Rocket Mortgage, the founder of the country’s second-largest mortgage, announced Monday that it will purchase Cooper, the industry’s largest mortgage payments collector.
The $9.4 billion transaction reflects a challenging market for mortgage lenders in general, and Rocket in particular. As mortgage rates reached a height of 3% during the pandemic, from 8% in 2023, lenders have reduced lenders’ businesses.
Furthermore, the Rocket abandoned what was once commander. A few years after being the national leader in loan volume, he fell behind United wholesale mortgages in 2023, according to data from the Home Mortgage Disclosure Act.
The merger will be zero in the post-closure process where you collect monthly mortgage payments, track escrows, and work with borrowers in need of relief.
“This seems like a play to dramatically increase mortgage service rights,” says Guy Cecala, publisher of Inside Mortgage Finance, an industry trade publication. “History shows that to become a huge servicer, you have to make a massive acquisition.”
What does merger mean for mortgage borrowers?
It’s difficult to say. The US housing finance industry remains fragmented, with dozens of big players and hundreds of small players. In 2023, the most recent full year when data is available, Rocket Mortgage generated 5.08% of all mortgages, with Cooper’s market share of 0.5%. The combined companies do not significantly narrow consumer choices as consumers shop for loans.
“The mortgage market, especially on the originating side, is very fragmented,” Sekara says. “There are still many options.”
Some of the transactional mortgage services add wrinkles. When the two companies’ service portfolios are combined, they will collect “one for six American mortgages” payments, Rocket said in a news release.
The borrower says little about who will handle the rights to the service. When the loan closes, most lenders sell their services to another company, sometimes another lender. Cooper was the largest servicer in the United States.
Will the mortgage process be easier?
Rocket’s latest deal follows another major acquisition to buy Redfin, a discount real estate broker. Lenders are leaning towards one-stop shopping. It was called an “end-to-end homeownership experience” in a news release. The idea is that home buyers will be represented by Redfin agents to retrieve the mortgage from the rocket and provide services to the loan.
However, it should be noted that this concept has been in and out of style for decades without gaining traction.
“No one has made it successful despite the attempt,” Sekara says.
