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What changed in Rocket Companies, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Rocket Companies, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+485 added−581 removedSource: 10-K (2024-02-27) vs 10-K (2023-03-01)

Top changes in Rocket Companies, Inc.'s 2023 10-K

485 paragraphs added · 581 removed · 385 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeAdditionally, we earn ancillary revenue such as late fees and modification incentives on the loans we service. Subservicing revenue is primarily based on contractual per loan fees. Because cash flows depend on the balances of outstanding mortgages, the value of our servicing fee income fluctuates based on the size of our servicing portfolio and other model inputs.
Biggest changeCash flows are directly correlated to the balances of outstanding mortgages and can fluctuate based on the volume of loans added or that are paid off in any given period. Additionally, we earn ancillary revenue such as late fees and modification incentives on the loans we service. Subservicing revenue is primarily based on contractual per loan fees.
Competition across our businesses supporting complex personal transactions such as mortgages is intense and can take many forms, including: • Marketing, client acquisition and distribution channels • Speed and certainty of obtaining loans • Client service levels • Client retention levels • Reputation and brand recognition • Variety of loan programs and services being made available • Interest rates and fees charged for loans, loan terms and amounts • Access to capital and liquidity Business Model We operate a scalable, capital light business model underpinned by constant innovation and our competitive strengths, which include our digital-first brand, technology, data insights, client-first culture and partnerships.
Competition across our businesses supporting complex personal transactions such as mortgages is intense and can take many forms, including: • Marketing, client acquisition and distribution channels • Speed and certainty of obtaining loans • Client service levels • Client retention levels • Reputation and brand recognition • Variety of loan programs and services being made available • Interest rates and fees charged for loans, loan terms and amounts • Access to capital and liquidity Business Model We operate a scalable business model underpinned by constant innovation and our competitive strengths, which include our digital-first brand, technology, data insights, client-first culture and partnerships.
Available Information Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed or furnished pursuant to Section 13(a) of the Exchange Act are made available free of charge on or through our website at www.rocketcompanies.com as soon as reasonably practicable after such reports are filed with, or furnished to, the U.S.
Available Information Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed or furnished pursuant to Section 13(a) of the Exchange Act are made available free of charge on or through our website at rocketcompanies.com as soon as reasonably practicable after such reports are filed with, or furnished to, the U.S.
Women comprise 8 65% of enrolled team members in the program and 44% of the team members enrolled are racially/ethnically diverse. As a result, 87% of team members indicated they have access to the learning and development needed to do their job well. The Company strongly encourages collaboration, connection, and inclusion through participation in our Team Member Resource Networks.
Women comprise 65% of enrolled team members in the program and 44% of the team members enrolled are racially/ethnically diverse. As a result, 87% of team members indicated they have access to the learning and development needed to do their job well. The Company strongly encourages collaboration, connection, and inclusion through participation in our Team Member Resource Networks (“TMRN”).
We are also subject to a variety of regulatory and contractual obligations imposed by credit owners, insurers and guarantors of the loans we originate or facilitate and/or service. This includes, but is not limited to, Fannie Mae, Freddie Mac, Ginnie Mae, FHFA, the Department of Veterans Affairs ("VA"), and the FHA/HUD.
We are also subject to a variety of regulatory and contractual obligations imposed by credit owners, insurers and guarantors of the loans we originate or facilitate and/or service. This includes, but is not limited to, Fannie Mae, Freddie Mac, Ginnie Mae, FHFA, the Department of Veterans Affairs (“VA”), and the FHA/HUD.
The gain on sale of loans, net includes all components related to the origination and sale of mortgage loans, including: • Net gain on sale of loans, which represents the premium received in excess of the loan principal amount and certain fees charged by investors upon sale of loans into the secondary market; 6 • Loan origination fees (credits), points and certain costs; • Provision for or benefit from investor reserves; • The change in fair value of interest rate lock commitments ("IRLCs") and loans held for sale; • The gain or loss on forward commitments hedging loans held for sale and IRLCs; and • The fair value of originated mortgage servicing rights ("MSRs").
The gain on sale of loans, net includes all components related to the origination and sale of mortgage loans, including: • Net gain on sale of loans, which represents the premium received in excess of the loan principal amount and certain fees charged by investors upon sale of loans into the secondary market; • Loan origination fees (credits), points and certain costs; • Provision for or benefit from investor reserves; • The change in fair value of interest rate lock commitments (“IRLCs”) and loans held for sale; 6 • The gain or loss on forward commitments hedging loans held for sale and IRLCs; and • The fair value of originated mortgage servicing rights (“MSRs”).
We originate mortgage loans that are sold either to government backed entities or to investors in the secondary mortgage market. Since our counterparties are primarily the government-sponsored enterprise ("GSEs") as well as other diversified sets of investors, we do not need to hold significant capital to grow our origination business.
We originate mortgage loans that are sold either to government backed entities or to investors in the secondary mortgage market. Since our counterparties are primarily the government-sponsored enterprise (“GSEs”) as well as other diversified sets of investors, we do not need to hold significant capital to grow our origination business.
Securities and Exchange Commission ("SEC"). The information on our website is not, and shall not be deemed to be, part of this report or incorporated into any other filings we make with the SEC. The reports and the other documents we file with the SEC are available on the SEC’s website at www.sec.gov.
Securities and Exchange Commission (“SEC”). The information on our website is not, and shall not be deemed to be, part of this report or incorporated into any other filings we make with the SEC. The reports and the other documents we file with the SEC are available on the SEC’s website at sec.gov.
This extensive regulatory framework we are subject to includes U.S. federal, state and local laws and Canadian regulations and rules. Governmental authorities and various U.S. federal, state and Canadian agencies have broad oversight, supervision, and enforcement authority over our business. Because we are not a depository institution, we must comply with state licensing requirements to conduct our business.
This extensive regulatory framework we are subject to includes U.S. federal, state and local laws. Governmental authorities and various U.S. federal and state agencies have broad oversight, supervision, and enforcement authority over our business. Because we are not a depository institution, we must comply with state licensing requirements to conduct our business.
The Consumer Financial Protection Bureau ("CFPB"), established under the Dodd-Frank Act, directly and significantly influences the regulation of residential mortgage loan originations and servicing.
The Consumer Financial Protection Bureau (“CFPB”), established under the Dodd-Frank Act, directly and significantly influences the regulation of residential mortgage loan originations and servicing.
On December 31 2022, the net client retention rate of our servicing portfolio was 95% on an annual basis. There is a strong correlation between this metric and client lifetime value, and we believe these levels are far superior to others in the mortgage industry and rival subscription-based models across industries such as cable and wireless service companies.
On December 31 2023, the net client retention rate of our servicing portfolio was 97% on an annual basis. There is a strong correlation between this metric and client lifetime value, and we believe these levels are far superior to others in the mortgage industry and rival subscription-based models across industries such as 4 cable and wireless service companies.
As of December 31, 2022, we had approximately 18,500 team members all of whom are based in the United States and Canada. As part of our talent strategy, we provide tools and resources to our team members that enable them to reach their full potential, build their own career paths, enhance their well-being and support their financial goals.
As of December 31, 2023, we had approximately 14,700 team members all of whom are based in the United States and Canada. As part of our talent strategy, we provide tools and resources to our team members that enable them to reach their full potential, build their own career paths, enhance their well-being and support their financial goals.
Since 2010, Rocket Mortgage has won 20 J.D. Power Awards in total across mortgage origination and mortgage servicing. Our net promoter score was 73 for full year 2022, placing us among companies recognized for best-in-class service. Our mortgage origination business includes our Direct-To-Consumer (DTC) segment and our Partner Network segment.
Since 2010, Rocket Mortgage has won 21 J.D. Power Awards in total across mortgage origination and mortgage servicing. Our net promoter score was 74 for full year 2023, placing us among companies recognized for best-in-class service. Our mortgage origination business includes our Direct-To-Consumer (DTC) segment and our Partner Network segment.
From time to time, we may use our website as a channel of distribution of material information. Financial and other material information regarding the Company is routinely posted on and accessible at www.rocketcompanies.com. Our inaugural ESG (environmental, social and governance) report, can be accessed on ir.rocketcompanies.com. 9
From time to time, we may use our website as a channel of distribution of material information. Financial and other material information regarding the Company is routinely posted on and accessible at rocketcompanies.com. Our ESG report, can be accessed at ir.rocketcompanies.com.
As a reflection of our commitment to prioritize our team members, Rocket Companies ranked #7 on Fortune Magazine’s list of 100 Best Companies to Work For in 2022 and has ranked in the top-30 companies on the list for 19 consecutive years.
As a reflection of our commitment to prioritize our team members, Rocket Companies ranked #11 on Fortune Magazine’s list of 100 Best Companies to Work For in 2023 and has ranked in the top-30 companies on the list for 20 consecutive years.
The CFPB has rulemaking authority with respect to many of the federal consumer protection laws applicable to mortgage lenders and servicers, including Truth in Lending Act ("TILA"), Real Estate Settlement Procedures Act ("RESPA"), Equal Credit Opportunity Act ("ECOA"), Fair Credit Reporting Act ("FCRA"), and the Fair Debt Collection Practices Act.
The CFPB has rulemaking authority with respect to many of the federal consumer protection laws applicable to mortgage lenders and servicers, including Truth in Lending Act (“TILA”), Real Estate Settlement Procedures Act (“RESPA”), Equal Credit Opportunity Act (“ECOA”), Fair Credit Reporting Act (“FCRA”), and the Fair Debt Collection Practices Act.
This enables us to effectively scale during market expansion, efficiently onboard partners, and grow into new client segments and channels, with less time and investment than our competitors. This process partitioning has allowed us to identify many areas that could be automated. These automated processes produce true objectivity and greatly reduce human error.
This enables us to effectively scale during market expansion, efficiently onboard partners, and grow into new client segments and channels, with less time and investment than our competitors. This process partitioning has allowed us to identify many areas that could be automated.
As a highly regulated business, the regulatory and legal requirements we face can change and may even become more restrictive. In turn, this could make our compliance responsibilities more complex. We are also subject to judicial and administrative decisions that impose requirements and restrictions on our business. Numerous U.S. federal regulatory consumer protection laws impact our business.
In turn, this could make our compliance responsibilities more complex. We are also subject to judicial and administrative decisions that impose requirements and restrictions on our business. Numerous U.S. federal and state regulatory consumer protection laws impact our business.
We employ our same client‑centric philosophy and technology cultivated through our origination business towards the servicing of loans to deliver a digital client experience in servicing, specifically designed around the needs and expectations of our clients.
Servicing the loans that we originate provides us with an opportunity to build long‑term relationships and continually deliver a seamless experience to our clients. We employ our same client‑centric philosophy and technology cultivated through our origination business towards the servicing of loans to deliver a digital client experience in servicing, specifically designed around the needs and expectations of our clients.
The licensing process includes the submission of an application to the relevant state agency, a character and fitness review of key individuals and an administrative review of our business operations. We are also supervised by regulatory agencies under U.S. state and Canadian law.
The licensing process includes the submission of an application to the relevant state agency, a character and fitness review of key individuals and an administrative review of our business operations. We are also supervised by regulatory agencies under U.S. state laws. In addition, the GSEs and the Federal Housing Finance Agency (“FHFA”), Ginnie Mae, Federal Trade Commission (“FTC”), U.S.
Rocket Loans generates fees in a similar fashion to our mortgage business, receiving an origination fee, an investor fee from the end buyer, and an ongoing servicing fee for the work the company performs.
Rocket Loans allows clients to apply for personal loans online and receive same day funding through a proprietary technology stack. Rocket Loans generates fees in a similar fashion to our mortgage business, receiving an origination fee, an investor fee from the end buyer, and an ongoing servicing fee for the work the company performs.
Mortgage Servicing Fees We also generate significant income from servicing our clients’ loans. For every mortgage that we service, we receive contractual recurring cash flows for the life of the loan, primarily those which are part of a securitization by the GSEs or Ginnie Mae.
Mortgage Servicing Fees We also generate significant income from servicing our clients’ loans. For every mortgage that we service, we receive contractual recurring cash flows for the life of the loan.
Our team members have access to training and mentorship opportunities, specialized leadership programs and a variety of educational programs. These programs include ROCK Academy, our tuition assistance program, as well as our internal mobility program, THRIVE.
Our team members have access to training and mentorship opportunities, specialized leadership programs and a variety of educational programs. These programs include ROCK Academy, our tuition assistance program, as well as our internal mobility program, THRIVE. We offer competitive, best in class benefit and wellness offerings that start on day one for all team members.
Based on engagement survey results, approximately 90% of our team members support the various ways the Company contributes to the community. In 2022, 73% of our team members participated in community volunteering or giving events.
We also actively provide and promote opportunities for our team members to share their voice and engage with our community. Based on engagement survey results, approximately 90% of our team members support the various ways the Company contributes to the community. In 2022, 65% of our team members participated in community volunteering or giving events.
Similar licensing laws apply to us in Canada. We incur significant ongoing costs to comply with licensing and other legal requirements under the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (“the SAFE Act”) and the Dodd‑Frank Act, among others.
We incur significant ongoing costs to comply with licensing and other legal requirements under the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (“the SAFE Act”) and the Dodd‑Frank Act, among others. To conduct our residential mortgage origination operations in the United States, we are licensed in all 50 states and the District of Columbia.
Our system has been designed to integrate across business functions, continuously monitoring in‑progress transactions and leveraging our proprietary, data‑driven, decision engine to recommend the most efficient task for each team member. Marketing We believe our national Rocket brand is a competitive advantage that is difficult to replicate.
Our system has been designed to integrate across business functions, continuously monitoring in‑progress transactions and leveraging our proprietary, data‑driven, decision engine to recommend the most efficient task for each team member. We have data and scale that uniquely positions Rocket to lead the next wave of industry transformation with generative AI.
In 2022, the Company introduced LinkedIn Learning, an award-wining industry leader in online training with over 8,000 available courses covering a wide range of technical, business, software and creative topics.
Some of these offerings include a 100% company paid benefit plan, comprehensive mental health support services, and an onsite health care clinic dedicated to improving team members’ health. In 2022, the Company introduced LinkedIn Learning, an award-wining industry leader in online training with over 8,000 available courses covering a wide range of technical, business, software and creative topics.
Amrock generates title revenue as a leading provider of title insurance services, property valuations and settlement services. This business complements our mortgage origination platform with digital appraisal and closing services integrated throughout our Rocket Mortgage technology and processes. Through Rocket Money, we earn monthly subscription revenue from premium members, as well as other service-based fees from users.
Title, Services and Other Fee Income Other income includes revenues from services provided to clients or partners across our platform. Amrock generates revenue as a leading provider of title insurance services, property valuations and settlement services. This business complements our mortgage origination platform with digital appraisal and closing services integrated throughout our Rocket Mortgage technology and processes.
In our industry, we believe we are the only company of scale with significant digital‑first brand recognition. Our in‑house marketing agency has a long history of creating bold and visible events and campaigns and reaching potential clients through highly targeted marketing strategies.
Our in‑house marketing agency has a long history of creating bold and visible events and campaigns and reaching potential clients through highly targeted marketing strategies. Our scale and data analytics provide distinct advantages in the efficiency of our marketing initiatives.
In 2022, approximately 84% of our team members completed these engagement surveys. Based on these results, we are building a culture of inclusion where 86% of our team members feel they can be their authentic self at work. We also actively provide and promote opportunities for our team members to share their voice and engage with our community.
In 2023, 86% of our team members completed these engagement surveys. 8 Based on these results, we are building a culture of inclusion where 87% of our team members feel they can be their authentic self at work and 81% feel a sense of belonging at the Company.
Our TMRNs are a community of team members cultivating a culture of belonging, engagement, and business impact in support of Rocket’s mission, strategic objectives, and goals. Total membership in 2022 exceeded 10,000 team members across our 13 networks. To understand and improve team member retention and engagement, the Company surveys team members with the assistance of third-party consultants.
Our TMRNs are a community of team members cultivating a culture of belonging, engagement, and business impact in support of Rocket’s mission, strategic objectives, and goals. Total membership in 2023 exceeded 4,500 team members across our 11 networks.
Dan Gilbert, our founder and Chairman, purposefully created a strong cultural foundation of core principles, or “ISMs”, as an operating system to guide decision‑making by all our team members. At the heart of the ISMs is a simple, yet powerful, concept: “Love our team members.
Our flagship business, Rocket Mortgage, is an industry leader, having provided over $1.7 trillion in home loans since inception. Dan Gilbert, our founder and Chairman, purposefully created a strong cultural foundation of core principles, or “ISMs”, as an operating system to guide decision‑making by all our team members.
Rocket Homes also empowers clients to buy or sell properties directly through a streamlined process to create high-impact listings and offers one-on-one support from home selling specialists. • Rocket Loans. Our personal loan business that offers a simple, fast and intuitive user experience by leveraging a single, automated technology platform, with particular focus on high quality, prime borrowers.
Rocket Homes also empowers clients to buy or sell properties directly through a streamlined process to create high-impact listings and offers one-on-one support from home selling specialists. • Rocket Money. Our personal finance app that helps clients manage their financial lives.
We are committed to fostering a diverse and inclusive workplace and we proactively recruit for and hire diverse talent across a wide range of candidates to achieve the highest performing teams. Our Diversity, Equity and Inclusion team is committed to fostering an inclusive environment built on open doors, open minds and an open culture rooted in trust.
Our Diversity, Equity and Inclusion team is committed to fostering an inclusive environment built on open doors, open minds and an open culture rooted in trust.
Our online marketing platform, a customer acquisition leader in the mortgage and personal financial product sectors. Core Digital Media enables growth for our broader platform by offering marketing insights and lead generation technology. Rocket Platform The Rocket Platform’s promise to clients is to create certainty in life’s most complex moments so that we can help our clients reach their dreams.
Our Windsor, Canada based digital mortgage broker that serves the needs of consumers across Canada by leveraging technology to simplify the mortgage experience. • Core Digital Media. Our online marketing platform, a customer acquisition leader in the mortgage and personal financial product sectors. Core Digital Media enables growth for our broader platform by offering marketing insights and lead generation technology.
In addition, the GSEs and the Federal Housing Finance Agency ("FHFA"), Ginnie Mae, Federal Trade Commission ("FTC"), U.S. Department of Housing and Urban Development 7 ("HUD"), Federal Housing Administration ("FHA"), various investors, non‑agency securitization trustees and others subject us to periodic reviews and audits. This broad and extensive supervisory and enforcement oversight will continue to occur in the future.
Department of Housing and Urban Development (“HUD”), Federal Housing Administration (“FHA”), various investors, non‑agency securitization trustees and others subject us to periodic reviews and audits. This broad and extensive supervisory and enforcement oversight will continue to occur in the future. As a highly regulated business, the regulatory and legal requirements we face can change and may even become more restrictive.
This differentiated servicing experience focuses on client service with positive, regular touchpoints and a better understanding of our clients’ future needs. • Amrock. Our leading provider of title insurance services, property valuation and settlement services, leveraging proprietary technology that integrates seamlessly into the Rocket platform and processes.
This differentiated servicing experience focuses on client service with positive, regular touchpoints and a better understanding of our clients’ future needs. • Rocket Homes. Our proprietary home search platform and real estate agent referral network, Rocket Homes provides technology-enabled services to support the home buying and selling experience.
The CFPB has been active and continues to amend rules and regulations within its purview. We continue to work diligently to assess and understand the implications of the regulatory environment in which we operate and the regulatory changes that we are facing.
We must also adhere to applicable laws and regulations promulgated by the various provinces and territories of Canada where we conduct business. We continue to work diligently to assess and understand the implications of the regulatory environment in which we operate and the regulatory changes that we are facing.
Through Rocket Homes, we earn fees from real estate agent referrals, while at the same time matching Rocket Mortgage clients with highly rated agents and improving the certainty of closing. Rocket Loans allows clients to apply for a loan online and receive same day funding through a proprietary technology stack.
