Rocket Mortgage Acquires Mr. Cooper to Create an Industry Giant 

How’s this for a rocket-like trajectory?

As the ink dries on its agreement earlier this month to buy RedFin for $1.75 billion, lender Rocket Mortgage announced on Monday the next item in its M&A shopping spree: a $9.4 billion takeover of mortgage servicing giant Mr. Cooper.

Cooper D’etat

Rocket’s dual acquisitions give the company a stake in three major sections of the home-buying market. First: browse and shop for a new home on RedFin, the digital platform home to more than 1 million for-sale and for-rent listings. Second: Obtain a mortgage loan via Rocket, which ended 2024 as the third-largest originator of mortgages in the US behind PennyMac and United Wholesale Mortgages. And third: Service that loan through Mr. Cooper. 

Combined, Rocket and Mr. Cooper will service a $2.1 trillion loan book across some 10 million clients. They’ll also create a business that should, theoretically, naturally balance itself out no matter the ebbs and flows of interest rates:

• Periods of high interest rates tend to be relatively tough for originators like Rocket, which keeps few loans on its books, as fewer customers buy homes or refinance their existing mortgages. Conversely, high rates tend to be good times for servicers like Mr. Cooper, as existing borrowers tend to keep their current mortgage rather than refinance.
• Low rates, meanwhile, mark good times for originators like Rocket, sparking a surge in new and refinanced mortgages, which in turn disrupts the extended payments that servicers enjoy in the high-rate environment. These days, mortgage rates remain pretty high: While down from the 8% seen in late 2023, the average 30-year fixed mortgage rate was still 6.79% on Monday, according to Zillow.

Consolidation Prize: As home buying slows to a crawl — existing home sales last year fell to their lowest level since 1995 — the mortgage industry has shrunk and consolidated. Only 145 lenders originated at least $2 billion in mortgages last year, compared with 196 in 2022, Garth Graham, a senior partner at mortgage advisory firm Stratmor Group, told The Wall Street Journal. Whether that’s been good or bad for home buyers is a bit of an open question, but Rocket — likely to face at least some antitrust scrutiny as it completes both the RedFin and Mr. Cooper acquisitions this year — swears its bigger business will be good for clients, saving potentially as much as $20,000 in fees in the process of buying a typical $430,000 home.