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(Bloomberg) – Rocket Companies Inc., one of the nation’s largest mortgage lenders, announced a 277% increase in quarterly profits, marking a record year as the mortgage specialist participated in the U.S. housing rally.
The company posted adjusted revenue that exceeded estimates. And with a tenfold increase in net income last year to $ 9.4 billion, Rocket declared a special dividend of $ 1.11 per share, according to a statement released Thursday. Shares jumped 7.8% to $ 21.46 late in the day.
“We have been successful in driving growth in all segments of our business,” Jay Farner, CEO of Rocket, said in the release.
The pandemic real estate boom gave a major boost to the mortgage industry, which saw record lending volumes and profits in 2020 as rates fell to historically low levels. Much of this was thanks to the Federal Reserve, which kept a cap on borrowing costs and bought mortgage bonds as part of its attempt to stimulate the economy.
But profitability may have peaked. Rocket said a 4.41% profit margin on new loans last quarter, well above the company’s November estimate of 3.8% to 4.1%. He told investors Thursday to expect margins on new loans this quarter to be around 3.6% to 3.9%.
Mortgage lenders have warned investors in recent weeks that profitability will not increase this year. UWM Holdings Corp., the parent company of United Wholesale Mortgage, said profit on new loans this quarter could fall by a third from the fourth quarter of last year.
Mr. Cooper Group Inc., meanwhile, said this week that its gains on mortgage sales – lenders typically sell the loans they originate from – will be roughly flat this quarter.
Read more: In a flash, US yields hit 1.6%, wreaking havoc across all markets
Mortgage rates in the United States rose this week to their highest level in six months, threatening to quell the mortgage recovery. And with rising Treasury yields, borrowing costs could continue to rise.
This could deter more Americans from looking to refinance their debt, while soaring home prices put home ownership out of reach for many.
Mortgage applications fell to a nine-month low last week, while pending home sales last month fell to a six-month low.
(Updates the share price.)
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