Rocket Money earns monthly subscription revenue from premium members, as well as other service-based fees from users. Rocket Homes earns fees from real estate agent referrals, while at the same time matching Rocket Mortgage clients with highly rated agents and improving the certainty of closing.
Love our clients.” Since our inception in 1985, we have consistently demonstrated our ability to launch new consumer experiences, scale and automate operations, and extend our proprietary technologies to partners. Our flagship business, Rocket Mortgage, is an industry leader, having provided nearly $1.6 trillion in home loans since inception.
We believe our widely recognized “Rocket” brand is synonymous with simple, fast, and trusted digital experiences. Since our inception in 1985, we have consistently demonstrated our ability to launch new consumer experiences, scale and automate operations, and extend our proprietary technologies to partners.
Rocket Money offers clients a suite of financial wellness services including subscription cancellation, budget management and credit score improvement that save them time and money. • Rocket Homes. Our proprietary home search platform and real estate agent referral network, Rocket Homes provides technology-enabled services to support the home buying and selling experience.
Rocket Money offers clients a suite of financial wellness services including subscription cancellation, budget management and credit score improvement that save them time and money. • Rocket Loans. Our personal loan business that offers a simple, fast and intuitive user experience by leveraging a single, automated technology platform, with particular focus on high quality, prime borrowers.
Rocket Loans offers personal loans. In addition to personal loans, as of August 2022 Rocket Loans also began providing financing for solar panel purchases. • Lendesk. Our Canadian software company specializing in a point-of-sale system for mortgage professionals and a loan origination system for private lenders. • Rocket Mortgage Canada.
This provides a digital, seamless experience for our clients with speed and efficiency from their first interaction with Rocket Mortgage through closing. • Lendesk. Our Canadian software company specializing in a point-of-sale system for mortgage professionals and a loan origination system for private lenders. • Rocket Mortgage Canada.
Rocket Companies also ranked #1 on Fortune’s list of the Best Workplaces in Financial Services & Insurance in both 2021 and 2022.
Rocket Companies also ranked #2 on People Magazine’s 100 Companies That Care and #2 on Fortune’s list of the Best Workplaces in Financial Services & Insurance in 2023. During 2023, the Company offered a voluntary career transition program to certain eligible team members.
As of December 2022, we have 25.4 million Rocket Accounts that can access our services through our single sign-on solution. • Rocket Mortgage. One of the nation’s largest mortgage lenders, providing what we believe is the simplest and most convenient way to get a mortgage.
Rocket Portfolio of Companies Rocket Companies is a series of connected mortgage, real estate and financial services businesses centered on enabling AI-fueled homeownership. • Rocket Mortgage. The nation’s largest retail mortgage lender, providing what we believe is the simplest and most convenient way to get a mortgage.
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Item 1. Business Overview We are a Detroit‑based fintech company consisting of tech-driven mortgage, real estate and financial service businesses. We leverage our technology, data and best in class client service to provide clients with certainty in life’s most complex transactions so that they can achieve and live their dreams.
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Item 1. Business Overview We are a Detroit‑based fintech company including mortgage, real estate and personal finance business. We are committed to delivering industry-best client experiences through our AI-fueled homeownership strategy. Our full suite of products empowers our clients across financial wellness, personal loans, home search, mortgage finance, title and closing.
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We are committed to providing an industry-leading client experience powered by our platform. We believe our widely recognized “Rocket” brand is synonymous with providing simple, fast, and trusted digital solutions for complex transactions.
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At the heart of the ISMs is a simple, yet powerful, concept: “Love our team members. Love our clients.” We believe artificial intelligence ("AI") is evolving rapidly and approaching a critical inflection point, where knowledge engineering, machine learning, automation, and personalization will be at the center of how clients buy, sell and finance homes.
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We have expanded into complementary industries, such as real estate services, personal lending, and personal finance. With each of these businesses in large and fragmented markets, we seek to reinvent and streamline the client experience leveraging the Rocket platform. In June 2022, we published our first ESG (environmental, social, governance) report which outlines our ESG impact on all our stakeholders.
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Rocket is uniquely positioned for the next wave of transformation with generative AI given our vast data assets and technology foundation. In June 2023, we published our second ESG (environmental, social, governance) report which outlines our ESG impact on all our stakeholders. We take pride in investing in our communities and team members through our For-More-Than-Profit approach.
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We take pride in investing in our communities and team members through our For-More-Than-Profit approach. Rocket Portfolio of Companies Rocket Companies is a series of connected businesses centered on delivering innovative solutions to our clients through our technology experience and scale.
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Rocket Loans offers personal loans and financing for solar panel purchases. • Amrock. Our leading provider of title insurance services, property valuation and settlement services, leveraging proprietary technology that integrates seamlessly into the Rocket platform and processes.
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Servicing the loans that we originate provides us with an opportunity 4 to build long‑term relationships and continually deliver a seamless experience to our clients.
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Rocket Data and Technology We aim to continuously improve on delivering speed, certainty and value to our clients through scalable, technology-driven solutions. We believe artificial intelligence will be at the center of how clients buy, sell and finance homes. We have strategically invested in technology for nearly four decades and developed our technology in modules to facilitate agile enhancements.
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This provides a digital, seamless experience for our clients with speed and efficiency from their first interaction with Rocket Mortgage through closing. • Rocket Money (formerly known as Truebill). Our personal finance app that helps clients manage their financial lives.
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We have 10 petabytes of data in our environments, and thousands of attributes to establish accurate client profiles. We generate over 50 million call logs annually, which help us develop technology and processes to continuously improve upon our client experience. In a single year, we used AI to generate approximately 3.7 billion customer interactions and 5 assessments.
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Our Windsor, Canada based digital mortgage broker that serves the needs of consumers across Canada by leveraging technology to simplify the mortgage experience. • Rocket Central. Our shared professional services organization that provides technology, data, marketing, communication and other services to companies in the Rocket portfolio. • Core Digital Media.
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We believe AI will transform our business, and in turn, the client experience and the industry, from lead generation and allocation to underwriting, closing, and servicing. Marketing We believe our national Rocket brand is a competitive advantage that is difficult to replicate. In our industry, we believe we are the only company of scale with significant digital‑first brand recognition.
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The Rocket Platform brings all our core Rocket products together in one spot, with our client at the center.
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The CFPB has been active in supervision and enforcement, and continues to amend rules and regulations within its purview. Furthermore, our expansion of operations into Canada has made us subject to Canadian laws, 7 regulations and rules which have additional and distinct oversight, supervision, and enforcement requirements.
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The Rocket Platform enables us to nurture clients through ongoing, personalized experiences until they are ready for their next transaction – whether it be searching for and buying a new home, refinancing a home, building credit, getting a personal loan, understanding their personal finances, etc.
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Team Members participated in impactful learning through TMRN programming including technology and coding workshops and finance and home ownership planning featuring our Chief Financial Officer. To understand and improve team member retention and engagement, the Company surveys team members with the assistance of third-party consultants.
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We are committed to expanding our reach, growing market share, and delivering an integrated Rocket experience so every client interacts with the right product(s) at the right time – all while ensuring our culture and business stay strong.
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Also in 2023, Rocket Companies achieved the milestone of one million hours of volunteering in our communities. We are committed to fostering a diverse and inclusive workplace and we proactively recruit for and hire diverse talent across a wide range of candidates to achieve the highest performing teams.
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We continue to launch personalized, engaging products to meet the client where they are at, ultimately resulting in lift in conversion from lead to close, lower client acquisition cost, higher client lifetime value, and revenue growth. 5 Data and Technology We aim to identify the client's pain points and improve the client experience through scalable technology driven solutions.
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The career transition program included a compensation package, healthcare coverage, career transition services, and accelerated vesting of certain equity awards, if applicable.
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At the core of our platform is an advanced engine that enables the data-intensive modeling, modification and management of complex business processes and rules. We have turned processes that follow strict regulatory compliance into a series of client‑friendly questions and requests.
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The information in our ESG report is not, and shall not be deemed to be, part of this report or incorporated into any other filings we make to the SEC. 9
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We closely monitor the performance of new initiatives with operational data and metrics, including days to close, team member efficiency and client satisfaction. We have strategically invested in technology for nearly four decades and developed our technology in modules to facilitate agile enhancements.
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For example, our 2022 Super Bowl commercial, starring Anna Kendrick and Barbie, was ranked #1 by USA Today's Ad Meter, marking the second year in a row that we earned the #1 ranking. Our scale and data analytics provide distinct advantages in the efficiency of our marketing initiatives.
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Additionally, if a client repays a mortgage, our servicing portfolio decreases, which reduces our servicing fee income. The value of MSRs typically increase in value as interest rates rise and the likelihood of refinancing decreases. Conversely, when interest rates decline, MSR values decline as the likelihood of refinancing increases, due to the higher probability of loan prepayment.
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Our sizeable origination platform helps us grow our servicing portfolio by retaining the MSRs on new loan volume and thereby replenishing our MSRs during periods of high prepayments. Title, Services and Other Fee Income Other income includes revenues from services provided to clients or partners across our platform.
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To conduct our residential mortgage origination operations in the United States, we are licensed in all 50 states and the District of Columbia.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThese risks include, but are not limited to, the following: • The success and growth of our business will depend upon our ability to adapt to and implement technological changes. • Cyberattacks and other data and security breaches could result in serious harm to our reputation and adversely affect our business. • Our products use software, hardware and services that may be difficult to replace or cause errors or failures of our products that could adversely affect our business. • We are, and intend to continue, developing new products and services, and our failure to accurately predict their demand or growth could have an adverse effect on our business. • We are required to make servicing advances that can be subject to delays in recovery or may not be recoverable in certain circumstances. • We may be required to repurchase or substitute mortgage loans or MSRs that we have sold, or indemnify purchasers of our mortgage loans or MSRs. • Fraud could result in significant financial losses and harm to our reputation. • Loss of our key leadership could result in a material adverse effect on our business. • We utilize vendors and service providers, including affiliates and other third parties, to deliver products and services to our clients.
Biggest changeThese risks include, but are not limited to, the following: • The success and growth of our business, results of operations, and financial condition will depend upon our ability to adapt to and implement technological changes to meet our business needs and the changing demands of the market and our clients. • Cyberattacks, security breaches, or a failure to comply with information security laws or regulations could result in serious harm to our reputation and adversely affect our business. • We are, and intend to continue, developing new products and services, and our failure to accurately predict their demand or growth could have an adverse effect on our business. • We are required to make servicing advances that can be subject to delays in recovery or may not be recoverable in certain circumstances. • We may be required to repurchase or substitute mortgage loans or mortgage servicing rights (“MSRs”) that we have sold, or indemnify purchasers of our mortgage loans or MSRs. • We rely upon the accuracy and completeness of information about borrowers and any misrepresented information or fraud could result in significant financial losses and harm to our reputation. • Loss of our key leadership could result in a material adverse effect on our business. • Failure of vendors to perform to contractual agreements embedded in our products and services and our failure to effectively oversee vendor operations could adversely affect our business. • Rocket Loans, as a rapidly growing business, faces a range of interconnected risks and challenges that could have a material adverse effect on its operations. • Our Rocket Homes business is subject to challenges not faced by traditional real estate brokerages. • We may be unable to make acquisitions and investments, successfully integrate acquired companies into our business, or our acquisitions and investments may not meet our expectations, any of which could adversely affect our business, financial condition, and results of operations. • Negative public opinion could damage our brand and reputation, which could adversely affect our business and earnings. • Our risk management efforts may not be effective at mitigating potential losses resulting in increased costs or business disruption. • We face intense competition that could adversely affect us. • Our business is significantly impacted by interest rates.
Changes in prevailing interest rates or U.S. monetary policies that affect interest rates have and may continue to have a detrimental effect on our business. 10 • A disruption in the secondary home loan market, including the mortgage-backed security ("MBS") market, could have a detrimental effect on our business. • Regulation of title insurance rates could adversely affect our subsidiary, Amrock. • We are subject to various legal actions that if decided adversely, could be detrimental to our business. • If we cannot maintain our corporate culture, we could lose the innovation, collaboration and focus on the mission that contribute to our business. • Our certificate of incorporation contains a provision renouncing our interest and expectancy in certain corporate opportunities. • We are a “controlled company” within the meaning of the Exchange rules and, as a result, qualify for and intend to rely on exemptions from certain corporate governance requirements. • The dual class structure of our common stock may adversely affect the trading market for our Class A common stock.
Changes in prevailing interest rates or U.S. monetary policies that affect interest rates have and may continue to have a detrimental effect on our business. • A disruption in the secondary home loan market, including the mortgage-backed security (“MBS”) market, could have a detrimental effect on our business. 10 • We are subject to various legal actions that if decided adversely, or if viewed unfavorably by the public, could be detrimental to our business. • If we cannot maintain our corporate culture, we could lose the innovation, collaboration and focus on the mission that contribute to our business. • Our certificate of incorporation contains a provision renouncing our interest and expectancy in certain corporate opportunities. • We are controlled by RHI, an entity controlled by Dan Gilbert, whose interests may conflict with our interests and the interests of other stockholders.
Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business, financial condition, results of operations and cash flows.
Further, because we are a “controlled company” within the meaning of the New York Stock Exchange rules, we qualify for and intend to rely on exemptions from certain corporate governance requirements. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business, financial condition, results of operations and cash flows.
Removed
Their failure to perform to contractual agreements and our failure to effectively maintain a vendor oversight program could adversely affect our business. • Our subsidiary, Rocket Loans, is a growing company that faces increased risks, uncertainties, expenses and difficulties due to its relatively limited operating history, its reliance on third party relationships and sources and the expansion of its lending technology to other products. • Our Rocket Homes business model subjects us to challenges not faced by traditional real estate brokerages. • We may be unable to make acquisitions and investments, successfully integrate acquired companies into our business, or our acquisitions and investments may not meet our expectations, any of which could adversely affect our business, financial condition, and results of operations. • Negative public opinion could damage our brand and reputation which could adversely affect our business and earnings. • Our risk management efforts may not be effective at mitigating potential losses resulting in increased costs or business disruption. • We face intense competition that could adversely affect us. • Our business is significantly impacted by interest rates.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties We currently operate through a network of sixteen corporate offices, eleven client support locations and four call centers, located throughout the United States and Canada, which are all leased. Our headquarters and principal executive offices are located at 1050 Woodward Avenue, Detroit, Michigan 48226.
Biggest changeItem 2. Properties We currently operate through a network of fifteen corporate offices, ten client support locations and four call centers, located throughout the United States and Canada, which are all leased. Our headquarters and principal executive offices are located at 1050 Woodward Avenue, Detroit, Michigan 48226.
At this location, as of December 31, 2022, we lease office space totaling approximately 537,573 rentable square feet from an affiliate of Rocket Companies. The lease for our offices at 1050 Woodward Avenue expires on December 31, 2028 unless terminated earlier under certain circumstances specified in our leases.
At this location, as of December 31, 2023, we lease office space totaling approximately 505,535 rentable square feet from an affiliate of Rocket Companies. The lease for our offices at 1050 Woodward Avenue expires on December 31, 2028 unless terminated earlier under certain circumstances specified in our leases.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings For a discussion of our “Legal Proceedings,” refer to Note 14 Commitments, Contingencies, and Guarantees in the notes to our audited consolidated financial statements of this Annual Report on Form 10-K. Item 4. Mine Safety Disclosures Not applicable. 51 Part II
Biggest changeItem 3. Legal Proceedings For a discussion of our “Legal Proceedings,” refer to Note 14 Commitments, Contingencies, and Guarantees in the notes to our audited consolidated financial statements of this Annual Report on Form 10-K. Item 4. Mine Safety Disclosures Not applicable. 46 Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeRefer to Note 17, Non-controlling Interests for more information on non-controlling interests. 64 Results of Operations for the years ended December 31, 2022, 2021 and 2020 Summary of Operations Condensed Statement of Operations Data Year Ended December 31, ($ in thousands) 2022 2021 2020 Revenue Gain on sale of loans, net $ 3,137,417 $ 10,468,574 $ 15,070,703 Servicing fee income 1,458,637 1,325,938 1,074,255 Change in fair value of MSRs 185,036 (689,432) (2,379,355) Interest income, net 184,203 168,940 84,070 Other income 873,200 1,640,446 1,800,394 Total revenue, net 5,838,493 12,914,466 15,650,067 Expenses Salaries, commissions and team member benefits 2,797,868 3,356,815 3,238,301 General and administrative expenses 906,195 1,183,418 1,053,080 Marketing and advertising expenses 945,694 1,249,583 949,933 Interest and amortization expense on non-funding-debt 153,596 230,740 186,301 Other expenses 293,229 709,009 690,795 Total expenses 5,096,582 6,729,565 6,118,410 Income before income taxes $ 741,911 $ 6,184,901 $ 9,531,657 Provision for income taxes (41,978) (112,738) (132,381) Net Income 699,933 6,072,163 9,399,276 Net income attributable to non-controlling interest (653,512) (5,763,953) (9,201,325) Net income attributable to Rocket Companies $ 46,421 $ 308,210 $ 197,951 Gain on sale of loans, net The components of gain on sale of loans for the periods presented were as follows: Year Ended December 31, ($ in thousands) 2022 2021 2020 Net (loss) gain on sale of loans(1) $ (579,562) $ 7,462,202 $ 12,784,611 Fair value of originated MSRs 1,970,647 3,864,359 3,124,659 (Provision for) benefit from investor reserves (58,140) 8,557 (36,814) Fair value adjustment on loans held for sale and IRLCs (822,289) (2,106,952) 2,102,884 Revaluation gain (loss) from forward commitments economically hedging loans held for sale and IRLCs 2,626,761 1,240,408 (2,904,637) Gain on sale of loans, net $ 3,137,417 $ 10,468,574 $ 15,070,703 (1) Net (loss) gain on sale of loans represents the premium received in excess of the UPB, plus net origination fees. 65 The table below provides details of the characteristics of our mortgage loan production for each of the periods presented: ($ in thousands) Year Ended December 31, Loan origination volume by type 2022 2021 2020 Conventional Conforming $ 96,103,677 $ 273,463,292 $ 262,509,809 FHA/VA 28,208,025 55,231,445 47,975,043 Non Agency 8,817,581 22,498,615 9,723,925 Total mortgage loan origination volume $ 133,129,283 $ 351,193,352 $ 320,208,777 Portfolio metrics Average loan amount $ 283 $ 281 $ 278 Weighted average loan-to-value ratio 72.30 % 67.87 % 69.42 % Weighted average credit score 733 749 756 Weighted average loan rate 4.45 % 2.80 % 3.04 % Percentage of loans sold To GSEs and government 91.70 % 92.98 % 97.85 % To other counterparties 8.30 % 7.02 % 2.15 % Servicing-retained 99.53 % 95.23 % 96.69 % Servicing-released 0.47 % 4.77 % 3.31 % Net rate lock volume(1) $ 117,756,897 $ 333,790,140 $ 338,666,648 Gain on sale margin(2) 2.82 % 3.13 % 4.46 % (1) Net rate lock volume includes the UPB of loans subject to IRLCs, net of the pull-through factor as described in the “ Description of Certain Components of Financial Data ” section above.
