headlines are full of lenders leaving the consumer-direct channel because it is a refinance channel.
This slide from the investor deck says it all.
Consumers manage their finances entirely online (i.e., on their mobile phones) - payments, bank accounts, insurance, real estate, mortgage, and investments.
No one is walking into a mortgage branch to get a mortgage.
Oh, and if you’re waiting on a real estate agent to give you a referral, it’s too late that the borrower already found a mortgage (and was assigned a loan officer) online.
The good news is that you don’t have to commit the company’s entire resources to move online.
My agency, Kaleidico, offers this type of lead generation (engagement/website) platform free with our consumer-direct lead generation program.
Finally, and probably the only complex strategy in this analysis is partnering with other companies to offer the strategic advantages you’ve built through the previous three strategies.
In Rocket’s case, the two strategic partnerships include putting their engagement platform (website) under a bank and solar company.
Rocket Mortgage has consistently used the efficiency and effectiveness of its online technology to convince banks, investment firms, credit card companies, and now a diverse variety of tech companies to leave the lending to Rocket Mortgage.
You can do the same.
Scout banks and credit unions that want mortgage and home equity assets on their balance sheets, yet are notoriously bad at originating, and do a deal.
Then, find companies with customers that typically use home equity to fund their product and service purchases – solar installers, kitchen and bath designers, deck builders, etc.
These two strategies can work nicely together – stable loan funding and a steady source of leads.
That’s my strategy brief for the week.
If you want help building a unique mortgage strategy or executing any of these, schedule a discovery call with my agency, Kaleidico, and we’ll get you moving in the right direction.