Updated: May 28, 2021
We have big news out of Detroit this week as Quicken Loans submitted their SEC Filing looking for an IPO as Rocket Companies. I had a chance to briefly skim through the S-1 (if you can muscle through more than just a few pages… hat’s off to you) and I just can’t help but sit back in awe of what they have accomplished to this point. I know I shouldn’t be gushing over a competitor, but they are impressive. HousingWire published an excellent article explaining why this IPO is important to the mortgage industry… the one thing that stood out to me was what type of loans are sitting in their servicing portfolio. It’s like announcing a heavyweight fighter…
[In your best Michael Buffer Voice]
“Standing in the red corner… averaging a loan amount of $277,000; LTV’s of 73% and a staggering average FICO of 747… hailing from Detroittttt, Michigannnn… America’s Largest Online Lenderrrrr…. Rocket Companies Servicing Porttttfoliooooo”
The kicker about that portfolio though is the weighted average rate is 3.5% and I’m not sure if you’ve been paying attention or not, but mortgage rates are in the 2s right now. They can refinance that entire portfolio any time they want, BUT you have to think what the true value of that servicing asset will be if they decide to “Push Button. Get Mortgage”. The pandemic decimated the value of servicing portfolios across the country and I don’t think we’re going to see those values return anytime soon.
Okay. Enough about Big Red… let’s keep talking about refi’s… they aren’t going anywhere soon. Black Knight came out with a report on Monday stating that 75% of current homeowners have mortgage rates above 3.5% and have approximately $6.5 trillion dollars of untapped equity in their homes. Let me repeat my comment from earlier… refi’s are not going anywhere soon and while I’m all for “making hay while the sun is shining” refi’s cannot be your life blood. There is a timer ticking on this refi boom, so don’t forget to keep stoking the flame with your realtor relationships. Purchases will never go away… however a neglected realtor will leave you faster than a toupee in a hurricane. Yes. Inventory is tight. It’s been that way these past few years, but demand is surging and there are people buying homes. Don’t lose sight of that!
Alright, I know my headline teaser has you fixated on Kanye West’s affordable housing plan, as last weekend Yeezy announced he’d be running for President. It seems the rap mogul has turned in his MAGA hat and plans on campaigning for a solid 5 months to make some waves in the 2020 election. I mean… is it serious? Who knows? It’s 2020 and anything can happen nowadays. I was however fixated on an article I stumbled across regarding the Star Wars type low-cost housing models he’s building in his backyard. Unfortunately, in California you need building permits to… build… homes… soooo the prototypes were destroyed to avoid a hefty fine. Look I give him credit for thinking about inventive ways to provide affordable housing… unfortunately, just like his bid for the presidency… poor planning.
Stay safe. Stay healthy.
Talk to you soon,