Biggest changeRefer to Note 17, Non-controlling Interest for more information on non-controlling interests. 59 Results of Operations for the years ended December 31, 2023, 2022 and 2021 Summary of Operations Condensed Statement of Operations Data Year Ended December 31, ($ in thousands) 2023 2022 2021 Revenue Gain on sale of loans, net $ 2,066,292 $ 3,137,417 $ 10,468,574 Servicing fee income 1,401,780 1,458,637 1,325,938 Change in fair value of MSRs (700,982) 185,036 (689,432) Interest income, net 120,860 184,203 168,940 Other income 911,319 873,200 1,640,446 Total revenue, net 3,799,269 5,838,493 12,914,466 Expenses Salaries, commissions and team member benefits 2,257,291 2,797,868 3,356,815 General and administrative expenses 802,865 906,195 1,183,418 Marketing and advertising expenses 736,676 945,694 1,249,583 Interest and amortization expense on non-funding-debt 153,386 153,596 230,740 Other expenses 251,948 293,229 709,009 Total expenses 4,202,166 5,096,582 6,729,565 (Loss) income before income taxes $ (402,897) $ 741,911 $ 6,184,901 Benefit from (provision for) income taxes 12,817 (41,978) (112,738) Net (Loss) Income (390,080) 699,933 6,072,163 Net loss (income) attributable to non-controlling interest 374,566 (653,512) (5,763,953) Net (loss) income attributable to Rocket Companies $ (15,514) $ 46,421 $ 308,210 Gain on sale of loans, net The components of Gain on sale of loans, net for the periods presented were as follows: Year Ended December 31, ($ in thousands) 2023 2022 2021 Net gain (loss) on sale of loans(1) $ 684,415 $ (579,562) $ 7,462,202 Fair value of originated MSRs 1,092,332 1,970,647 3,864,359 (Provision for) benefit from investor reserves (112,372) (58,140) 8,557 Fair value adjustment on loans held for sale and IRLCs 224,605 (822,289) (2,106,952) Revaluation gain from forward commitments economically hedging loans held for sale and IRLCs 177,312 2,626,761 1,240,408 Gain on sale of loans, net $ 2,066,292 $ 3,137,417 $ 10,468,574 (1) Net gain (loss) on sale of loans represents the premium received in excess of the UPB, plus net origination fees. 60 The table below provides details of the characteristics of our mortgage loan production for each of the periods presented: Year Ended December 31, ($ in thousands) 2023 2022 2021 Closed loan origination volume by type Conventional Conforming $ 48,007,013 $ 96,103,677 $ 273,463,292 FHA/VA 24,035,770 28,208,025 55,231,445 Non Agency 6,669,211 8,817,581 22,498,615 Total mortgage closed loan origination volume $ 78,711,994 $ 133,129,283 $ 351,193,352 Portfolio metrics Average loan amount $ 270 $ 283 $ 281 Weighted average loan-to-value ratio 74.86 % 72.30 % 67.87 % Weighted average credit score 733 733 749 Weighted average loan rate 6.62 % 4.45 % 2.80 % Percentage of loans sold To GSEs and government 91.38 % 91.70 % 92.98 % To other counterparties 8.62 % 8.30 % 7.02 % Servicing-retained 94.86 % 93.45 % 95.23 % Servicing-released 5.14 % 6.55 % 4.77 % Net rate lock volume(1) $ 78,648,717 $ 117,756,897 $ 333,790,140 Gain on sale margin(2) 2.63 % 2.82 % 3.13 % (1) Net rate lock volume includes the UPB of loans subject to IRLCs, net of the pull-through factor as described in the “ Description of Certain Components of Financial Data ” section above.
Gain on sale of loans, net includes the net gain on sale of loans, fair value of originated MSRs, fair value adjustments on originated loans held for sale and IRLC’s, and revaluation of forward commitments economically hedging loans held for sale and IRLCs.
Gain on sale of loans, net includes the net gain on sale of loans, fair value of originated MSRs, fair value adjustments on originated loans held for sale and IRLC’s, and revaluation of forward commitments economically hedging loans held for sale and IRLCs.
When the mortgage loan is sold into the secondary market, any difference between the proceeds received and the current fair value of the loan is recognized and moves from the Fair value adjustment on loans held for sale and IRLCs component in the Net (loss) gain on sale of loans component in the table above.
When the mortgage loan is sold into the secondary market, any difference between the proceeds received and the current fair value of the loan is recognized and moves from the Fair value adjustment on loans held for sale and IRLCs component in the Net gain (loss) on sale of loans component in the table above.
The Revaluation from forward commitments economically hedging loans held for sale and IRLCs component reflects the forward hedge commitments intended to offset the various fair value adjustments that impact the Fair value adjustment on loans held for sale and IRLCs and the Net (loss) gain on sale of loans components.
The Revaluation gain from forward commitments economically hedging loans held for sale and IRLCs component reflects the forward hedge commitments intended to offset the various fair value adjustments that impact the Fair value adjustment on loans held for sale and IRLCs and the Net gain (loss) on sale of loans components.
During the time the loans are held for sale, we earn interest income from the borrower on the underlying mortgage loan. This income is partially offset by the interest and fees we have to pay under the loan funding facilities.
During the time the loans are held for sale, we earn interest income from the borrower on the underlying mortgage loan. This income is partially offset by the interest and fees we have to pay under the funding facilities.
The amount of financing actually advanced on each individual loan under our loan funding facilities, as determined by agreed upon advance rates, may be less than the stated advance rate depending, in part, on the market value of the mortgage loans securing the financings.
The amount of financing actually advanced on each individual loan under our funding facilities, as determined by agreed upon advance rates, may be less than the stated advance rate depending, in part, on the market value of the mortgage loans securing the financings.
We may from time to time use surplus cash to “buy-down” the effective interest rate of certain loan funding facilities or to self-fund a portion of our loan originations. Buy-down funds are included in Cash and cash equivalents on the Consolidated Balance Sheets.
We may from time to time use surplus cash to “buy-down” the effective interest rate of certain funding facilities or to self-fund a portion of our loan originations. Buy-down funds are included in Cash and cash equivalents on the Consolidated Balance Sheets.
This discussion and analysis contains forward-looking statements that involve risks and uncertainties which could cause our actual results to differ materially from those anticipated in these forward-looking statements, including, but not limited to, risks and uncertainties discussed below under the heading “ Special Note Regarding Forward-Looking Statements ,” and in Part I and elsewhere in this Form 10-K.
This discussion and analysis contains forward-looking statements that involve risks and uncertainties which could cause our actual results to differ materially from those anticipated in these forward-looking statements, including, but not limited to, risks and uncertainties discussed below under the heading “ Special Note Regarding Forward-Looking Statements ,” and in Part I and elsewhere in this Form 10-K. 48 Special Note Regarding Forward-Looking Statements This Form 10-K contains forward-looking statements, which involve risks and uncertainties.
This metric excludes clients whose loans were sold during the period as well as clients to whom we did not actively market to due to contractual prohibitions or other business reasons. We define "active" as those clients who do not pay-off their mortgage with us and originate a new mortgage with another lender during the period.
This metric excludes clients whose loans were sold during the period as well as clients to whom we did not actively market to due to contractual prohibitions or other business reasons. We define “ active ” as those clients who do not pay-off their mortgage with us and originate a new mortgage with another lender during the period.
Other key performance indicators for other Rocket Companies, besides Rocket Mortgage ("Other Rocket Companies"), allow us to monitor both revenues and unit sales generated by these businesses. We also include Rockethomes.com average unique monthly visits, as we believe traffic on the site is an indicator of consumer interest.
Other key performance indicators for other Rocket Companies, besides Rocket Mortgage ( “ Other Rocket Companies ”) , allow us to monitor both revenues and unit sales generated by these businesses. We also include Rockethomes.com average unique monthly visits, as we believe traffic on the site is an indicator of consumer interest.
See Note 14, Commitments, Contingencies, and Guarantees of the notes to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 73 Interest rate lock commitments, loan sale and forward commitments In the normal course of business, we are party to financial instruments with off-balance sheet risk.
See Note 14, Commitments, Contingencies, and Guarantees of the notes to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Interest rate lock commitments, loan sale and forward commitments In the normal course of business, we are party to financial instruments with off-balance sheet risk.
(5) This revenue is only reported annually. (6) Rockethomes.com average unique monthly visits is calculated by a third party service that monitors website activity. This metric doesn't necessarily have a direct correlation to revenues and is used primarily to monitor consumer interest in the Rockethomes.com site.
(5) This revenue is reported annually. (6) Rockethomes.com average unique monthly visits is calculated by a third party service that monitors website activity. This metric doesn't necessarily have a direct correlation to revenues and is used primarily to monitor consumer interest in the Rockethomes.com site.
Our definitions of each of our non-GAAP financial measures allow us to add back certain cash and non-cash charges, and deduct certain gains that are included in calculating Total revenues, net, Net Income attributable to Rocket Companies or Net Income. However, these expenses and gains vary greatly, and are difficult to predict.
Our definitions of each of our non-GAAP financial measures allow us to add back certain cash and non-cash charges, and deduct certain gains that are included in calculating Total revenues, net, Net income (loss) attributable to Rocket Companies or Net income (loss). However, these expenses and gains vary greatly, and are difficult to predict.
When we sell a pool of loans in the secondary market, the proceeds received from the sale of the loans are used to pay back the amounts we owe on the loan funding facilities. We rely on the cash generated from the sale of loans to fund future loans and repay borrowings under our loan funding facilities.
When we sell a pool of loans in the secondary market, the proceeds received from the sale of the loans are used to pay back the amounts we owe on the funding facilities. We rely on the cash generated from the sale of loans to fund future loans and repay borrowings under our funding facilities.
This metric is a measure of gain on sale revenue and excludes revenues from 60 Rocket Loans, changes in the loan repurchase reserve and fair value adjustments on repurchased loans held on our balance sheet, such as early buyouts.
This metric is a measure of gain on sale revenue and excludes revenues from Rocket Loans, changes in the loan repurchase reserve and fair value adjustments on repurchased loans held on our balance sheet, such as early buyouts.
Our non-GAAP financial measures are not calculated in accordance with GAAP and should not be considered as a substitute for revenue, net income, or any other operating performance measure calculated in accordance with GAAP.
Our non-GAAP financial measures are not calculated in accordance with GAAP and should not be considered as a substitute for revenue, net income (loss), or any other operating performance measure calculated in accordance with GAAP.
Each of our loan funding facilities allows the bank providing the funds to evaluate the market value of the loans that are serving as collateral for the borrowings or advances being made.
Each of our funding facilities allows the bank providing the funds to evaluate the market value of the loans that are serving as collateral for the borrowings or advances being made.
Tax Receivable Agreement In connection with the reorganization completed prior to our IPO in 2020, the Company entered into a Tax Receivable Agreement with RHI and our Chairman ("LLC Members") that will obligate the Company to make payments to the LLC Members generally equal to 90% of the applicable cash tax savings that the Company actually realizes or in some cases is deemed to realize as a result of the tax attributes generated by (i) certain increases in our allocable share of the tax basis in Holdings’ assets resulting from (a) the purchases of Holdings Units (along with the corresponding shares of our Class D common stock or Class C common stock) from the LLC Members (or their transferees of Holdings Units or other assignees) using the net proceeds from our initial public offering or in any future offering, (b) exchanges by the LLC Members (or their transferees of Holdings Units or other assignees) of Holdings Units (along with the corresponding shares of our Class D common stock or Class C common stock) for cash or shares of our Class B common stock or Class A common stock, as applicable, or (c) payments under the Tax Receivable Agreement; (ii) tax benefits related to imputed interest deemed arising as a result of payments made under the Tax Receivable Agreement and (iii) disproportionate allocations (if any) of tax 63 benefits to Holdings as a result of section 704(c) of the Code that relate to the reorganization transactions.
Tax Receivable Agreement In connection with the reorganization completed prior to our IPO in 2020, the Company entered into a Tax Receivable Agreement with RHI and our Chairman (“LLC Members”) that will obligate the Company to make payments to the LLC Members generally equal to 90% of the applicable cash tax savings that the Company actually realizes or in some cases is deemed to realize as a result of the tax attributes generated by (i) certain increases in our allocable share of the tax basis in Holdings’ assets resulting from (a) the purchases of Holdings Units (along with the corresponding shares of our Class D common stock or Class C common stock) from the LLC Members (or their transferees of Holdings Units or other assignees) using the net proceeds from our initial public offering or in any future offering, (b) exchanges by the LLC Members (or their transferees of Holdings Units or other assignees) of Holdings Units (along with the corresponding shares of our Class D 58 common stock or Class C common stock) for cash or shares of our Class B common stock or Class A common stock, as applicable, or (c) payments under the Tax Receivable Agreement; (ii) tax benefits related to imputed interest deemed arising as a result of payments made under the Tax Receivable Agreement and (iii) disproportionate allocations (if any) of tax benefits to Holdings as a result of section 704(c) of the Code that relate to the reorganization transactions.
We define “Adjusted EBITDA” as earnings before interest and amortization expense on non-funding debt, income tax, depreciation and amortization, share-based compensation expense, change in fair value of MSRs due to valuation assumptions (net of hedges), a litigation accrual, career transition program, and change in Tax receivable agreement liability. 55 We exclude from each of our non-GAAP financial measures the change in fair value of MSRs due to valuation assumptions (net of hedges) as this represents a non-cash non-realized adjustment to our total revenues, reflecting changes in assumptions including discount rates and prepayment speed assumptions, mostly due to changes in market interest rates, which is not indicative of our performance or results of operation.
We define “Adjusted EBITDA” as earnings (losses) before interest and amortization expense on non-funding debt, income tax, depreciation and amortization, share-based compensation expense, change in fair value of MSRs due to valuation assumptions (net of hedges), a litigation accrual, career transition program, and change in Tax receivable agreement liability. 50 We exclude from each of our non-GAAP financial measures the change in fair value of MSRs due to valuation assumptions (net of hedges) as this represents a non-cash non-realized adjustment to our total revenues, reflecting changes in assumptions including discount rates and prepayment speed assumptions, mostly due to changes in market interest rates, which is not indicative of our performance or results of operation.
We define "net client retention rate" as the number of clients that were active at the beginning of a period and which remain active at the end of the period, divided by the number of clients that were active at the beginning of the period.
We define “ net client retention rate ” as the number of clients that were active at the beginning of a period and which remain active at the end of the period, divided by the number of clients that were active at the beginning of the period.
Salaries, commissions and team member benefits Salaries, commissions and team member benefits include all payroll, benefits, and share-based compensation expenses for our team members. 62 General and administrative expenses General and administrative expenses primarily include occupancy costs, professional services, loan processing expenses on loans that do not close or that are not charged to clients on closed loans, commitment fees, fees on loan funding facilities, license fees, office expenses and other operating expenses.
Salaries, commissions and team member benefits Salaries, commissions and team member benefits include all payroll, benefits, and share-based compensation expenses for our team members. 57 General and administrative expenses General and administrative expenses primarily include occupancy costs, professional services, loan processing expenses on loans that do not close or that are not charged to clients on closed loans, commitment fees, fees on loan funding facilities, license fees, office expenses and other operating expenses.
(4) Reflects net expenses associated with compensation packages, healthcare coverage, career transition services, and accelerated vesting of certain equity awards. (5) Reflects changes in estimates of tax rates and other variables of the Tax receivable agreement liability. 59 Key Performance Indicators We monitor a number of key performance indicators to evaluate the performance of our business operations.
(4) Reflects net expenses associated with compensation packages, healthcare coverage, career transition services, and accelerated vesting of certain equity awards. (5) Reflects changes in estimates of tax rates and other variables of the Tax receivable agreement liability. 54 Key Performance Indicators We monitor a number of key performance indicators to evaluate the performance of our business operations.
Net loan origination fees and costs related to the origination of mortgage loans are recognized as a component of the fair value of IRLCs. 61 We establish reserves for our estimated liabilities associated with the potential repurchase or indemnity of purchasers of loans previously sold due to representation and warranty claims by investors.
Net loan origination fees and costs related to the origination of mortgage loans are recognized as a component of the fair value of IRLCs. 56 We establish reserves for our estimated liabilities associated with the potential repurchase or indemnity of purchasers of loans previously sold due to representation and warranty claims by investors.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information for Common Stock Our Class A Common Stock, par value $0.00001 per share, is listed on the New York Stock Exchange under the ticker symbol "RKT" and began trading on August 10, 2020.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information for Common Stock Our Class A Common Stock, par value $0.00001 per share, is listed on the New York Stock Exchange under the ticker symbol “RKT” and began trading on August 10, 2020.
Once closed, the underlying residential mortgage loan that is held for sale is pledged as collateral for the borrowing or advance that was made under these loan funding facilities. In most cases, the loans will remain in one of the loan funding facilities for only a short time, generally less than one month, until the loans are pooled and sold.
Once closed, the underlying residential mortgage loan that is held for sale is pledged as collateral for the borrowing or advance that was made under these funding facilities. In most cases, the loans will remain in one of the funding facilities for only a short time, generally less than 45 days, until the loans are pooled and sold.
Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in “ Management's Discussion and Analysis of Financial Condition and Results of Operations ” in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
(2) Rocket Companies is subject to U.S. Federal income taxes, in addition to state, local and Canadian taxes with respect to its allocable share of any net taxable income of Holdings.
(2) Rocket Companies is subject to U.S. Federal income taxes, in addition to state, local and Canadian taxes with respect to its allocable share of any net taxable income or loss of Holdings.
The decrease was driven by our cost reduction efforts affecting salaries, commissions, and team member benefits, general and administrative expenses, marketing and advertising expenses and other expenses including production and other 68 vendor-related costs.
The decrease was driven by our cost reduction efforts affecting salaries, commissions and team member benefits, general and administrative expenses, marketing and advertising expenses, and other expenses, including production and other 63 vendor-related costs.
The weighted average annualized retained servicing fee for our MSR portfolio was 0.29%, 0.28%, and 0.30% for the years ended December 31, 2022, 2021, and 2020, respectively. The vast majority of our portfolio consists of originated MSRs and consequently, the impact of purchased MSRs does not have a material impact on our weighted average service fee.
The weighted average annualized retained servicing fee for our MSR portfolio was 0.28%, 0.29%, and 0.28% for the years ended December 31, 2023, 2022, and 2021, respectively. The vast majority of our portfolio consists of originated MSRs and consequently, the impact of purchased MSRs does not have a material impact on our weighted average service fee.
On February 24, 2022, our board of directors authorized and declared a cash dividend (the "2022 Special Dividend") of $1.01 per share to the holders of our Class A common stock.
On February 24, 2022, our board of directors authorized and declared a cash dividend (the “2022 Special Dividend”) of $1.01 per share to the holders of our Class A common stock.
The professional service fees represent amounts received in exchange for professional services provided to affiliated companies. Services are provided primarily in connection with technology, facilities, human resources, accounting, training, and security functions. Other income also includes revenues from investment interest income and other miscellaneous income items.
The professional service fees represent amounts received in exchange for professional services provided to affiliated companies. Services are provided primarily in connection with technology, facilities, human resources, accounting, training, and security functions. Other income also includes revenues from other subsidiaries and other miscellaneous income items.
As discussed in Note 6, Borrowings, of the notes to the consolidated financial statements included in this Form 10-K, as of December 31, 2022, we had 15 different funding facilities in different amounts and with various maturities together with the Senior Notes.
As discussed in Note 6, Borrowings, of the notes to the consolidated financial statements included in this Form 10-K, as of December 31, 2023, we had 15 different funding facilities and financing facilities in different amounts and with various maturities together with the Senior Notes.
This section of this Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.
This section of this Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
Liquidity and Capital Resources Historically, our primary sources of liquidity have included: • cash flow from our operations, including: • sale of whole loans into the secondary market; • sale of mortgage servicing rights into the secondary market; • loan origination fees; • servicing fee income; and • interest income on loans held for sale; • borrowings, including under our loan funding facilities and other secured and unsecured financing facilities; and • cash and marketable securities on hand.
Liquidity and Capital Resources Historically, our primary sources of liquidity have included: • cash flow from our operations, including: • sale of whole loans into the secondary market; • sale of mortgage servicing rights and excess servicing cash flows into the secondary market; • loan origination fees; • servicing fee income; and • interest income on loans held for sale • borrowings, including under our funding facilities, financing facilities, and unsecured senior notes; and • cash and marketable securities on hand.
Recent Developments Business Trends The U.S. Federal Reserve raised the Federal Funds rate multiple times in 2022 to mitigate inflationary pressures. The resulting mortgage interest rate increases have driven a significant decline in the size of the mortgage origination market from 2021 to 2022.
Recent Developments Business Trends The U.S. Federal Reserve has raised the Federal Funds rate multiple times throughout 2022 and 2023 to mitigate inflationary pressures. The resulting mortgage interest rate increases have driven a significant decline in the size of the mortgage origination market from 2022 to 2023.
