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Paper losses on its mortgage servicing rights portfolio pushed Rocket Companies into the red during the final quarter of 2023, but the lending giant put a positive spin on its Q4 and 2023 results saying it’s racked up three consecutive quarters of positive adjusted earnings in a difficult market.
Rocket reported a $233 million fourth quarter net loss Thursday, driven largely by paper writedowns in the value of the company’s $509 billion mortgage servicing rights portfolio. Q4 revenue was up 44 percent from a year ago, to $694 million, and the company trimmed expenses by 5 percent, to $937 million.
For the full year, Rocket racked up a $493 million net loss as revenue dried up faster than the company could trim expenses. While 2023 revenue declined by 35 percent, to $3.8 billion, Rocket trimmed full-year expenses by 18 percent, to $4.2 billion.
At the end of the year, Rocket was collecting payments on 2.5 million mortgages on behalf of investors, a mortgage servicing rights portfolio that generates about $1.4 billion of recurring servicing fee income a year, the company said.
As is the case with many mortgage lenders who also service loans, Rocket executives say adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) are a better metric of performance.
The decline in interest rates at the end of 2023 prompted Rocket to write down the fair value of its mortgage servicing rights portfolio by $358 million in the fourth quarter, in part because falling rates make borrowers more likely to refinance and end up with another loan servicer.
Rocket achieved adjusted EBITDA profitability of $55 million for Q4 and $67 million for 2023, allowing CEO Varun Krishna…