In another move to adapt to the prospect of rising interest rates, Rocket Companies is acquiring personal finance app Truebill in a $1.275 billion deal that could give Rocket an edge in marketing real estate services, mortgages and other loans to Truebill’s 2.5 million members.
Truebill helps consumers manage subscriptions, budgeting and spending. The acquisition provides “a new organic growth opportunity and a significant channel to nurture clients,” Rocket company said.
The data that Truebill collects about clients who have linked their bank accounts to the app will help Rocket know when to market mortgages, auto loans and personal loans to them, said Rocket Cos. CEO Jay Farner.
Only about one in four Truebill clients are homeowners, Farner told Yahoo Finance Live, so there’s a big opportunity to market purchase mortgages to renters when they’re ready to buy a home.
Jay Farner
Rocket Cos. talks to “millions of people a year,” Farner said, but “the vast majority … aren’t ready to transact yet. So how do we assist them, how do we stay engaged with those clients? Well, Truebill answers that question, right?”
Rocket Cos. — the holding company for Rocket Mortgage, Rocket Homes, Amrock and Rocket Auto — saw third quarter net income fall 53 percent from a year ago, as rising mortgage rates cut into its highly profitable mortgage refinancing business.
In a bid to do more business with homebuyers taking out purchase mortgages, Rocket has been strengthening its ties to real estate agents and independent mortgage brokers who are well connected into local markets, and making its mortgage technology available to banks and credit unions. In August, Rocket Homes announced that it was hiring on-staff real estate agents and launching an iBuyer program.
The Truebill deal could not only help Rocket Mortgage boost its lending and real estate brokerage businesses, but is also expected to provide a steady source of revenue — about $100 million a year — that’s not tied to the cyclical ups and downs of real estate.
For the same reason, Rocket has also been building its mortgage loan servicing portfolio, which now generates $1.3 billion in annual servicing fees. At the end of the third quarter, Rocket was collecting payments on $521 billion in outstanding mortgages, up 30 percent from a year ago.
Despite the potential for the Truebill acquisition to boost Rocket’s bottom line, the company’s share price sagged after the announcement, touching a new all-time low of $14.07. Since going public last year, Rocket’s share price has been volatile, hitting an all-time high of $43 in March.
Yahoo Finance Live host Brian Sozzi said some investors had been expecting that Rocket would offer a special dividend. While those investors may have concluded that Rocket’s acquisition of Truebill means the special dividend is off the table, Farner said that’s not the case.
“We’ve got billions of dollars of cash, and we’re always thinking about the right move to make to reward our shareholders but also grow our company for the long run,” Farner said, noting that Rocket has also been buying its stock back.
Julie Booth
On a third quarter earnings call with investment analysts, Rocket Cos. CFO Julie Booth said the company had increased the pace of those buybacks, repurchasing 5.7 million shares for $94 million through the end of October. That’s on top of a $2.2 billion payout in March the form of a special dividend of $1.11 per Class A common share.
At the time, Booth said Rocket had $5.1 billion in available cash to use for acquisitions, share repurchases and dividend payouts.
“For acquisitions, we look for bolt-on targets that would be additive to our platform by bringing new clients into our ecosystem, enhancing operational efficiencies or enhancing our product offering,” Booth said.
Get Inman’s Extra Credit Newsletter delivered right to your inbox. A weekly roundup of all the biggest news in the world of mortgages and closings delivered every Wednesday. Click here to subscribe.