Comparative periods presented to the extent impacted were updated. Although we use our non-GAAP financial measures to assess the performance of our business, such use is limited because they do not include certain material costs necessary to operate our business. Our non-GAAP financial measures can represent the effect of long-term strategies as opposed to short-term results.
Although we use our non-GAAP financial measures to assess the performance of our business, such use is limited because they do not include certain material costs necessary to operate our business. Our non-GAAP financial measures can represent the effect of long-term strategies as opposed to short-term results.
Federal Income Tax Rate 21.00 % 21.00 % 21.00 % Canadian taxes 0.01 0.01 0.01 State and Local Income Taxes (net of federal benefit) 3.28 3.91 3.83 Effective Income Tax Rate for Adjusted Net (Loss) Income 24.29 % 24.92 % 24.84 % (3) The year ended December 31, 2022 amounts exclude the impact of the career transition program.
Federal Income Tax Rate 21.00 % 21.00 % 21.00 % Canadian taxes 0.01 0.01 0.01 State and Local Income Taxes (net of federal benefit) 3.39 3.28 3.91 Effective Income Tax Rate for Adjusted Net (Loss) Income 24.40 % 24.29 % 24.92 % (3) The years ended December 31, 2023 and 2022 amounts exclude the impact of the career transition program.
Summary results by segment for the years ended December 31, 2022, 2021 and 2020 Our operations are organized by distinct marketing channels which promote client acquisition into our platform and include two reportable segments: Direct to Consumer and Partner Network.
Summary results by segment for the years ended December 31, 2023, 2022 and 2021 Our operations are organized by distinct marketing channels which promote client acquisition and are categorized under two reportable segments: Direct to Consumer and Partner Network.
Included in gain on sale of loans, net is also the fair value of originated MSRs, which represents the estimated fair value of MSRs related to loans which we have sold and retained the right to service.
Included in gain on sale of loans, net is also the fair value of originated MSRs, which represents the estimated fair value of MSRs related to loans which we have sold and retained the right to service. Loan servicing income, net Loan servicing income, net includes Servicing fee income and Change in fair value of MSRs.
We also have loan funding facilities directly with the GSEs. Loans financed under these facilities are generally financed at approximately 97% to 98% of the principal balance of the loan (although certain types of loans are financed at lower percentages of the principal balance of the loan), which requires us to fund the balance from cash generated from operations.
Loans financed under these facilities are generally financed at approximately 97% to 98% of the principal balance of the loan (although certain types of loans are financed at lower percentages of the principal balance of the loan), which requires us to fund the balance from cash generated from operations.
For segments, we measure gain on sale margin of sold loans and refer to this metric as ‘sold loan gain on sale margin.’ A loan is considered sold when it is sold to investors on the secondary market. In previous disclosures, 'sold loans' were referred to as 'funded loans'.
For segments, we measure gain on sale margin of sold loans and refer to this metric as ‘sold loan gain on sale margin.’ A loan is considered sold when it is sold to investors on the secondary market.
Other income Other income includes revenues generated from Amrock (title insurance services, property valuation, and settlement services), Rocket Homes (real estate network referral fees), Rocket Auto (auto marketplace sales revenues), Core Digital Media (third party lead generation revenues), Rock Connections (third party sales and support revenues), Rocket Money (personal finance), Rocket Loans (personal loans) and professional service fees.
Other income Other income includes revenues generated from Amrock (title insurance services, property valuation, and settlement services), Rocket Homes (real estate network referral fees), Rocket Auto (auto marketplace sales revenues), Core Digital Media (third party lead generation revenues), Rock Connections (third party sales and support revenues), Rocket Money (personal finance), Rocket Loans (personal loans), deposit income related to revenu e earned on deposits, including escrow deposits, and professional service fees.
GAAP-based measures can be found in the consolidated financial statements and related notes included elsewhere in this Form 10-K. 56 Reconciliation of Adjusted Revenue to Total Revenue, net Years Ended December 31, ($ in thousands) 2022 2021 2020 Total Revenue, net $ 5,838,493 $ 12,914,466 $ 15,650,067 Change in fair value of MSRs due to valuation assumptions (net of hedges)(1) (1,210,947) (487,473) 1,288,156 Adjusted Revenue $ 4,627,546 $ 12,426,993 $ 16,938,223 (1) Reflects changes in assumptions including discount rates and prepayment speed assumptions, mostly due to changes in market interest rates, and the effects of contractual prepayment protection associated with sales of MSRs .
GAAP-based measures can be found in the consolidated financial statements and related notes included elsewhere in this Form 10-K. 51 Reconciliation of Adjusted Revenue to Total Revenue, net Years Ended December 31, ($ in thousands) 2023 2022 2021 Total Revenue, net $ 3,799,269 $ 5,838,493 $ 12,914,466 Change in fair value of MSRs due to valuation assumptions (net of hedges) (1) (29,007) (1,210,947) (487,473) Adjusted Revenue $ 3,770,262 $ 4,627,546 $ 12,426,993 (1) Reflects changes in assumptions including discount rates and prepayment speed assumptions, mostly due to changes in market interest rates, and the effects of contractual prepayment protection associated with sales of MSRs .
The timing and extent to which the Company repurchases its shares will depend upon, among other things, market conditions, share price, liquidity targets, regulatory requirements and other factors. As of December 31, 2022 approximately $590.7 million remains available under the Share Repurchase Program.
The timing and extent to which the Company repurchases its shares will depend upon, among other things, market conditions, share price, liquidity targets, regulatory requirements and other factors. There were no shares repurchased during the three months ended December 31, 2023. As of December 31, 2023 approximately $590.7 million remains available under the Share Repurchase Program.
Marketing and advertising expenses Marketing and advertising expenses are primarily related to performance and brand marketing. Other expenses Other expenses primarily consist of expenses generated from Amrock (title insurance services, property valuation, and settlement services), depreciation and amortization on property and equipment, and mortgage servicing related expenses.
Other expenses Other expenses primarily consist of depreciation and amortization on property and equipment, mortgage servicing related expenses, and expenses generated from Amrock (title insurance services, property valuation, and settlement services).
Components of operating expenses Our operating expenses as presented in the statement of operations data include salaries, commissions and team member benefits, general and administrative expenses, marketing and advertising expenses, and other expenses.
Components of operating expenses Our operating expenses as presented in the statement of operations data include Salaries, commissions and team member benefits, General and administrative expenses, Marketing and advertising expenses, Interest and amortization expense on non-funding-debt and Other expenses.
Our selected peer group is comprised of PennyMac Financial Services Inc, Rithm Capital Corp, Mr Cooper Group Inc, Anywhere Real Estate Inc., Zillow Group Inc Class C, Redfin Corp, Stewart Information Services Corp, SoFi Technologies Inc, Guild Holdings Company, Compass, Inc. loanDepot, Inc., UWM Holdings Corporation, Home Point Capital Inc., and Blend Labs, Inc.
Our selected peer group is comprised of PennyMac Financial Services Inc, Rithm Capital Corp, Mr Cooper Group Inc, Anywhere Real Estate Inc., Zillow Group Inc Class C, Redfin Corp, Stewart Information Services Corp, SoFi Technologies Inc, Guild Holdings Company, Compass, Inc. loanDepot, Inc., UWM Holdings Corporation, and Blend Labs, Inc. Certain companies were not publicly traded companies at inception date.
(9) Represents tax benefits due to the amortization of intangible assets and other tax attributes resulting from the purchase of Holdings units, net of payment obligations under Tax Receivable Agreement. 58 Reconciliation of Adjusted Diluted Weighted Average Shares Outstanding to Diluted Weighted Average Shares Out standing Year Ended December 31, ($ in thousands, except per share) 2022 2021 2020 Diluted weighted average Class A common shares outstanding 1,971,620,573 1,989,433,567 116,238,493 Assumed pro forma conversion of Class D shares (1) — — 1,872,476,780 Adjusted diluted weighted average shares outstanding 1,971,620,573 1,989,433,567 1,988,715,273 Adjusted Net (Loss) Income (2) $ (136,962) $ 4,501,862 $ 8,286,174 Adjusted Diluted (Loss) Earnings Per Share $ (0.07) $ 2.26 $ 4.17 (1) Reflects the proforma exchange and conversion of non-dilutive Class D common stock to Class A common stock.
(9) Represents tax benefits due to the amortization of intangible assets and other tax attributes resulting from the purchase of Holdings units, net of payment obligations under Tax Receivable Agreement. 53 Reconciliation of Adjusted Diluted Weighted Average Shares Outstanding to Diluted Weighted Average Shares Out standing Year Ended December 31, ($ in thousands, except per share) 2023 2022 2021 Diluted weighted average Class A common shares outstanding 1,980,523,690 1,971,620,573 1,989,433,567 Assumed pro forma conversion of Class D shares (1) — — — Adjusted diluted weighted average shares outstanding 1,980,523,690 1,971,620,573 1,989,433,567 Adjusted Net (Loss) Income $ (143,105) $ (136,962) $ 4,501,862 Adjusted Diluted (Loss) Earnings Per Share $ (0.07) $ (0.07) $ 2.26 (1) Reflects the pro forma exchange and conversion of non-dilutive Class D common stock to Class A common stock.
Special Note Regarding Forward-Looking Statements This Form 10-K contains forward-looking statements, which involve risks and uncertainties. These forward-looking statements are generally identified by the use of forward-looking terminology, including the terms “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” and, in each case, their negative or other various or comparable terminology.
These forward-looking statements are generally identified by the use of forward-looking terminology, including the terms “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” and, in each case, their negative or other various or comparable terminology.
Performance Graph Set forth below is a graph comparing the percentage change in the cumulative total shareholder return on our common stock against the cumulative total return of a broad market index composed of all issuers listed on the New York Stock Exchange ("NYSE"), Dow Jones U.S.
Performance Graph Set forth below is a graph comparing the percentage change in the cumulative total shareholder return on our common stock against the cumulative total return of a broad market index composed of all issuers listed on the New York Stock Exchange (“NYSE”), and our selected peer group.
Reconciliation of Adjusted Net (Loss) Income to Net Income Attributable to Rocket Companies Year Ended December 31, ($ in thousands) 2022 2021 2020 Net Income attributable to Rocket Companies $ 46,421 $ 308,210 $ 197,951 Net Income impact from pro forma conversion of Class D common shares to Class A common shares(1) 655,863 5,766,284 9,203,435 Adjustment to the provision for income tax(2) (138,803) (1,428,937) (2,235,345) Tax-effected Net Income(2) $ 563,481 $ 4,645,557 $ 7,166,041 Share-based compensation expense(3) 233,760 163,738 162,608 Change in fair value of MSRs due to valuation assumptions (net of hedges)(4) (1,210,947) (487,473) 1,288,156 Loss on extinguishment of Senior Notes — 87,262 43,695 Litigation accrual(5) — 15,000 — Career transition program(6) 81,132 — — Change in Tax receivable agreement liability(7) (34,159) 18,835 (7,859) Tax impact of adjustments(8) 225,949 55,211 (371,015) Other tax adjustments(9) 3,822 3,732 4,548 Adjusted Net (Loss) Income $ (136,962) $ 4,501,862 $ 8,286,174 (1) Reflects Net Income to Class A common stock from pro forma exchange and conversion of corresponding shares of our Class D common shares held by non-controlling interest holders as of December 31, 2022, 2021 and 2020.
Reconciliation of Adjusted Net (Loss) Income to Net (Loss) Income Attributable to Rocket Companies Year Ended December 31, ($ in thousands) 2023 2022 2021 Net (loss) income attributable to Rocket Companies $ (15,514) $ 46,421 $ 308,210 Net (loss) income impact from pro forma conversion of Class D common shares to Class A common shares (1) (372,541) 655,863 5,766,284 Adjustment to the benefit from (provision for) income tax (2) 84,995 (138,803) (1,428,937) Tax-effected net (loss) income (2) $ (303,060) $ 563,481 $ 4,645,557 Share-based compensation expense (3) 177,389 233,760 163,738 Change in fair value of MSRs due to valuation assumptions (net of hedges) (4) (29,007) (1,210,947) (487,473) Loss on extinguishment of Senior Notes — — 87,262 Litigation accrual (5) — — 15,000 Career transition program (6) 51,495 81,132 — Change in Tax receivable agreement liability (7) 6,565 (34,159) 18,835 Tax impact of adjustments (8) (50,372) 225,949 55,211 Other tax adjustments (9) 3,885 3,822 3,732 Adjusted Net (Loss) Income $ (143,105) $ (136,962) $ 4,501,862 (1) Reflects net (loss) income to Class A common stock from pro forma exchange and conversion of corresponding shares of our Class D common shares held by non-controlling interest holders as of December 31, 2023, 2022 and 2021.
For the year ended December 31, 2020, Class D common shares were anti-dilutive and therefore included in the proforma conversion of Class D shares in the table above. For the years ended December 31, 2022 and 2021, Class D common shares were dilutive and are included in the dilutive weighted average Class A common shares outstanding in the table above.
For the years ended December 31, 2023, 2022 and 2021, Class D common shares were dilutive and are included in the dilutive weighted average Class A common shares outstanding in the table above.
The Adjustment to the provision for income tax reflects the difference between (a) the income tax computed using the effective tax rates below applied to the Income before income taxes assuming Rocket Companies, Inc. owns 100% of the non-voting common interest units of Holdings and (b) the Provision for income taxes. 57 Year Ended December 31, 2022 2021 2020 Net income attributable to Rocket Companies $ 46,421 $ 308,210 $ 197,951 Net income impact from pro forma conversion of Class D common shares to Class A common shares 655,863 5,766,284 9,203,435 Provision for income taxes 41,978 112,738 132,381 Adjusted income before income taxes 744,262 6,187,232 9,533,767 Effective Income Tax Rate for Adjusted Net (Loss) Income 24.29 % 24.92 % 24.84 % Adjusted provision for income taxes 180,781 1,541,675 2,367,726 Provision for income taxes 41,978 112,738 132,381 Adjustment to the provision for income tax $ (138,803) $ (1,428,937) $ (2,235,345) December 31, 2022 2021 2020 Statutory U.S.
The Adjustment to the benefit from (provision for) income tax reflects the difference between (a) the income tax computed using the effective tax rates below applied to the (loss) income before income taxes assuming Rocket Companies, Inc. owns 100% of the non-voting common interest units of Holdings and (b) the (benefit from) provision for income taxes. 52 Year Ended December 31, 2023 2022 2021 Net (loss) income attributable to Rocket Companies $ (15,514) $ 46,421 $ 308,210 Net (loss) income impact from pro forma conversion of Class D common shares to Class A common shares (372,541) 655,863 5,766,284 (Benefit from) provision for income taxes (12,817) 41,978 112,738 Adjusted (loss) income before income taxes (400,872) 744,262 6,187,232 Effective Income Tax Rate for Adjusted Net (Loss) Income 24.40 % 24.29 % 24.92 % Adjusted (benefit from) provision for income taxes (97,812) 180,781 1,541,675 (Benefit from) provision for income taxes (12,817) 41,978 112,738 Adjustment to the benefit from (provision for) income tax $ 84,995 $ (138,803) $ (1,428,937) December 31, 2023 2022 2021 Statutory U.S.
Our loan funding facilities, early buy out facilities, MSRs facility and unsecured lines of credit also generally require us to comply with certain operating and financial covenants and the availability of funds under these facilities is subject to, among other conditions, our continued compliance with these covenants.
Our funding facilities and financing facilities also generally require us to comply with certain operating and financial covenants and the availability of funds under these facilities is subject to, among other conditions, our continued compliance with these covenants.
In order to originate and aggregate loans for sale into the secondary market, we use our own working capital and borrow or obtain money on a short-term basis primarily through committed and uncommitted loan funding facilities established with large global banks. Our loan funding facilities are primarily in the form of master repurchase agreements.
We are also subject to contingencies which may have a significant impact on the use of our cash. In order to originate and aggregate loans for sale into the secondary market, we use our own working capital and borrow or obtain money on a short-term basis primarily through committed and uncommitted funding facilities, generally established with large global banks.
As of February 22, 2023 there were approximately 122 holders of record of our Class A Common Stock and 2 holders of record of our Class D Common Stock.
As of February 20, 2024 there were approximately 114 holders of record of our Class A Common Stock and 2 holders of record of our Class D Common Stock.
(3) MSR fair market value multiple is a metric used to determine the relative value of the MSR asset in relation to the annualized retained servicing fee, which is the cash that the holder of the MSR asset would receive from the portfolio as of such date.
(2) Market share information is based on Fannie Mae mortgage volume market share estimates as of December 2023. 55 (3) MSR fair market value multiple is a metric used to determine the relative value of the MSR asset in relation to the annualized retained servicing fee, which is the cash that the holder of the MSR asset would receive from the portfolio as of such date.
At December 31, 2022, the aggregate available amount under our facilities was $22.3 billion, with combined outstanding balances of $4.2 billion and unutilized capacity of $18.1 billion.
At December 31, 2023, the aggregate available amount under our facilities was $21.2 billion, with combined outstanding balances of $3.6 billion and unutilized capacity of $17.6 billion.
Expenses Expenses for the periods presented were as follows: Year Ended December 31, ($ in thousands) 2022 2021 2020 Salaries, commissions and team member benefits $ 2,797,868 $ 3,356,815 $ 3,238,301 General and administrative expenses 906,195 1,183,418 1,053,080 Marketing and advertising expenses 945,694 1,249,583 949,933 Interest and amortization expense on non-funding debt 153,596 230,740 186,301 Other expenses 293,229 709,009 690,795 Total expenses $ 5,096,582 $ 6,729,565 $ 6,118,410 Total expenses were $5.1 billion, a decrease of $1.6 billion or 24.3%, as compared with $6.7 billion for the same period in 2021.
Expenses Expenses for the periods presented were as follows: Year Ended December 31, ($ in thousands) 2023 2022 2021 Salaries, commissions and team member benefits $ 2,257,291 $ 2,797,868 $ 3,356,815 General and administrative expenses 802,865 906,195 1,183,418 Marketing and advertising expenses 736,676 945,694 1,249,583 Interest and amortization expense on non-funding debt 153,386 153,596 230,740 Other expenses 251,948 293,229 709,009 Total expenses $ 4,202,166 $ 5,096,582 $ 6,729,565 Total expenses were $4.2 billion, a decrease of $0.9 billion or 18%, as compared with $5.1 billion for the same period in 2022.
Reconciliation of Adjusted EBITDA to Net Income Year Ended December 31, ($ in thousands) 2022 2021 2020 Net Income $ 699,933 $ 6,072,163 $ 9,399,276 Interest and amortization expense on non-funding debt 153,596 230,740 186,301 Income tax provision 41,978 112,738 132,381 Depreciation and amortization 94,020 74,713 74,316 Share-based compensation expense (1) 233,760 163,738 162,608 Change in fair value of MSRs due to valuation assumptions (net of hedges) (2) (1,210,947) (487,473) 1,288,156 Litigation accrual (3) — 15,000 — Career transition program (4) 81,132 — — Change in Tax receivable agreement liability (5) (34,159) 18,835 (7,859) Adjusted EBITDA $ 59,313 $ 6,200,454 $ 11,235,179 (1) The year ended December 31, 2022 amounts exclude the impact of the career transition program.
Reconciliation of Adjusted EBITDA to Net (Loss) Income Year Ended December 31, ($ in thousands) 2023 2022 2021 Net (loss) income $ (390,080) $ 699,933 $ 6,072,163 Interest and amortization expense on non-funding debt 153,386 153,596 230,740 (Benefit from) provision for income taxes (12,817) 41,978 112,738 Depreciation and amortization 110,271 94,020 74,713 Share-based compensation expense (1) 177,389 233,760 163,738 Change in fair value of MSRs due to valuation assumptions (net of hedges) (2) (29,007) (1,210,947) (487,473) Litigation accrual (3) — — 15,000 Career transition program (4) 51,495 81,132 — Change in Tax receivable agreement liability (5) 6,565 (34,159) 18,835 Adjusted EBITDA $ 67,202 $ 59,313 $ 6,200,454 (1) The years ended December 31, 2023 and 2022 amounts exclude the impact of the career transition program.
