Rocket Mortgage to Woo Small Credit Unions
Nation’s largest mortgage lender offers to serve as an online originator through a partnership with Q2 Holdings.
Credit unions will soon have the option of allowing Rocket Mortgage to originate loans on their websites through a partnership with Q2 Holdings, an Austin, Texas fintech.
The essential proposition is simple: Credit unions earn fees by allowing Rocket Mortgage to reside on their websites as a mortgage lender to members.
Rocket Mortgage’s presence is enabled by Q2’s online platform, which it calls the Q2 Partner Marketplace Program. The platform is designed to mimic an app store, where financial institutions can evaluate, pick and deploy applications from a catalog of pre-integrated third-party products with no up-front investment.
“Rocket Mortgage is focused on using technology to create certainty and simplicity in the home loan process – one of the most complex transactions most Americans will experience,” Rocket Mortgage CEO Bob Walters said. “In this new partnership with Q2, we are able to help more consumers achieve the American Dream of homeownership – right inside the digital banking platform they already use.”
Jonathan Price, Q2’s EVP for emerging businesses, corporate and business development, said Q2 has already been reaching out to credit unions in advance of the program’s launch in early October.
Price said Q2 will be targeting institutions where the credit union either has no mortgage presence, or it is a small part of its asset base. He said a rule-of-thumb would be mortgages as less than 15% of assets.
As of March 31, 3,383 of the nation’s 5,007 credit unions tracked by the NCUA had balance sheets where first mortgages accounted for less than 15% of assets.
They held $57.8 billion in first mortgages, or 10% of their assets. Among all credit unions, first mortgages accounted for 23% of assets.
If those 3,383 credit unions were to increase their first mortgages to 23% of assets, it would represent an increase of $77.1 billion.
That’s real money even for Rocket Mortgage, which was the nation’s largest first-mortgage lender last year, with $322 billion in first-mortgage originations, up 5.7% from 2020, according to data from the Home Mortgage Disclosure Act (HMDA).
Rocket Mortgage moved its headquarters to downtown Detroit in 2010 and launched its online mortgage lending program in 2015. Since then, it has blasted its way to the top.
Rocket Mortgage, a part of Rocket Companies, has also become a familiar product to couch potatoes from coast to coast through its television ads. During the 2022 Super Bowl, it depicted a young buyer using a Rocket Mortgage phone app to win a vicious bidding war for Barbie’s dream house. A more recent spot sets home buying in a family reunion.
Sam Schey, Rocket Mortgage’s EVP of strategic partnerships, said the familiarity and trust of the brand is one benefit of the partnership.
For credit unions, he said the partnership offers a manageable way to offer mortgages, which called part of the table stakes for any retail financial institution.
In order to sell mortgages in a way that pleases members, things like turn times and pull-through rates become critical. And some members don’t just want the easy conforming loans, they want FHA and VA loans that require a high level of originating expertise.
“They feel an obligation to secure their zero-cost or low-cost deposit base by offering mortgages as a product,” Schey said. “Most credit unions are losing money through the origination phase, and they rationalize that by the asset created on the other end.”
Rocket Mortgage is the originator of the mortgages, but it can sell them to the credit union or sell the credit union a diversified collection of mortgage-backed securities.
“We can offer diversity in assets versus your current geographic footprint by exposing you to a national base,” he said. “We have as deep a capital markets department as you are going to find in this industry.”
Rocket Mortgage does not hold any mortgages, instead selling them to Fannie Mae, Freddie Mac and Ginnie Mae.
However, it retains service rights. And through Q2, members are able to log into Q2 digital banking and see their balance and contact Rocket Mortgage, if necessary.
Credit unions with larger mortgage portfolios might benefit by lowering the cost of scaling up and scaling down to meet swings in demands for refinancings, Price said.
Rocket Mortgage has service level agreements with its clients to ensure members are treated well. And credit unions don’t have to worry their members will become cross-selling marketing targets, Schey said.
“When we interact with financial service companies, we start from a place of protecting your client, meaning the data is walled off from the rest of Rocket,” Schey said.