For additional discussion, see Note 16, Segments of the consolidated financial statements of this Form 10-K. 69 Direct to Consumer Results Year Ended December 31, ($ in thousands) 2022 2021 2020 Sold Loan Volume $ 84,142,087 $ 213,888,883 $ 199,841,530 Sold Loan Gain on Sale Margin 4.14 % 4.75 % 5.48 % Revenue Gain on sale $ 2,573,970 $ 8,843,040 $ 12,076,569 Interest income 222,621 265,438 215,171 Interest expense on funding facilities (106,561) (161,867) (161,478) Service fee income 1,455,121 1,323,171 1,070,463 Changes in fair value of MSRs 185,036 (689,432) (2,379,355) Other income 449,813 1,001,060 900,520 Total Revenue, net $ 4,780,000 $ 10,581,410 $ 11,721,890 (Increase) decrease in MSRs due to valuation assumptions (net of hedges) (1,210,947) (487,473) 1,288,156 Adjusted Revenue $ 3,569,053 $ 10,093,937 $ 13,010,046 Less: Directly Attributable Expenses(1) 2,517,850 3,697,774 3,637,525 Contribution Margin $ 1,051,203 $ 6,396,163 $ 9,372,521 (1) Direct expenses attributable to operating segments exclude corporate overhead, depreciation and amortization, and interest and amortization expense on non-funding debt.
For additional discussion, see Note 16, Segments of the consolidated financial statements of this Form 10-K. 64 Direct to Consumer Results Year Ended December 31, ($ in thousands) 2023 2022 2021 Sold Loan Volume $ 43,598,231 $ 84,142,087 $ 213,888,883 Sold Loan Gain on Sale Margin 3.86 % 4.14 % 4.75 % Revenue Gain on sale $ 1,660,038 $ 2,573,970 $ 8,843,040 Interest income 182,097 222,621 265,438 Interest expense on funding facilities (114,447) (106,561) (161,867) Service fee income 1,396,639 1,455,121 1,323,171 Changes in fair value of MSRs (700,982) 185,036 (689,432) Other income 565,882 449,813 1,001,060 Total Revenue, net $ 2,989,227 $ 4,780,000 $ 10,581,410 Change in fair value of MSRs due to valuation assumptions, net of hedges (29,007) (1,210,947) (487,473) Adjusted Revenue $ 2,960,220 $ 3,569,053 $ 10,093,937 Less: Directly attributable expenses(1) 1,924,273 2,517,850 3,697,774 Contribution Margin $ 1,035,947 $ 1,051,203 $ 6,396,163 (1) Direct expenses attributable to operating segments exclude corporate overhead, depreciation and amortization, and interest and amortization expense on non-funding debt.
Interest income, net The components of interest income, net for the periods presented were as follows: Year Ended December 31, ($ in thousands) 2022 2021 2020 Interest income $ 350,591 $ 430,086 $ 329,593 Interest expense on funding facilities (166,388) (261,146) (245,523) Interest income, net $ 184,203 $ 168,940 $ 84,070 Interest income, net was $184.2 million, an increase of $15.3 million, or 9.0%, as compared to $168.9 million for the same period in 2021.
Interest income, net The components of interest income, net for the periods presented were as follows: Year Ended December 31, ($ in thousands) 2023 2022 2021 Interest income $ 327,448 $ 350,591 $ 430,086 Interest expense on funding facilities (206,588) (166,388) (261,146) Interest income, net $ 120,860 $ 184,203 $ 168,940 Interest income, net was $120.9 million, a decrease of $63.3 million, or 34%, as compared to $184.2 million for the same period in 2022.
Loan servicing fee income is recorded to income as earned, which is upon collection of payments from borrowers. We have elected to subsequently measure the MSRs at fair value on a recurring basis.
Servicing fee income consists of the contractual fees earned for servicing the loans and includes ancillary revenue such as late fees and modification incentives. Servicing fee income is recorded to income as earned, which is upon collection of payments from borrowers. We have elected to subsequently measure the MSRs at fair value on a recurring basis.
Furthermore, at the point of sale of the loan, the Fair value of originated MSRs and the (Provision for) benefit from investor reserves are recognized each in their respective components shown above. 66 Year ended December 31, 2022 summary Gain on sale of loans, net was $3.1 billion, a decrease of $7.3 billion, or 70.0%, as compared with $10.5 billion for the same period in 2021, primarily driven by the changes in Net (loss) gain on sale of loans, Fair value adjustment on loans held for sale and IRLCs and Revaluation from forward commitments economically hedging loans held for sale.
Furthermore, at the point of sale of the loan, the Fair value of originated MSRs and the (Provision for) benefit from investor reserves are recognized each in their respective components shown above. 61 Year ended December 31, 2023 summary Gain on sale of loans, net was $2.1 billion, a decrease of $1.1 billion, or 34%, as compared with $3.1 billion for the same period in 2022.
Loan servicing income (loss), net For the periods presented, loan servicing income (loss), net consisted of the following: Year Ended December 31, ($ in thousands) 2022 2021 2020 Retained servicing fee $ 1,416,488 $ 1,292,031 $ 1,043,147 Subservicing income 9,066 9,389 7,996 Ancillary income 33,083 24,518 23,112 Servicing fee income 1,458,637 1,325,938 1,074,255 Change in valuation model inputs or assumptions 1,279,945 510,869 (1,360,052) Change in fair value of MSR hedge (68,998) (23,396) 71,896 Collection / realization of cash flows (1,025,911) (1,176,905) (1,091,199) Change in fair value of MSRs 185,036 (689,432) (2,379,355) Loan servicing income (loss), net $ 1,643,673 $ 636,506 $ (1,305,100) December 31, ($ in thousands) 2022 2021 2020 MSR UPB of loans serviced $ 486,540,840 $ 485,087,214 $ 371,494,905 Number of MSR loans serviced 2,412,117 2,384,150 1,975,605 UPB of loans subserviced and temporarily serviced $ 48,163,762 $ 66,779,210 $ 38,057,838 Number of loans subserviced and temporarily serviced 122,380 180,900 83,622 Total serviced UPB $ 534,704,602 $ 551,866,424 $ 409,552,743 Total loans serviced 2,534,497 2,565,050 2,059,227 MSR fair value $ 6,946,940 $ 5,385,613 $ 2,862,685 Total serviced delinquency rate, excluding loans in forbearance (60+) 0.88% 0.94% 0.84% Total serviced delinquency count (60+) as % of total 1.20% 1.60% 3.91% Weighted average credit score 736 738 740 Weighted average LTV 71.08% 70.57% 72.12% Weighted average loan rate 3.40% 3.17% 3.54% Weighted average service fee 0.29% 0.28% 0.30% 67 Loan servicing income, net was $1.6 billion, which compares to $0.6 billion for the same period in 2021.
Loan servicing income, net For the periods presented, loan servicing income, net consisted of the following: Year Ended December 31, ($ in thousands) 2023 2022 2021 Retained servicing fee $ 1,350,595 $ 1,416,488 $ 1,292,031 Subservicing income 9,446 9,066 9,389 Ancillary income 41,739 33,083 24,518 Servicing fee income 1,401,780 1,458,637 1,325,938 Change in valuation model inputs or assumptions 37,570 1,279,945 510,869 Change in fair value of MSR hedge (8,563) (68,998) (23,396) Collection/realization of cash flows (729,989) (1,025,911) (1,176,905) Change in fair value of MSRs (700,982) 185,036 (689,432) Loan servicing income, net $ 700,798 $ 1,643,673 $ 636,506 December 31, ($ in thousands) 2023 2022 2021 MSR UPB of loans serviced $ 468,237,971 $ 486,540,840 $ 485,087,214 Number of MSR loans serviced 2,357,209 2,412,117 2,384,150 UPB of loans subserviced and temporarily serviced $ 40,867,450 $ 48,163,762 $ 66,779,210 Number of loans subserviced and temporarily serviced 99,938 122,380 180,900 Total serviced UPB $ 509,105,421 $ 534,704,602 $ 551,866,424 Total loans serviced 2,457,147 2,534,497 2,565,050 MSR fair value $ 6,439,787 $ 6,946,940 $ 5,385,613 Total serviced delinquency count (60+) as % of total 1.23% 1.20% 1.60% Weighted average credit score 733 736 738 Weighted average LTV 71.40% 71.08% 70.57% Weighted average loan rate 3.74% 3.40% 3.17% Weighted average service fee 0.28% 0.29% 0.28% Loan servicing income, net was $0.7 billion, a decrease of $0.9 billion, or 57%, which compares to $1.6 billion for the same period in 2022.
If the bank determines that the value of the collateral has decreased, the bank can require us to provide additional collateral or reduce the amount outstanding with respect to those loans (e.g., initiate a margin call).
If the bank determines that the value of the collateral has decreased, the bank can require us to provide additional collateral or reduce the amount outstanding with respect to those loans (e.g., initiate a margin call). Our inability or unwillingness to satisfy the request could result in the termination of the facilities and possible default under our other funding facilities.
We will also deploy cash to self-fund loan originations, a portion of which can be transferred to a warehouse line or the early buy out line, provided that such loans meet the eligibility criteria to be placed on such lines. The remaining portion will be funded in normal course over a short period of time, generally less than 45 days.
We will also deploy cash to self-fund loan originations, a portion of which can be transferred to a mortgage loan funding facility or the early buy out line, provided that such loans meet the eligibility criteria to be placed on such lines.
A breach of these covenants can result in an event of default under these facilities and as such allows the lenders to pursue certain remedies.
A breach of these covenants can result in an event of default under these facilities and as such allows the lenders to pursue certain remedies. In addition, some of these facilities include cross default or cross acceleration provisions that could result in some facilities terminating if an event of default or acceleration of maturity occurs.
We also generated $59.3 million of Adjusted EBITDA, which was a decrease of $6.1 billion, or 99.0%, compared to $6.2 billion for the same period in 2021. See “Non-GAAP Financial Measures” below for more information on Adjusted EBITDA.
Our Net Loss was $390.1 million, compared to a Net Income of $699.9 million for the same period in 2022. We also generated $67.2 million of Adjusted EBITDA, which was an increase of $7.9 million, or 13.3%, compared to $59.3 million for the same period in 2022. See “Non-GAAP Financial Measures” below for more information on Adjusted EBITDA.
The amount owed and outstanding on our loan funding facilities fluctuates significantly based on our origination volume, the amount of time it takes us to sell the loans it originates, and the amount of loans being self-funded with cash.
In addition, a large unanticipated margin call could have a material adverse effect on our liquidity. The amount owed and outstanding on our funding facilities fluctuates significantly based on our origination volume, the amount of time it takes us to sell the loans we originate, and the amount of loans being self-funded with cash.
The decrease in Contribution Margin was driven primarily by a decrease in sold loan volume and sold loan gain on sale margin. 70 Partner Network Results Year Ended December 31, ($ in thousands) 2022 2021 2020 Sold Loan Volume $ 60,498,569 $ 138,802,940 $ 106,530,173 Sold Loan Gain on Sale Margin 1.05 % 1.20 % 2.19 % Revenue Gain on sale 540,234 1,597,569 2,986,418 Interest income 125,034 161,256 111,876 Interest expense on funding facilities (59,818) (99,226) (83,628) Other income 33,163 105,976 165,699 Total Revenue, net $ 638,613 $ 1,765,575 $ 3,180,365 (Increase) decrease in MSRs due to valuation assumptions (net of hedges) — — — Adjusted Revenue $ 638,613 $ 1,765,575 $ 3,180,365 Less: Directly Attributable Expenses 362,317 686,296 537,543 Total Contribution Margin $ 276,296 $ 1,079,279 $ 2,642,822 Year ending December 31, 2022 summary Partner Network Adjusted Revenue decreased $1.1 billion, or 63.8% to $638.6 million in 2022 from $1.8 billion in 2021.
The decrease in contribution margin was driven primarily by lower gain on sale revenue, offset by a reduction in directly attributable expenses and the above referenced difference in the Change in fair value of MSRs year over year. 65 Partner Network Results Year Ended December 31, ($ in thousands) 2023 2022 2021 Sold Loan Volume $ 34,892,877 $ 60,498,569 $ 138,802,940 Sold Loan Gain on Sale Margin 1.05 % 1.05 % 1.20 % Revenue Gain on sale 371,392 540,234 1,597,569 Interest income 145,351 125,034 161,256 Interest expense on funding facilities (91,793) (59,818) (99,226) Other income 13,902 33,163 105,976 Total Revenue, net $ 438,852 $ 638,613 $ 1,765,575 Change in fair value of MSRs due to valuation assumptions, net of hedges — — — Adjusted Revenue $ 438,852 $ 638,613 $ 1,765,575 Less: Directly attributable expenses 240,402 362,317 686,296 Total Contribution Margin $ 198,450 $ 276,296 $ 1,079,279 Year ending December 31, 2023 summary Partner Network Adjusted Revenue was $438.9 million, a decrease of $199.8 million, or 31%, as compared to $638.6 million for the same period in 2022.
Historically, our primary uses of funds have included: 71 • origination of loans; • interest expense; • repayment of debt; • operating expenses; and • distributions to RHI including those to fund distributions for payment of taxes by RHI shareholders. We are also subject to contingencies which may have a significant impact on the use of our cash.
Historically, our primary uses of funds have included: • origination of loans; 66 • interest expense; • repayment of debt; • operating expenses; • acquisition of mortgage servicing rights; and • distributions to RHI including those to fund distributions for payment of taxes by RHI shareholders.
The change in valuation model inputs or assumptions was a $1.3 billion increase in 2022, as compared to a $510.9 million increase in 2021, predominately due to lower prepayment speed assumptions, which was due to the increase in mortgage interest rates.
The Change in valuation model inputs or assumptions was a $37.6 million increase in 2023, as compared to a $1.3 billion increase in 2022, due to relatively flat mortgage interest rates during 2023 as compared to rising interest rates 62 throughout 2022.
The following summarizes key performance indicators of the business: Year Ended December 31, (Units and $ in thousands) 2022 2021 2020 Rocket Mortgage(1) Loan Production Data Closed loan origination volume $ 133,129,283 $ 351,193,352 $ 320,208,777 Direct to Consumer origination volume $ 78,641,022 $ 199,894,693 $ 200,543,558 Partner Network origination volume $ 54,488,261 $ 151,298,659 $ 119,665,219 Gain on sale margin(2) 2.82 % 3.13 % 4.46 % Servicing Portfolio Data Total serviced UPB (includes subserviced) $ 534,704,602 $ 551,866,424 $ 409,552,743 MSRs UPB of loans serviced $ 486,540,840 $ 485,087,214 $ 371,494,905 UPB of loans subserviced and temporarily serviced 48,163,762 66,779,210 38,057,838 Total loans serviced (includes subserviced) 2,534.5 2,565.1 2,059.2 Number of MSRs loans serviced 2,412.1 2,384.2 1,975.6 Number of loans subserviced and temporarily serviced 122.4 180.9 83.6 MSR fair value multiple(3) 4.98 3.91 2.53 Total serviced delinquency rate, excluding loans in forbearance (60+) 0.88 % 0.94 % 0.84 % Total serviced MSR delinquency rate (60+) 1.20 % 1.60 % 3.91 % Net client retention rate(4) 95 % 91 % 91 % Select Other Rocket Companies Amrock gross revenue(5) $ 504,270 $ 1,393,174 $ 1,251,381 Amrock closings 344.0 1,115.1 1,040.1 Rocket Homes gross revenue(5) $ 52,796 $ 57,559 $ 45,628 Rocket Homes real estate transactions 32.7 33.1 27.4 Rockethomes.com average unique monthly visitors(6) 2,053.3 1,829.7 568.5 Rocket Loans gross revenue(5) $ 68,828 $ 95,442 $ 393,879 Rocket Loans closed units 28.2 17.4 9.1 Rock Connections gross revenue(5) $ 108,652 $ 68,783 $ 90,196 Total Select Other Rocket Companies gross revenue $ 734,546 $ 1,614,958 $ 1,781,084 Total Select Other Rocket Companies net revenue(7) $ 619,272 $ 1,543,023 $ 1,694,719 (1) Rocket Mortgage origination volume and gain on sale margins exclude all reverse mortgage activity.
The following summarizes key performance indicators of the business: Year Ended December 31, (Units and $ in thousands) 2023 2022 2021 Rocket Mortgage Loan Production Data Closed loan origination volume $ 78,711,994 $ 133,129,283 $ 351,193,352 Direct to Consumer origination volume $ 43,763,278 $ 78,641,022 $ 199,894,693 Partner Network origination volume $ 34,948,716 $ 54,488,261 $ 151,298,659 Gain on sale margin(1) 2.63 % 2.82 % 3.13 % Refinance market share(2) 12.1 % 11.0 % 10.8 % Purchase market share(2) 3.7 % 3.2 % 3.3 % Servicing Portfolio Data Total serviced UPB (includes subserviced) $ 509,105,421 $ 534,704,602 $ 551,866,424 MSRs UPB of loans serviced $ 468,237,971 $ 486,540,840 $ 485,087,214 UPB of loans subserviced and temporarily serviced $ 40,867,450 $ 48,163,762 $ 66,779,210 Total loans serviced (includes subserviced) 2,457.1 2,534.5 2,565.1 Number of MSRs loans serviced 2,357.2 2,412.1 2,384.2 Number of loans subserviced and temporarily serviced 99.9 122.4 180.9 MSR fair value multiple(3) 4.94 4.98 3.91 Total serviced MSR delinquency rate (60+) 1.23 % 1.20 % 1.60 % Net client retention rate(4) 97 % 95 % 91 % Select Other Rocket Companies Amrock gross revenue(5) $ 244,224 $ 504,270 $ 1,393,174 Amrock closings 161.8 344.0 1,115.1 Rocket Homes gross revenue(5) $ 53,155 $ 52,796 $ 57,559 Rocket Homes real estate transactions 25.3 32.7 33.1 Rockethomes.com average unique monthly visitors(6) 1,498.1 2,053.3 1,829.7 Rocket Loans gross revenue(5) $ 62,305 $ 68,828 $ 95,442 Rocket Loans closed units 39.2 28.2 17.4 Total Select Other Rocket Companies gross revenue $ 359,684 $ 625,894 $ 1,546,175 Total Select Other Rocket Companies net revenue(7) $ 351,766 $ 617,434 $ 1,537,714 (1) Gain on sale margin is calculated by dividing Gain on sale of loans, net by the net rate lock volume for the period.
We have returned $409.3 million to shareholders in aggregate under the $1 billion Share Repurchase Program which was renewed in November 2022. Special Dividends On February 25, 2021, our board of directors authorized and declared a cash dividend (the "2021 Special Dividend") of $1.11 per share to the holders of our Class A common stock.
Special Dividends On February 25, 2021, our board of directors authorized and declared a cash dividend (the “2021 Special Dividend”) of $1.11 per share to the holders of our Class A common stock.
This graph assumes an initial investment of $100 on August 6, 2020 and reflects the cumulative total return on that investment, including the reinvestment of all dividends where applicable, through December 31, 2021. The comparisons in this graph are required by the SEC and are not intended to forecast or be indicative of possible future performance of our common stock.
This graph covers the period of the initial listing of our stock on August 6, 2020 to year ended December 31, 2023. This graph assumes an initial investment of $100 on August 6, 2020 and reflects the 47 cumulative total return on that investment, including the reinvestment of all dividends where applicable, through December 31, 2023.
Executive Summary We are a Detroit-based fintech holding company consisting of tech-driven mortgage, real estate and financial services businesses - including Rocket Mortgage, Rocket Homes, Rocket Loans and Rocket Money (formerly known as Truebill). We 54 are committed to providing an industry-leading client experience powered by our simple, fast and trusted digital solutions.
Executive Summary We are a Detroit-based fintech company including mortgage, real estate and personal finance businesses. We are committed to providing an industry-leading client experience powered by our simple, fast and trusted digital solutions. In addition to Rocket Mortgage, the nation’s largest retail mortgage lender, we have expanded into complementary industries, such as real estate services and personal finance.
Year ending December 31, 2022 summary Direct to Consumer Adjusted Revenue decreased $6.5 billion, or 64.6% to $3.6 billion in 2022 from $10.1 billion in 2021. The decrease was driven by a decrease in sold loan volume and sold loan gain on sale margin, resulting in decreased gain on sale revenue of $6.3 billion, or 70.9%.
Year ending December 31, 2023 summary Direct to Consumer Adjusted Revenue was $3.0 billion, a decrease of $608.8 million, or 17% from $3.6 billion in 2022. Gain on sale revenue decreased $913.9 million, or 36%. The decrease in gain on sale revenue was driven by a decrease in net rate lock volume from reduced mortgage demand.
Other expenses were $293.2 million, a decrease of $415.8 million, or 58.6%, associated with a decrease in title revenue at Amrock.
Other expenses were $251.9 million, a decrease of $41.3 million, or 14%, associated with a decrease in title related expenses at Amrock.
The decrease was primarily due to a reduction in sold loan volume of $208.1 billion, or 59.0%, to $144.6 billion in 2022 from $352.7 billion in 2021.
The Fair value of originated MSRs was $1.1 billion, a decrease of $0.9 billion or 45%, as compared with $2.0 billion in 2022. The decrease was primarily due to a reduction in sold loan volume in 2023 to $78.5 billion, a decrease of $66.1 billion, or 46%, from $144.6 billion in 2022.

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Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeHigher interest rates also generally reduce demand for purchase mortgages as home ownership becomes more expensive. The refinance market is generally subject to more significant fluctuations than the purchase market as a result of interest rate changes.
Biggest changeAs a result of the interest rate hikes in the federal funds rate implemented by the Federal Reserve in both 2022 and 2023, refinancing has consisted of a smaller portion of the market as fewer consumers are interested in refinancing their mortgages. Higher interest rates have also reduced demand for purchase mortgages as home ownership has become more expensive.
If any of this information was intentionally or negligently misrepresented and such misrepresentation was not detected prior to the acquisition or closing of the loan, the value of the loan could be significantly lower than expected, resulting in a loan being approved in circumstances where it would not have been, had we been approved if provided with accurate data.
If any of this information was intentionally or negligently misrepresented and such misrepresentation was not detected prior to the acquisition or closing of the loan, the value of the loan could be significantly lower than expected, resulting in a loan being approved in circumstances where it would not have been had we been provided with accurate data.
Additionally, the interpretation of such data protection and privacy laws is rapidly evolving, making implementation and enforcement, and thus compliance requirements, ambiguous, uncertain, and potentially inconsistent. Although we make reasonable efforts to comply with all applicable data protection laws and regulations, our interpretations and such measures may have been or may prove to be insufficient or incorrect.
Additionally, the interpretation of data protection and privacy laws is rapidly evolving, making implementation and enforcement, and thus compliance requirements, ambiguous, uncertain, and potentially inconsistent. Although we make reasonable efforts to comply with all applicable data protection laws and regulations, our interpretations and such measures may have been or may prove to be insufficient or incorrect.
These provisions include: • having a dual class common stock structure, which provides RHI with the ability to control the outcome of matters requiring stockholder approval, even if it beneficially owns significantly less than a majority of the shares of our outstanding common stock; • having a classified board of directors; • providing that, when the RHI Affiliated Entities and permitted transferees (collectively, the “RHI Parties”) beneficially own less than a majority of the combined voting power of the common stock, a director may only be removed with cause by the affirmative vote of 75% of the combined voting power of our common stock; • providing that, when the RHI Parties beneficially own less than a majority of the combined voting power of our common stock, vacancies on our board of directors, whether resulting from an increase in the number of directors or the death, removal or resignation of a director, will be filled only by our board of directors and not by stockholders; • providing that, when the RHI Parties beneficially own less than a majority of the combined voting power of our common stock, certain amendments to our certificate of incorporation or amendments to our bylaws will require the approval of 75% of the combined voting power of our common stock; • prohibiting stockholders from calling a special meeting of stockholders; • authorizing stockholders to act by written consent only until the RHI Parties cease to beneficially own a majority of the combined voting power of our common stock; • establishing advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted on by stockholders at stockholder meetings; • authorizing “blank check” preferred stock, the terms and issuance of which can be determined by our board of directors without any need for action by stockholders; and • providing that the decision to transfer our corporate headquarters outside of Detroit, Michigan will require the approval of 75% of the combined voting power of our common stock.
These provisions include: • having a dual class common stock structure, which provides RHI with the ability to control the outcome of matters requiring stockholder approval, even if it beneficially owns significantly less than a majority of the shares of our outstanding common stock; • having a classified board of directors; • providing that, when the RHI Affiliated Entities and permitted transferees (collectively, the “RHI Parties”) beneficially own less than a majority of the combined voting power of the common stock, a director may only be removed with cause by the affirmative vote of 75% of the combined voting power of our common stock; • providing that, when the RHI Parties beneficially own less than a majority of the combined voting power of our common stock, vacancies on our board of directors, whether resulting from an increase in the number of directors or the death, removal or resignation of a director, will be filled only by our board of directors and not by stockholders; • providing that, when the RHI Parties beneficially own less than a majority of the combined voting power of our common stock, certain amendments to our certificate of incorporation or amendments to our bylaws will require the approval of 75% of the combined voting power of our common stock; • prohibiting stockholders from calling a special meeting of stockholders; • authorizing stockholders to act by written consent only until the RHI Parties cease to beneficially own a majority of the combined voting power of our common stock; • establishing advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted on by stockholders at stockholder meetings; 41 • authorizing “blank check” preferred stock, the terms and issuance of which can be determined by our board of directors without any need for action by stockholders; and • providing that the decision to transfer our corporate headquarters outside of Detroit, Michigan will require the approval of 75% of the combined voting power of our common stock.
Our certificate of incorporation provides that, to the fullest extent permitted by applicable law, we renounce our right to certain business opportunities, and that each RHI party has no duty to communicate or offer such business opportunity to us and is not liable to us or any of our stockholders for breach of any fiduciary or other duty under statutory or common law, as a director, officer or controlling stockholder, or otherwise, by reason of the fact that any such individual pursues or acquires such business opportunity, directs such business opportunity to another person or fails to present such business opportunity, or information regarding such business opportunity, to us.
Our certificate of incorporation provides that, to the 39 fullest extent permitted by applicable law, we renounce our right to certain business opportunities, and that each RHI Party has no duty to communicate or offer such business opportunity to us and is not liable to us or any of our stockholders for breach of any fiduciary or other duty under statutory or common law, as a director, officer or controlling stockholder, or otherwise, by reason of the fact that any such individual pursues or acquires such business opportunity, directs such business opportunity to another person or fails to present such business opportunity, or information regarding such business opportunity, to us.
Additional risks related to our loan funding facilities include: • limitations imposed on us under the indentures governing our 2.875% Senior Notes due 2026, 3.625% Senior Notes due 2029, 3.875% Senior Notes due 2031, and our 4.000% Senior Notes due 2033 and other existing and future financing facilities that contain restrictive covenants and borrowing conditions that may limit our ability to raise additional debt; • a decline in liquidity in the credit markets; • prevailing interest rates; • the financial strength of the lenders from whom we borrow; • the decision of lenders from whom we borrow to reduce their exposure to mortgage loans and MSRs due to a change in such lenders’ strategic plan, future lines of business or otherwise; • the amount of eligible collateral pledged on advance facilities, which may be less than the borrowing capacity of the facility; • the larger portion of our loan funding facilities that is uncommitted, versus committed; • more stringent financial covenants in such refinanced facilities, which we may not be able to achieve; and • accounting changes that impact calculations of covenants in our debt agreements.
Additional risks related to our loan funding facilities include: • limitations imposed on us under the indentures governing our 2.875% Senior Notes due 2026, 3.625% Senior Notes due 2029, 3.875% Senior Notes due 2031, and our 4.000% Senior Notes due 2033 and other existing and future financing facilities that contain restrictive covenants and borrowing conditions that may limit our ability to raise additional debt; • a decline in liquidity in the credit markets; • prevailing interest rates; • the financial strength of the lenders from whom we borrow; • the decision of lenders from whom we borrow to reduce their exposure to mortgage loans and MSRs due to a change in such lenders’ strategic plan, future lines of business, regulatory restrictions or otherwise; • the amount of eligible collateral pledged on advance facilities, which may be less than the borrowing capacity of the facility; • the larger portion of our loan funding facilities that is uncommitted, versus committed; • more stringent financial covenants in such refinanced facilities, which we may not be able to achieve; and • accounting changes that impact calculations of covenants in our debt agreements.
We are parties to a Tax Receivable Agreement with RHI and Dan Gilbert that provides for the payment by us to RHI and Dan Gilbert (or their transferees of Holdings Units or other assignees) of 90% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually realize (computed using simplifying assumptions to address the impact of state and local taxes) as a result of: (i) certain increases in our allocable share of the tax basis in Holdings’ assets resulting from (a) the purchases of Holdings Units (along with the corresponding shares of our Class D common stock or Class C common stock) from RHI and Dan Gilbert (or their transferees of Holdings Units or other assignees) using the net proceeds from our initial public offering or in any future offering, (b) exchanges by RHI and Dan Gilbert (or their transferees of Holdings Units or other assignees) of Holdings Units (along with the corresponding shares of our Class D common stock or Class C common stock) for cash or shares of our Class B common stock or Class A common stock, as applicable, or (c) payments under the Tax Receivable Agreement; (ii) tax benefits related to imputed interest deemed arising as a result of payments made under the Tax Receivable Agreement; and (iii) disproportionate allocations (if any) of tax benefits to Holdings as a result of section 704(c) of the Internal Revenue Code of 1986, as amended (the “Code”) 44 that relate to the reorganization transactions.
We are parties to a Tax Receivable Agreement with RHI and Dan Gilbert that provides for the payment by us to RHI and Dan Gilbert (or their transferees of Holdings Units or other assignees) of 90% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually realize (computed using simplifying assumptions to address the impact of state and local taxes) as a result of: (i) certain increases in our allocable share of the tax basis in Holdings’ assets resulting from (a) the purchases of Holdings Units (along with the corresponding shares of our Class D common stock or Class C common stock) from RHI and Dan Gilbert (or their transferees of Holdings Units or other assignees) using the net proceeds from our initial public offering or in any future offering, (b) exchanges by RHI and Dan Gilbert (or their transferees of Holdings Units or other assignees) of Holdings Units (along with the corresponding shares of our Class D common stock or Class C common stock) for cash or shares of our Class B common stock or Class A common stock, as applicable, or (c) payments under the Tax Receivable Agreement; (ii) tax benefits related to imputed interest deemed arising as a result of payments made under the Tax Receivable Agreement; and (iii) disproportionate allocations (if any) of tax benefits to Holdings as a result of section 704(c) of the Internal Revenue Code of 1986, as amended that relate to the reorganization transactions.
We may not have sufficient protection or recovery plans in certain circumstances, such as natural disasters affecting the Detroit, Phoenix, Cleveland or Charlotte areas, and our business interruption insurance may be insufficient to compensate us for losses that may occur. Our risk management efforts may not be effective at mitigating potential losses resulting in increased costs or business disruption.
We may not have sufficient protection or recovery plans in certain circumstances, such as natural disasters affecting the Detroit, Phoenix, Cleveland or Charlotte areas, and our business interruption insurance may be insufficient to compensate us for losses that may occur. 21 Our risk management efforts may not be effective at mitigating potential losses resulting in increased costs or business disruption.
The laws and regulations governing insurance companies continue to evolve and vary by state, adding uncertainty and complexity to compliance. Financial conditions and claim management practices are subject to 34 regulator examinations and high scrutiny. Departures from compliance, sound underwriting practices or adequate reserves for unknown claims could result in fines, enforcement actions or loss of authority to insure.
The laws and regulations governing insurance companies continue to evolve and vary by state, adding uncertainty and complexity to compliance. Financial conditions and claim management practices are subject to regulator examinations and high scrutiny. Departures from compliance, sound underwriting practices or adequate reserves for unknown claims could result in fines, enforcement actions or loss of authority to insure.
The DOJ, through its use of a disparate impact theory under the FHA, is attempting to hold home loan lenders responsible for the pricing practices of brokers, alleging that the lender is 40 directly responsible for the total fees and charges paid by the borrower even if the lender neither dictated what the broker could charge nor kept the money for its own account.
The DOJ, through its use of a disparate impact theory under the FHA, is attempting to hold home loan lenders responsible for the pricing practices of brokers, alleging that the lender is directly responsible for the total fees and charges paid by the borrower even if the lender neither dictated what the broker could charge nor kept the money for its own account.
If we are not successful in recapturing our existing loans that are refinanced, our MSRs may become increasingly subject to run‑off, and in order to maintain our servicing portfolios at consistent levels we may need to purchase additional MSRs on the open market to add to our servicing portfolio, which could increase our costs and risks and decrease the profitability of our servicing business.
If we are not successful in recapturing our existing loans that are refinanced, our MSRs may become increasingly subject to run-off, and in order to maintain our servicing portfolios at consistent levels we may need to purchase 16 additional MSRs on the open market to add to our servicing portfolio, which could increase our costs and risks and decrease the profitability of our servicing business.
As a result, RHI is able to control 43 any action requiring the general approval of our stockholders, so long as it owns at least 10% of our issued and outstanding common stock, including the election of our board of directors, the adoption of amendments to our certificate of incorporation and bylaws and the approval of any merger or sale of substantially all of our assets.
As a result, RHI is able to control any action requiring the general approval of our stockholders, so long as it owns at least 10% of our issued and outstanding common stock, including the election of our board of directors, the adoption of amendments to our certificate of incorporation and bylaws and the approval of any merger or sale of substantially all of our assets.
Negative public opinion can result from our actual or alleged conduct in any number of activities, including loan origination, loan servicing, debt collection practices, negative events (e.g., data breaches, executive misconduct, violations of law, etc.) corporate governance and other activities, such as the lawsuits against us.
Negative public opinion can result from our actual or alleged conduct in any number of activities, including loan origination, loan servicing, debt collection practices, negative events (e.g., data breaches, executive misconduct, violations of law, etc.) 20 corporate governance and other activities, such as the lawsuits against us.
A failure to adequately supervise service providers and vendors, including outside foreclosure counsel, may also have these negative results. The laws and regulations applicable to us are subject to administrative or judicial interpretation, but some of these laws and regulations have been enacted only recently and may not yet have been interpreted or may be interpreted infrequently.
A failure to adequately supervise service providers and vendors, including outside foreclosure counsel, may also have these negative results. 30 The laws and regulations applicable to us are subject to administrative or judicial interpretation, but some of these laws and regulations have been enacted only recently and may not yet have been interpreted or may be interpreted infrequently.
Further, after we initially report the expected tax characterization of distributions we have paid, the actual characterization, which is not 48 determined with finality until after the end of the tax year in which the distribution occurs, could vary from our expectation with the result that holders of our common stock could incur different income tax liabilities than initially expected.
Further, after we initially report the expected tax characterization of distributions we have paid, the actual characterization, which is not determined with finality until after the end of the tax year in which the distribution occurs, could vary from our expectation with the result that holders of our common stock could incur different income tax liabilities than initially expected.
These regulations could hinder the underwriter’s and the agent’s ability to promptly adapt to changing market dynamics through price adjustments, which could adversely affect operations, particularly in a rapidly declining market. ATIC is also subject to regulations and reporting requirements imposed by the National Association of Insurance Commissioners (“NAIC”).
These regulations could hinder the underwriter’s and the agent’s ability to promptly adapt to changing market dynamics through price adjustments, which could adversely affect operations, particularly in a rapidly declining market. ATIC is also subject to regulations and reporting requirements imposed by the National Association of Insurance Commissioners.
If in the future a state agency were to determine that we are required to obtain additional licenses in that state in order to transact business, or if we lose an existing license or are otherwise found to be in violation of a law or regulation, our business operations in that state may be suspended until we obtain the license or otherwise remedy the compliance issue.
If in the future a state agency were to determine that we are required to obtain additional licenses in that state in order to transact business, or if we lose an existing license or are 34 otherwise found to be in violation of a law or regulation, our business operations in that state may be suspended until we obtain the license or otherwise remedy the compliance issue.
These developments have previously limited and are expected to limit our ability to target our marketing efforts, and any additional loss of such signals in the future may adversely affect our targeting capabilities and our marketing efforts. We also rely on app marketplaces to connect users with our apps.
These developments have previously limited and are expected to further limit our ability to target our marketing efforts, and any additional loss of such signals in the future may adversely affect our targeting capabilities and our marketing efforts. We also rely on app marketplaces to connect users with our apps.
Uncertainty remains regarding the future of the GSEs, including with respect to the duration of conservatorship, the extent of their roles in the market and what forms they will have, and whether they will be government agencies, government-sponsored agencies or private for-profit entities. In September 2021, FHFA and the U.S.
Uncertainty remains regarding the future of the GSEs, including with respect to the duration of conservatorship, the extent of their roles in the market and what forms they will have, and whether they will be government agencies, government- sponsored agencies or private for-profit entities. 25 In September 2021, FHFA and the U.S.
For violations of the TCPA, the law provides for a private right of action under which a plaintiff may recover monetary damages of $500 for each call or text made in violation of the prohibitions on calls made using an “artificial or pre‑recorded voice” or an automatic telephone dialing system (“ATDS”).
For violations of the TCPA, the law provides for a private right of action under which a plaintiff may recover monetary damages of $500 for each call or text made in violation of the prohibitions on calls made using an “artificial or pre-recorded voice” or an automatic telephone dialing system.
If a mortgage loan or MSR does not comply with the representations and warranties that we made with respect to it at the time of its sale, we could be required to repurchase the loan or MSR, replace 17 it with a substitute loan or MSR and/or indemnify secondary market purchasers for applicable losses.
If a mortgage loan or MSR does not comply with the representations and warranties that we made with respect to it at the time of its sale, we could be required to repurchase the loan or MSR, replace it with a substitute loan or MSR and/or indemnify secondary market purchasers for applicable losses.
There can be no assurance that future tax law changes will not increase the rate of the corporate income tax significantly, impose new limitations on deductions, credits or other tax benefits, or make other changes that may adversely affect our business, cash flows or financial performance.
There can be no assurance 35 that future tax law changes will not increase the rate of the corporate income tax significantly, impose new limitations on deductions, credits or other tax benefits, or make other changes that may adversely affect our business, cash flows or financial performance.
A loan subject to a material misrepresentation is typically unsalable or subject to repurchase if it is sold before detection of the misrepresentation. In addition, the persons and entities making a 18 misrepresentation are often difficult to locate and it is often difficult to collect from them any monetary losses we have suffered.
A loan subject to a material misrepresentation is typically unsalable or subject to repurchase if it is sold before detection of the misrepresentation. In addition, the persons and entities making a misrepresentation are often difficult to locate and it is often difficult to collect from them any monetary losses we have suffered.
Rocket Homes’ core business is the referral of homebuyers, who have been prequalified for a mortgage by Rocket Mortgage or another lender, to a network of third party partner real estate agents that assist those homebuyers in the purchase of their new home.
Rocket Homes’ core business is the referral of homebuyers, who have been prequalified for a mortgage by Rocket Mortgage or another lender, to a network of third-party real estate agents that assist those homebuyers in the purchase of their new home.
We recognize the inherent risks related to weather and the climate wherever our business is conducted. Our primary locations may be vulnerable to extreme weather conditions which may disrupt our business and may cause us to experience additional costs to maintain or resume operations and higher attrition.
Further, we recognize the inherent risks related to weather and the climate wherever our business is conducted. Our primary locations may be vulnerable to extreme weather conditions which may disrupt our business and may cause us to experience additional costs to maintain or resume operations and higher attrition.
Title insurance rates are regulated differently in various states, with most states requiring ATIC to file and receive approval of rates before such rates become effective to be utilized by title agents. Other states set promulgated rates controlling the title insurance rates that can be charged.
Title insurance rates are regulated 31 differently in various states, with most states requiring ATIC to file and receive approval of rates before such rates become effective to be utilized by title agents. Other states set promulgated rates controlling the title insurance rates that can be charged.
A material weakness in our internal control over financial reporting could adversely impact our ability to provide timely and accurate financial information. If we are unable to report financial information timely and accurately or to maintain effective disclosure controls and procedures, we could adversely affect our business prospects.
A material weakness in our internal control over financial reporting could adversely impact our ability to provide timely and accurate financial information. If we are unable to report financial 43 information timely and accurately or to maintain effective disclosure controls and procedures, we could adversely affect our business prospects.
Furthermore, attempts to enforce our intellectual property rights against third parties could also provoke these third parties to assert their own intellectual property or other rights against us, or result in a holding that invalidates or narrows the scope of our rights, in whole or in part.
Furthermore, attempts to enforce our intellectual property rights against third parties could also provoke these third parties to assert their own intellectual property or other rights against us, or result in a holding that invalidates or narrows the scope of 37 our rights, in whole or in part.
We could make payments to RHI and Dan Gilbert under the Tax Receivable Agreement that are greater than our actual cash tax savings and may not be able to recoup those payments, which could negatively impact our liquidity.
We could make payments to 40 RHI and Dan Gilbert under the Tax Receivable Agreement that are greater than our actual cash tax savings and may not be able to recoup those payments, which could negatively impact our liquidity.
Furthermore, the existence of the foregoing provisions, as well as the significant Class A common stock beneficially owned by RHI, could limit the price that investors 46 might be willing to pay in the future for shares of our Class A common stock.
Furthermore, the existence of the foregoing provisions, as well as the significant Class A common stock beneficially owned by RHI, could limit the price that investors might be willing to pay in the future for shares of our Class A common stock.
Third party misuse of our intellectual property in attempts to defraud our clients and others are often difficult to identify and costly to enforce against. Our failure to adequately address these third parties could result in 41 material harm to our reputation.
Third-party misuse of our intellectual property in attempts to defraud our clients and others are often difficult to identify and costly to enforce against. Our failure to adequately address these third parties could result in material harm to our reputation.
Risks Relating to Technology and Cybersecurity The success and growth of our business, results of operations, financial condition and liquidity will depend upon our ability to adapt to and implement technological changes to meet our business needs and the changing demands of the market and our clients.
Risks Relating to Technology and Cybersecurity The success and growth of our business, results of operations, and financial condition will depend upon our ability to adapt to and implement technological changes to meet our business needs and the changing demands of the market and our clients.
These claims could also result in litigation, require us to purchase a costly license or require us to devote additional research and development resources to change our software, any of which could adversely affect our business.
These claims could also 13 result in litigation, require us to purchase a costly license or require us to devote additional research and development resources to change our software, any of which could adversely affect our business.
We cannot ensure that we are in full compliance, and will always remain in full compliance with all licensing laws and regulations, and we may be subject to 38 fines or penalties, including license revocation, for any non‑compliance.
We cannot ensure that we are in full compliance, and will always remain in full compliance with all licensing laws and regulations, and we may be subject to fines or penalties, including license revocation, for any non-compliance.
It is possible that the 28 adoption of any such proposals might lead to higher fees being charged by the GSEs and/or lower prices on our sales of mortgage loans to them.
It is possible that the adoption of any such proposals might lead to higher fees being charged by the GSEs and/or lower prices on our sales of mortgage loans to them.
Our hedging strategies also require us to provide cash margin to our hedging counterparties from time to time. The Financial Industry Regulatory Authority, Inc. (“FINRA”) requires us to provide daily cash margin to (or receive daily cash margin from, depending on the daily value of related MBS) our hedging counterparties from time to time.
Our hedging strategies also require us to provide cash margin to our hedging counterparties from time to time. The Financial Industry Regulatory Authority, Inc. requires us to provide daily cash margin to (or receive daily cash margin from, depending on the daily value of related MBS) our hedging counterparties from time to time.
Our failure, and/or the failure by the various third party vendors and service providers with whom we do business, to comply with applicable privacy policies or federal, state or similar international laws and regulations could damage our reputation or the reputation of these businesses, discourage potential users from our products and services and/or result in fines and/or proceedings by governmental agencies and/or consumers, one or all of which could materially and adversely affect our business, financial condition and results of operations.
Our failure, and/or the failure by the various third-party vendors and service providers with whom we do business, to comply with applicable federal, state or similar international laws and regulations could damage our reputation or the reputation of these businesses, discourage potential users from our products and services and/or result in fines and/or proceedings by governmental agencies and/or consumers, one or all of which could materially and adversely affect our business, financial condition and results of operations.
We are subject to laws and regulations regarding our use of telemarketing; a failure to comply with such laws, including the TCPA, could increase our operating costs and adversely impact our business.
We are subject to guidelines, laws and regulations regarding our use of telemarketing; a failure to comply with such laws and guidelines, including the TCPA, could increase our operating costs and adversely impact our business.
In the absence of additional clarification and guidance from the IRS on certain tax 39 matters, the Company will take positions with respect to a number of unsettled issues.
In the absence of additional clarification and guidance from the IRS on certain tax matters, the Company will take positions with respect to a number of unsettled issues.
In addition, the activation of additional U.S. military reservists or members of the National Guard may significantly increase the proportion of mortgage loans whose interest rates are reduced by application of the Service Members Civil Relief Act (the “Relief Act”) or similar state or local laws. As a result, any such attacks or armed conflicts may adversely impact our performance.
In addition, the activation of additional U.S. military reservists or members of the National Guard may significantly increase the proportion of mortgage loans whose interest rates are reduced by application of the Service Members Civil Relief Act or similar state or local laws. As a result, any such attacks or armed conflicts may adversely impact our performance.
But if we do not effectively manage our growth through the deployment of resources including processes, technology and personnel, the quality of our services could suffer, which could negatively affect our brand and operating results. We are required to make servicing advances that can be subject to delays in recovery or may not be recoverable in certain circumstances.
But if we do not effectively manage our growth through the deployment of resources including processes, technology and talent, the quality of our services could suffer, which could negatively affect our brand and operating results. We are required to make servicing advances that can be subject to delays in recovery or may not be recoverable in certain circumstances.
Other of our competitors, such as 23 correspondent lenders who originate mortgage loans using their own funds, may have more operational flexibility in approving loans.
Other of our competitors, such as correspondent lenders who originate mortgage loans using their own funds, may have more operational flexibility in approving loans.
As a result, our loan origination revenues vary from quarter to quarter. Additionally, financial markets have experienced significant volatility as a result of the effects of the COVID-19 pandemic.
As a result, our loan origination revenues vary from quarter to quarter. Additionally, financial markets experienced significant volatility as a result of the effects of the COVID-19 pandemic.
Department of Justice ("DOJ") and CFPB, take the position that these laws apply not only to intentional discrimination, but also to neutral practices that have a disparate impact on a group that shares a characteristic that a creditor may not consider in making credit decisions (i.e., creditor or servicing practices that have a disproportionate negative affect on a protected class of individuals).
Department of Justice (“DOJ”) and CFPB, take the position that these laws apply not only to intentional discrimination, but also to neutral practices that have a disparate impact on a group that shares a characteristic that a creditor may not consider in making credit decisions (i.e., creditor or servicing practices that have a disproportionate negative affect on a protected class of individuals).
In the event that any of our loan funding facilities is terminated or is not renewed, or if the principal amount that may be drawn under our funding agreements that provide for immediate funding at closing were to significantly decrease, we may be unable to find replacement financing on commercially favorable terms, or at all, which could be detrimental to our business.
In the event that any of our loan funding facilities are terminated or are not renewed, or if the principal amount that may be drawn under our funding agreements that provide for immediate funding at closing were to significantly decrease, we may be unable to find replacement financing on commercially favorable terms, or at all, which could be detrimental to our business.
In addition, the GSEs and the FHFA, Ginnie Mae, the FTC, the HUD, various investors, non‑agency securitization trustees, warehouse line providers, and others subject us to periodic reviews and audits. A determination of our failure to comply with applicable law or other relevant requirements could lead to enforcement action, administrative fines and penalties, or other administrative action.
In addition, the GSEs and 33 the FHFA, Ginnie Mae, the FTC, the HUD, various investors, non-agency securitization trustees, warehouse line providers, and others subject us to periodic reviews. A determination of our failure to comply with applicable law or other relevant requirements could lead to enforcement action, administrative fines and penalties, or other administrative action.
Our financial performance has decreased, and may further decrease, or be subject to substantial volatility because of changes in prevailing interest rates. As a result, we are particularly affected by the policies of the U.S. Federal Reserve that influence interest rates and impact the size of the loan origination market. In 2022, the U.S.
Our financial performance has decreased, and may further decrease, or be subject to substantial volatility because of changes in prevailing interest rates. As a result, we are particularly affected by the policies of the U.S. Federal Reserve that influence interest rates and impact the size of the loan origination market. In both 2022 and 2023, the U.S.
Any disruption in service or the loss of the right to use any of the software or services provided to us by third parties could result in decreased functionality of our products or services until equivalent technology is either developed by us or, if available from another provider, is identified, obtained and integrated, which could adversely affect our business.
Any disruption in service or the loss of the right to use any of 18 the software or services provided to us by third parties could result in decreased functionality of our products or services until an equivalent service/technology is either developed by us or, if available from another provider, is identified, obtained, and integrated, which could adversely affect our business.
Our reported financial results may be materially and adversely affected by future changes in accounting principles generally accepted in the United States. U.S. GAAP is subject to standard setting or interpretation by the Financial Accounting Standards Board (“FASB”), the Public Company Accounting Oversight Board (“PCAOB”), the SEC and various bodies formed to promulgate and interpret appropriate accounting principles.
Our reported financial results may be materially and adversely affected by future changes in accounting principles generally accepted in the United States. U.S. GAAP is subject to standard setting or interpretation by the Financial Accounting Standards Board, the Public Company Accounting Oversight Board, the SEC and various bodies formed to promulgate and interpret appropriate accounting principles.
Excessive home building or high foreclosure rates resulting in an oversupply of housing in a particular area may also increase the amount of losses incurred on defaulted mortgage loans. 26 Furthermore, several state and local governments in the United States are experiencing, and may continue to experience, budgetary strain.
Excessive home building or high foreclosure rates resulting in an oversupply of housing in a particular area may also increase the amount of losses incurred on defaulted mortgage loans. Furthermore, 24 several state and local governments in the United States are experiencing, and may continue to experience, budgetary strain.
Our hedging activities in the future may include entering into interest rate swaps, interest rate swaptions, caps and floors, purchasing or selling U.S. Treasury securities, and/or other tools and strategies. These hedging decisions will be determined in light of the facts and circumstances existing at the time and may differ from our current hedging strategies.
Our hedging activities in the future may include entering into interest rate swaps, interest rate swaptions, caps and floors, purchasing or selling U.S. Treasury securities, mortgage options, and/or other tools and strategies. These hedging decisions will be determined in light of the facts and circumstances existing at the time and may differ from our current hedging strategies.
On August 16, 2022, the Inflation Reduction Act of 2022 (the “Inflation Reduction Act”) was enacted, which, among other things, imposed a 15% minimum tax on book income of certain large corporations, a 1% excise tax on net stock repurchases made after December 31, 2022 and several tax incentives to promote clean energy.
On August 16, 2022, the Inflation Reduction Act of 2022 was enacted, which, among other things, imposed a 15% minimum tax on book income of certain large corporations, a 1% excise tax on net stock repurchases made after December 31, 2022 and several tax incentives to promote clean energy.
In addition, our failure to comply with these laws, regulations and rules may result in reduced payments by clients, modification of the original terms of loans, permanent forgiveness of debt, delays in the foreclosure process, increased servicing advances, litigation, enforcement actions, and repurchase and indemnification obligations.
In addition, our failure to comply with these laws, regulations and rules may result in reduced payments by clients, modification of the original terms of loans, permanent forgiveness of debt, delays in the foreclosure process, increased servicing advances, litigation including class actions, enforcement actions, and repurchase and indemnification obligations.
We depend on our ability to sell loans in the secondary market to a limited number of investors and to the GSEs, and to securitize our loans into Mortgage Backed Securities (MBS) through the GSEs and Ginnie Mae. If our ability to sell or securitize mortgage loans is impaired, we may not be able to originate mortgage loans.
We depend on our ability to sell loans in the secondary market to a limited number of investors and to the GSEs, and to securitize our loans into mortgage-backed securities (“MBS”) through the GSEs and Ginnie Mae. If our ability to sell or securitize mortgage loans is impaired, we may not be able to originate mortgage loans.
Amrock Title Insurance Company ("ATIC"), a title insurance underwriter, is heavily regulated by its domiciled state of Texas and by the department of insurance in each state where it holds a certificate of authority to transact title insurance. It is subject to state title insurance statutes and insurance codes as well as federal law.
Amrock Title Insurance Company (“ATIC”), a title insurance underwriter, is heavily regulated by its domiciled state of Texas and by the department of insurance in each state where it holds a certificate of authority to transact title insurance. It is subject to state title insurance statutes and insurance codes as well as federal law.
The markets for our services are characterized by constant technological changes, with frequent introductions of new technology-driven products and services. We rely on our proprietary technology to make our Rocket technology platform available to clients, evaluate loan applicants and service loans.
The markets for our services are characterized by constant technological changes, with frequent introductions of new technology-driven products and services. We rely on our proprietary technology to make our technology available to clients, evaluate loan applicants and service loans.
The federal CRA was enacted as part of several landmark pieces of legislation to address systemic inequities in access to credit, expand financial inclusion, and reverse the impact of decades of redlining in low and moderate-income ("LMI") communities and minority communities.
The federal CRA was enacted as part of several landmark pieces of legislation to address systemic inequities in access to credit, expand financial inclusion, and reverse the impact of decades of redlining in low and moderate-income (“LMI”) communities and minority communities.
We depend, in part, on search engines and other online sources for our website traffic. We are included in search results as a result of both paid search listings, where we purchase specific search terms that will result in the inclusion of our listing, and unpaid or algorithmic searches, which depend upon the searchable content on our sites.
We depend, in part, on search engines and other online sources for our website traffic. We are included in search engine result pages as a result of both paid search listings, where we purchase specific search terms that will result in the inclusion of our listing, and unpaid or algorithmic searches, which depend upon the searchable content on our sites.
If we are unable to continue to grow our loan origination business, this could adversely affect our business. On the other hand, we may experience significant growth in our mortgage loan volume and MSRs.
If we are unable to continue to grow our loan origination business, this could adversely affect our business. On the other hand, we may experience significant growth in our mortgage loan volume and mortgage servicing rights (MSRs).
We are required to follow specific guidelines and eligibility standards that impact the way we service and originate GSE and U.S. government agency loans, including guidelines and standards with respect to: • credit standards for mortgage loans; • our staffing levels and other servicing practices; 27 • the origination, servicing, and ancillary fees that we may charge; • our modification standards and procedures; • the amount of reimbursable and non‑reimbursable advances that we may make; and • the types of loan products that are eligible for sale or securitization.
When servicing or originating GSE and U.S. government agency loans, we are required to follow specific guidelines and eligibility standards that impact the way we service and originate such loans, including guidelines and standards with respect to: credit standards for mortgage loans; our staffing levels and other servicing practices; the origination, servicing, and ancillary fees that we may charge; our modification standards and procedures; the amount of reimbursable and non-reimbursable advances that we may make; and the types of loan products that are eligible for sale or securitization.
Such restrictions, however, do not apply to any business combination between RHI, any direct or indirect equity holder of RHI or any person that acquires (other than in connection with a registered public offering) our voting stock from RHI or any of its affiliates or successors or any “group,” or any member of any such group, to which such persons are a party under Rule 13d-5 of the Exchange Act and who is designated in writing by RHI as an “RHI Transferee,” on the one hand, and us, on the other.
Such restrictions, however, do not apply to any business combination between RHI, any direct or indirect equity holder of RHI or any person that acquires (other than in connection with a registered public offering) our voting stock from RHI or any of its affiliates or successors or any “group,” or any member of any such group, to which such persons are a party under Rule 13d-5 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and who is designated in writing by RHI as an “RHI Transferee,” on the one hand, and us, on the other.
In November 2021, under new leadership, FHFA issued its 2022 Conservatorship Scorecard for the GSEs and Common Securitization Solutions (CSS), reflecting a shift in the regulators' priorities. The Conservatorship Scorecard de-emphasizes exiting the GSEs from conservatorship, de-emphasizes CSS’ potential shift to a market utility, and reiterates the importance of Credit Risk Transfer (CRT).
In November 2021, under new leadership, FHFA issued its 2022 Conservatorship Scorecard for the GSEs and Common Securitization Solutions (“CSS”), reflecting a shift in the regulators' priorities. The Conservatorship Scorecard de-emphasizes exiting the GSEs from conservatorship, de-emphasizes CSS’ potential shift to a market utility, and reiterates the importance of credit risk transfer.
As is standard in the industry, under the terms of our master servicing agreements with the GSEs, the GSEs have the right to terminate us as servicer of the loans we service on their behalf at any time and also have the right to cause us to sell the MSRs to a third party.
As is standard in the industry, under the terms of our master servicing agreements with the Agencies, they have the right to terminate us as servicer of the loans we service on their behalf at any time and also have the right to cause us to sell the MSRs to a third party.
Of the $613.7 million Tax receivable agreement liability recorded, we estimate that, as a result of the amount of the increases in the tax basis in Holdings’ assets from the purchase of Holdings Units (along with the corresponding shares of our Class D common stock) in connection with the initial public offering, the over-allotment option (Greenshoe), and the March 2021 paired interest exchange, assuming no material changes in the relevant tax law and that we will have sufficient taxable income to utilize all of the tax attributes covered by the Tax Receivable Agreement when they are first available to be utilized under applicable law, future payments to RHI and Dan Gilbert under the Tax Receivable Agreement would aggregate to approximately $267.6 million over the next 20 years and for yearly payments over that time to range between zero to $40.0 million per year.
Of the $584.7 million Tax receivable agreement liability recorded, we estimate that, as a result of the amount of the increases in the tax basis in Holdings’ assets from the purchase of Holdings Units (along with the corresponding shares of our Class D common stock) in connection with the initial public offering, the over-allotment option (Greenshoe), and the March 2021 paired interest exchange, assuming no material changes in the relevant tax law and that we will have sufficient taxable income to utilize all of the tax attributes covered by the Tax Receivable Agreement when they are first available to be utilized under applicable law, future payments to RHI and Dan Gilbert under the Tax Receivable Agreement would aggregate to approximately $301.3 million over the next 20 years and for yearly payments over that time to range between zero to $25.0 million per year.
In addition, failure to comply with servicing standards could result in termination of our agreements with the GSEs with little or no notice and without any compensation.
In addition, failure to comply with servicing standards could result in termination of our agreements with the Agencies with little or no notice and without any compensation.
Risks Relating to our Human Capital We may not be able to hire, train and retain qualified personnel to support our growth, and difficulties with hiring, team member training and other labor issues could adversely affect our ability to implement our business objectives and disrupt our operations. Our operations depend on the work of our approximately 18,500 team members.
Risks Relating to our Human Capital We may not be able to hire, train and retain qualified personnel to support our growth, and difficulties with hiring, team member training and other labor issues could adversely affect our ability to implement our business objectives and disrupt our operations. Our operations depend on the work of our approximately 14,700 team members.
A change in these principles or interpretations could also require us to alter our accounting systems in a manner that could increase our operating costs and impact the content of our financial statements. We are subject to various legal actions that if decided adversely, could be detrimental to our business.
A change in these principles or interpretations could also require us to alter our accounting systems in a manner that could increase our operating costs and impact the content of our financial statements. We are subject to various legal actions that if decided adversely, or if viewed unfavorably by the public, could be detrimental to our business.
Currently, there are three states that have CRA legislation: Massachusetts, as well as Illinois (where extensive rulemaking is underway to implement the legislative requirements), and New York, both of which were recently passed in 2021, with other states expected to introduce similar CRA legislation in future legislative sessions.
Currently, there are three states that have CRA legislation: Massachusetts, as well as Illinois (where extensive rulemaking is being finalized to implement the legislative requirements), and New York, both of which were passed in 2021, with other states expected to introduce similar CRA legislation in future legislative sessions.
If we are unable to keep pace with technological change affecting the markets for our services or if we are unable to successfully innovate and continue to deliver a superior client experience, the demand for our products and services may decrease, we may be unable to attract clients and our growth and results of operations may be harmed.
If we are unable to keep pace with technological change affecting the markets for our services or if we are unable to successfully innovate, integrate and adopt new technologies to continue to deliver a superior client experience, the demand for our products and services may decrease, we may be unable to attract clients and our growth and results of operations may be harmed.
As of December 31, 2022, we also had available to us $1.5 billion of financing through a master repurchase agreement facility specialized for the early buy out of certain mortgage loans in agency mortgage pools, and up to $1.0 billion available through a syndicated unsecured revolving credit facility.
As of December 31, 2023, we also had available to us $1.5 billion of financing through a master repurchase agreement facility specialized for the early buy out of certain mortgage loans in agency mortgage pools, and up to $1.3 billion available through a syndicated unsecured revolving credit facility.
Department of Treasury suspended certain provisions added to the Preferred Stock Purchase Agreements (“PSPAs”) with Fannie Mae and Freddie Mac (“Enterprises”) on January 14, 2021. Among other limitations, the suspended provisions previously limited the acquisition of loans with higher risk characteristics, second homes and investment properties, and limited the Enterprises’ cash windows.
Department of Treasury suspended certain provisions added to the Preferred Stock Purchase Agreements (“PSPAs”) with Fannie Mae and Freddie Mac (“Enterprises”). Among other limitations, the suspended provisions previously limited the acquisition of loans with higher risk characteristics, second homes and investment properties, and limited the Enterprises’ cash windows.
Supreme Court confirmed that the “disparate impact” theory applies to cases brought under the FHA, while emphasizing that a causal relationship must be shown between a specific policy of the defendant and a discriminatory result that is not justified by a legitimate, nondiscriminatory business objective of the defendant.
Supreme Court confirmed that the “disparate impact” theory applies to cases brought under the FHA, while emphasizing that a causal relationship must be shown between a specific policy of the defendant and a discriminatory result that is not justified by a legitimate, nondiscriminatory business objective of the defendant. In 2020, the U.S.
We must also comply with a number of federal, state and local consumer protection laws including, among others, TILA, the Real Estate Settlement Procedures Act (“RESPA”), the Fair Credit Reporting Act, ECOA, FHA, the TCPA, the GLBA, the Electronic Fund Transfer Act, the Servicemembers Civil Relief Act (“SCRA”), Military Lending Act, the Homeowners Protection Act (“HPA”), the Home Mortgage Disclosure Act (“HMDA”), the SAFE Act, the Federal Trade Commission Act, the Dodd Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”), U.S. federal and state laws prohibiting unfair, deceptive, or abusive acts or practices, and state foreclosure laws.
We must also comply with a number of federal, state and local consumer protection laws including, among others, TILA, the Real Estate Settlement Procedures Act (“RESPA”), the Fair Credit Reporting Act, Equal Credit Opportunity Act (“ECOA”), FHA, the TCPA, the GLBA, the Electronic Fund Transfer Act, the Servicemembers Civil Relief Act, Military Lending Act, the Homeowners Protection Act, the Home Mortgage Disclosure Act, the SAFE Act, the Federal Trade Commission Act, the Dodd Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”), U.S. federal and state laws prohibiting unfair, deceptive, or abusive acts or practices, and state foreclosure laws.
Delays in the sale of mortgage loans, increased borrowing costs or increased hedge risk also increase our exposure to market risks, which could adversely affect our profitability on sales of loans. Any such delays or failure to sell loans could be materially adverse to our business.
Delays in the sale of mortgage loans, increased borrowing costs or increased hedge risk also increase our exposure to market risks, which could adversely affect our profitability on sales of loans. Any such delays or failure to sell loans could have a materially adverse effect on our business.
We are, and intend in the future to continue, investing significant resources in developing new tools, features, services, products and other offerings, including offerings of mortgage, other lending and financial products including offerings in the solar energy industry.
We are, and intend in the future to continue, investing significant resources in developing new tools, features, services, products and other offerings, including offerings of mortgage, other lending and financial products.
We are reliant on internet search engines and app marketplaces to connect with consumers, and limitations on our ability to obtain new clients through those channels could adversely affect our business. We rely on our ability to attract online consumers to our websites and web centers and convert them into loan applicants and clients in a cost-effective manner.
We are reliant on internet search engines and app marketplaces to connect with consumers, and limitations on our ability to obtain new clients through those channels could adversely affect our business. We rely on our ability to attract online consumers to our websites and mobile applications to then convert them into loan applicants and clients in a cost-effective manner.
In the United States, regulations and interpretations concerning personally identifiable and data security promulgated by state and federal regulators, including, but not limited to, the CFPB, FTC, NYDFS and CPPA (California’s regulatory body authorized to enforce CPRA), could conflict or give rise to differing views of personal privacy rights.
In the United States, regulations and interpretations concerning NPI and data security promulgated by state and federal regulators, including, but not limited to, the CFPB, FTC, NYDFS and CPPA (California’s regulatory body authorized to enforce CPRA), could conflict or give rise to differing views of privacy and security rights around NPI.
During any period in which one of our clients is not making payments on a loan we service, including in certain circumstances where a client prepays a loan, we are required under most of our servicing agreements to advance our own funds to meet contractual principal and interest remittance requirements, pay property taxes and insurance premiums, legal expenses and other protective advances (“payment advances”).
During any period in which one of our clients is not making payments on a loan we service we are required under most of our servicing agreements to advance our own funds to meet contractual principal and interest remittance requirements, pay property taxes and insurance premiums, legal expenses and other protective advances (“payment advances”).
Because accounting rules for valuing certain assets and liabilities are highly complex and involve significant judgment and assumptions, these complexities could lead to a delay in preparation of financial information and the delivery of this information to our stockholders and also increase the risk of errors and restatements, as well as the cost of compliance.
In addition, accounting rules for valuing certain assets and liabilities are highly complex and involve significant judgment and assumptions, which could lead to a delay in preparation of financial information and the delivery of this information to our stockholders and also increase the risk of errors and restatements, as well as the cost of compliance.
These regulations directly impact our business and require ongoing compliance, monitoring and internal and external audits as they continue to evolve, and may result in ever-increasing public scrutiny and escalating levels of enforcement and sanctions.
These laws and any regulations implementing such laws directly impact our business and require ongoing compliance, monitoring and internal and external audits as they continue to evolve and may result in ever-increasing public scrutiny and escalating levels of enforcement and sanctions.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe fair value of IRLCs is derived from the fair value of similar mortgage loans or bonds, which is based on observable market data. Changes to the fair value of IRLCs are recognized based on changes in interest rates, changes in the probability that the commitment will be exercised (pull through factor), and the passage of time.
Biggest changeChanges to the fair value of IRLCs are recognized based on changes in interest rates, changes in the probability that the commitment will be exercised (pull through factor), and the passage of time. The expected net future cash flows related to the associated servicing of the loan are included in the fair value measurement of IRLCs.
Derivative financial instruments We enter into IRLCs, forward commitments to sell mortgage loans, and forward commitments to purchase mortgage loans which are considered derivative financial instruments. Our derivative financial instruments are accounted for as free-standing derivatives and are included in the Consolidated Balance Sheets at fair value.
Derivative financial instruments We enter into IRLCs, forward commitments to sell and purchase mortgage loans, which are considered derivative financial instruments. Our derivative financial instruments are accounted for as free-standing derivatives and are included in the Consolidated Balance Sheets at fair value.
The fair value of loans held for sale that trade in active secondary markets is estimated using Level 2 measurements derived from observable market data, including market prices of securities backed by similar mortgage loans adjusted for certain factors to approximate the fair value of a whole mortgage loan, including the value attributable to mortgage servicing and credit risk.
The fair value of loans held for sale that trade in active secondary markets is estimated using Level 2 measurements derived from observable market data, including market prices of securities backed by similar mortgage loans adjusted for certain 70 factors to approximate the fair value of a whole mortgage loan, including the value attributable to mortgage servicing and credit risk.
These disputes over interpretations with the various tax authorities may be settled by audit, administrative appeals or adjudication in the court systems of the tax jurisdictions in which the Company operates. We regularly review whether we may be assessed additional income taxes as a 77 result of the resolution of these matters, and the Company records additional reserves as appropriate.
These disputes over interpretations with the various tax authorities may be settled by audit, administrative appeals or adjudication in the court systems of the tax jurisdictions in which the Company operates. We regularly review whether we may be assessed additional income taxes as a result of the resolution of these matters, and the Company records additional reserves as appropriate.
Changes in fair value of mortgage loans held for sale are included in gain on sale of loans in the Consolidated Statements of Income and Comprehensive Income. Changes in economic or other relevant conditions could cause our assumptions with respect to market prices of securities backed by similar mortgage loans to be different than our estimates.
Changes in fair value of mortgage loans held for sale are included in gain on sale of loans in the Consolidated Statements of Income (Loss) and Comprehensive Income (Loss). Changes in economic or other relevant conditions could cause our assumptions with respect to market prices of securities backed by similar mortgage loans to be different than our estimates.
With our financing facilities, we seek to mitigate this risk by ensuring that we have sufficient borrowing capacity with a variety of well-established counterparties to meet its funding needs. Critical Accounting Policies The preparation of financial statements in conformity with U.S.
With our financing facilities, we seek to mitigate this risk by ensuring that we have sufficient borrowing capacity with a variety of well-established counterparties to meet our funding needs. Critical Accounting Policies The preparation of financial statements in conformity with U.S.
We expect that the changes in fair value of the forward commitments will either substantially or partially offset the changes in fair value of the IRLCs, uncommitted mortgage loans held for sale, and MSR assets that we intend to sell.
We expect that the changes in fair value of the forward commitments will either substantially or partially offset the 71 changes in fair value of the IRLCs, uncommitted mortgage loans held for sale, and MSR assets that we intend to sell.
Loans held for sale for which there is little to no observable trading activity of similar instruments are valued using Level 3 measurements based upon dealer price quotations which typically results in credit spreads (i.e., purchase price discounts).
Loans held for sale for which there is little to no observable trading activity of similar instruments are valued using Level 3 measurements based upon dealer price quotations and internal models which typically results in credit spreads (i.e., purchase price discounts).
These activities generally involve an exchange of obligations with unaffiliated banks or companies, referred to in such transactions as “counterparties.” If a counterparty were to default, we could potentially be exposed to financial loss if such counterparty were unable to meet its obligations to us.
These financing and risk hedging activities generally involve an exchange of obligations with unaffiliated banks or companies, referred to in such transactions as “counterparties.” If a financing or risk hedging counterparty were to default, we could potentially be exposed to financial loss if such counterparty were unable to meet its obligations to us.
Because substantially all of our production is deliverable to Fannie Mae, Freddie Mac, and Ginnie Mae, we utilize forward agency or Ginnie Mae To Be Announced (“TBA”) securities as our primary hedge instrument to mitigate the basis risk associated with U.S. Treasury futures, Eurodollar futures or other non-mortgage instruments.
Because substantially all of our production is deliverable to Fannie Mae, Freddie Mac, and Ginnie Mae, we utilize forward agency or Ginnie Mae To Be Announced (“TBA”) securities as our primary hedge instrument, along with U.S. Treasury futures, and other non-mortgage hedging instruments, to mitigate basis risk.
We record interest and penalties related to uncertain income tax positions in income tax expense. 78
We record interest and penalties related to uncertain income tax positions in income tax expense. 72
In a declining interest rate environment, the fair value of MSRs generally decreases as prepayments increase and therefore the estimated life of the MSRs and related cash flows decrease.
In periods of rising interest rates, the fair value of the MSRs generally increases as prepayments decrease, and therefore the estimated life of the MSRs and related expected cash flows increase. In a declining interest rate environment, the fair value of MSRs generally decreases as prepayments increase and therefore the estimated life of the MSRs and related cash flows decrease.
For the years ended December 31, 2022, our clients’ weighted average credit score was 733 and its approximate average loan size was $283 wit h a weighted average loan-to-value ratio of approximately 72.3%. Counterparty risk We are subject to risk that arises from our financing facilities and interest rate risk hedging activities.
For the year ended December 31, 2023, our clients’ weighted average credit score was 733 and its approximate average loan size was $270,000 wit h a weighted average loan-to-value ratio of approximately 74.9%. Counterparty risk We are subject to risk that arises from our financing facilities and interest rate risk hedging activities.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk In the normal course of business, we are subject to a variety of risks which can affect our operations and profitability.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk In the normal course of business, we are subject to a variety of risks which can affect our operations and profitability. We broadly define these areas of risk as interest rate risk, credit risk, and counterparty risk.
Fair value is determined on a monthly basis using a valuation model that calculates the present value of estimated future net servicing fee income. The model uses estimates of prepayment speeds, discount rate, cost to service, escrow account earnings, contractual servicing fee income, and ancillary income and late fees, among others.
Fair value is determined on a monthly basis using a valuation model that calculates the present value of estimated future net servicing fee income. The model uses estimates of prepayment speeds, discount rate, cost to service, escrow account earnings, contractual servicing fee income, among others. These estimates are supported by market and economic data collected from various outside sources.
Interest rate risk also occurs in periods where changes in short-term interest rates result in mortgage loans being originated with terms that provide a smaller interest rate spread above the financing terms of our loan funding facilities, which can negatively impact our net interest income.
Interest rate risk also occurs in periods where changes in short-term interest rates result in mortgage loans being originated with terms that provide a smaller interest rate spread above the financing terms of our loan funding facilities, which can negatively impact our net interest income. 69 Credit risk We are subject to credit risk, which is the risk of default that results from a borrower’s inability or unwillingness to make contractually required mortgage payments.
Increases in prepayment speeds generally have an adverse effect on the value of MSRs as the underlying loans prepay faster, which causes accelerated MSR amortization. Increases in the discount rate result in a lower 76 MSR value and decreases in the discount rate result in a higher MSR value.
The key assumptions used to estimate the fair value of MSRs are prepayment speeds and the discount rate. Increases in prepayment speeds generally have an adverse effect on the value of MSRs as the underlying loans prepay faster, which causes accelerated MSR amortization.
We incurred no losses due to nonperformance by any of our cou nterparties during the years ended December 31, 2022 and 2021. Also, in the case of our financing facilities, we are subject to risk if the counterparty chooses not to renew a borrowing agreement and we are unable to obtain financing to originate mortgage loans.
Also, in the case of our financing facilities, we are subject to risk if the counterparty chooses not to renew a borrowing agreement and we are unable to obtain financing to originate mortgage loans.
Credit risk We are subject to credit risk, which is the risk of default that results from a borrower’s inability or unwillingness to make contractually required mortgage payments. Generally, all loans sold into the secondary market are sold without recourse. For such loans, our credit risk is limited to repurchase obligations due to fraud or origination defects.
Generally, all loans sold into the secondary market are sold without recourse. For such loans, our credit risk is limited to repurchase obligations due to fraud or origination defects.
We broadly define these areas of risk as interest rate, credit risk, counterparty risk, and risk related to the COVID-19 pandemic. 74 Interest rate risk We are subject to interest rate risk which may impact our origination volume and associated revenue, MSR valuations, IRLCs and mortgage loans held for sale valuations, and the net interest margin derived from our funding facilities.
Interest rate risk We are subject to interest rate risk which may impact our origination volume and associated revenue, MSR valuations, IRLCs and mortgage loans held for sale valuations, and the net interest margin derived from our funding facilities. The fair value of MSRs are driven primarily by interest rates, which impact the likelihood of loan prepayments and refinancing.
These estimates are supported by market and economic data collected from various outside sources. On a quarterly basis we obtain an independent third-party valuation to corroborate the value estimated by our internal model. All of our MSRs are classified as a Level 3 asset.
On a quarterly basis we obtain an independent third-party valuation to corroborate the value estimated by our internal model. All of our MSRs are classified as a Level 3 asset. Changes in economic and other relevant conditions could cause our assumptions, such as with respect to the prepayment speeds, to be different than our estimates.
In accordance with Treasury Market Practices Group’s recommendation, we execute Securities Industry and Financial Markets Association trading agreements with all material trading partners. Each such agreement provides for an exchange of margin money sh ould either party’s exposure exceed a predetermined contractual limit. Such margin requirements limit our overall counterparty exposure.
Each such agreement provides for an exchange of margin money sh ould either party’s exposure exceed a predetermined contractual limit. Such margin requirements limit our overall counterparty exposure.
Changes in the fair value of the IRLCs and forward commitments to sell mortgage loans derivative instruments are recognized in current period earnings and are included in gain on sale of loans in the consolidated statements of income and comprehensive income.
Changes in the fair value of the IRLCs are recognized in gain on sale of loans, net and salaries and commission expense in the Consolidated Statements of Income (Loss) and Comprehensive Income (Loss).
The master netting agreements contain a legal right to offset amounts due to and from the same counterparty. Derivative assets in the Consolidated Balance Sheets represent derivative contracts in a gain position net 75 of loss positions with the same counterparty and, therefore, also represent our maximum counterparty credit risk.
Derivative assets in the Consolidated Balance Sheets represent derivative contracts in a gain position net of loss positions with the same counterparty and, therefore, also represent our maximum counterparty credit risk. We incurred no losses due to nonperformance by any of our cou nterparties during the years ended December 31, 2023 and 2022.
The expected net future cash flows related to the associated servicing of the loan are included in the fair value measurement of IRLCs. Given the unobservable nature of the pull through factor, IRLCs are classified as Level 3.
Given the unobservable nature of the pull through factor, IRLCs are classified as Level 3.
We manage this risk by selecting only counterparties that we believe to be financially strong, spreading the risk among many such counterparties, placing contractual limits on the amount of unsecured credit extended to any single counterparty, and entering into netting agreements with the counterparties as appropriate.
We manage this risk by selecting only counterparties that we believe to be financially strong, spreading the risk among many such counterparties, and entering into netting agreements with the counterparties as appropriate. In accordance with Treasury Market Practices Group’s recommendation, we execute Securities Industry and Financial Markets Association trading agreements with all material trading partners.
Forward commitments to purchase mortgage loans are recognized in current period earnings and are included as a component of servicing fee income. Commitments to fund residential mortgage loans with our potential borrowers are commitment agreements to lend funds to these potential borrowers at a specified interest rate within a specified period of time.
Commitments to fund residential mortgage loans with our potential borrowers are commitment agreements to lend funds to these potential borrowers at a specified interest rate within a specified period of time. The fair value of IRLCs is derived from the fair value of similar mortgage loans or bonds, which is based on observable market data.
Removed
The fair value of MSRs are driven primarily by interest rates, which impact the likelihood of loan prepayments and refinancing. In periods of rising interest rates, the fair value of the MSRs generally increases as prepayments decrease, and therefore the estimated life of the MSRs and related expected cash flows increase.
Added
To the extent that we have a master netting agreement in place with a counterparty, such master netting agreement contains a legal right to offset amounts due to and from the same counterparty, further mitigating counterparty exposure.
Removed
Changes in economic and other relevant conditions could cause our assumptions, such as with respect to the prepayment speeds, to be different than our estimates. The key assumptions used to estimate the fair value of MSRs are prepayment speeds and the discount rate.
Added
Increases in the discount rate result in a lower MSR value and decreases in the discount rate result in a higher MSR value.
Added
The cash flows related to forward commitments to sell and purchase mortgage loans are included within the gain on sale of loans and the change in fair value of MSRs in the Consolidated Statement of Cash Flows.

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