After the refi boom, can Quicken keep rocketing higher?

DETROIT (Reuters) - Quicken Loans Inc, once an obscure online mortgage player, seized on the refinancing boom to become the nation’s third largest mortgage lender, behind only Wells Fargo & Co and JPMorgan Chase & Co.

Dan Gilbert, Chairman of Rock Ventures and Founder Chairman of Quicken Loans, listens to a question from the audience, during a panel discussion at Techonomy Detroit held at Wayne State University in Detroit, Michigan, U.S. September 17, 2013. REUTERS/Rebecca Cook/File Photo

Now, with the refi market saturated, Quicken faces a pivotal challenge – convincing home buyers to trust that emotional transaction to a website instead of the banker next door.

The mortgage market is shifting to purchases, and borrowers rarely turn to online-only lenders for that type of mortgage. That raises the question of whether Quicken’s meteoric rise was a fluke of timing and historically low interest rates, or whether the company has truly disrupted an entrenched local culture of handshake real estate deals.

Quicken will still have to convince the likes of Jeff Chen, a 28-year-old software engineer from San Francisco. Chen is quite comfortable conducting business online – except when it came to buying his first home.

“I never really wanted to get a mortgage solely online – I still wanted to speak to somebody,” he said. “It gives me the warm fuzzies.”

Quicken is working hard to build its purchase mortgage business through a new tool called Rocket Mortgage. News last month that Quicken founder Dan Gilbert is trying to buy Yahoo Inc also suggests it wants to boost its brand with digital marketing and consumer data.

“The central question of the Quicken story is, how much and how quickly can they convert what they’ve done to purchase-money transactions,” said Michael Drayne, a senior vice president at Ginnie Mae, a U.S. government-owned mortgage company.


Quicken may also need the support of realtors, who have a tendency to shoo away online lenders in favor of local bankers.

Realtors are forbidden from getting paid for such referrals. The dynamic has more to do with their comfort in handling problems that arise during the complex process of closing a mortgage.

Realtors often tell clients that the potential savings or convenience of online mortgage shopping aren’t worth the risk of losing the home, said Erin Lantz, vice president of mortgages at Zillow, a real estate web site.

Unlike rivals with branches across the country, Quicken does not have an extensive network of bankers in the field to develop business relationships with realtors.

Online lender loanDepot recently acquired branch-based lenders imortgage and Mortgage Master for just that reason, according to loanDepot Chief Financial Officer Bryan Sullivan.

“It is still a relationship business,” he said. “They’re feet on the street.”

Quicken spokesman Jordan Fylonenko rejected the notion that the company needs to rely on realtor referrals. It has spent heavily to familiarize borrowers with its brand, he said, and gets positive reviews from its customers.

Its business is nonetheless still tilted heavily toward refinancing, a simpler transaction where borrowers don’t have to fear losing out on their dream home. Quicken’s chief economist, Bob Walters, told Reuters that 25 to 35 percent of its mortgages are used for home purchases. The company declined to give a more specific figure.

Walters’ range compares with 56 percent at Wells Fargo, 48 percent at JPMorgan Chase and 34 percent at LoanDepot, according to 2015 data from Inside Mortgage Finance.

As a private company, Quicken is not required to disclose such metrics, Fylonenko said, and recent data would be “distorted” by Quicken’s outsized role in refinancing.

Quicken executives say the company ranks among the top five in market share of home purchase mortgages, though its first-quarter ranking by Inside Mortgage Finance puts it at No. 8.

The trade publication had to come up with its own estimate because Quicken is the only major mortgage lender that does not provide figures on how much of its business is refinancing versus home purchases, according to Inside Mortgage Finance CEO Guy Cecala.


The housing meltdown of the last decade prompted the Federal Reserve to push rates to historic lows – which catapulted Quicken to new highs. It also got a boost from federal programs that steered business to Quicken when refinancing demand overwhelmed the mortgage market.

Many lenders couldn’t keep up after the Obama administration launched its Home Affordable Refinance Program in 2009. The program intended to put the brakes on the foreclosure crisis by helping underwater borrowers - those who owe more than their properties are worth - stay in their homes.

Fannie Mae, the mortgage finance company that is mostly taxpayer-owned, approached Quicken for assistance. “Quicken stepped up and addressed needs in the market,” Fannie spokeswoman Callie Dosberg said. As recently as 2008, Quicken ranked No. 23 in mortgage market share, but it has since elbowed aside lenders including SunTrust Banks Inc and Bank of America Corp as it moved into the No. 3 position.

For a graphic on Quicken's market share, see:

In an April interview, Berkshire Hathaway Inc Chairman Warren Buffett attributed Quicken’s success to its bootstrapping culture, driven by Gilbert’s tendency to seize on opportunities like the one presented by Fannie Mae.

Reuters reported last month that Buffett is backing Gilbert’s bid to buy Yahoo. The 85-year-old billionaire has been friends with Gilbert since meeting at a conference some years ago. He said he was impressed by Quicken’s financial performance and how it motivates a large, young staff in what is effectively a call center.

“They have people that are enthused about coming to work every day, and when you have people doing fairly routine jobs, and they come excited about doing them, that can accomplish a lot,” Buffett said in an interview.


Quicken is relying on Rocket Mortgage, a platform it launched in February, to lure more homebuyers. The lender devoted more than three years and 500 of its 15,000 employees to developing Rocket, which it calls the first tool to allow borrowers to complete an entire mortgage approval online.

An applicant enters his Social Security number and the address of the property. Rocket Mortgage then pulls a credit report, verifies income, assets, employment and other data, and either approves the loan or not.

Although Quicken has bankers available to answer questions, few customers call them, Fylonenko said: “Most do not ever speak with a human being.”

Quicken closed $2 billion in mortgages through Rocket in the first 140 days of its launch, two-thirds of which were for home purchases, he added.

Rocket will also add to Quicken’s trove of information on existing and potential customers. Quicken executives are obsessed with data, in part because the company has to work harder to find leads than its big bank rivals, whose credit cards, checking accounts and ATMs are already woven into the fabric of customers’ lives.

By analyzing factors like age or a home’s distance from a borrower’s job, Quicken says it can predict behavior. The company is close to being able to accurately predict on Jan. 1 whether a borrower will buy a home that year, Gilbert said. That may explain why he is interested in Yahoo.

A Yahoo acquisition would give Quicken a bounty of information about consumer online search habits, according to analysts who have studied the company and its evolving role in the mortgage market. Yahoo’s email program and its search engine - with a homepage that is still one of the most visited on the Internet - could also provide a huge branding platform, they said.

“I’m not sure how it will play out,” said Cecala, “but it certainly opens the door for them to move into new frontiers.”

Reporting by Dan Freed in Detroit; Editing by Lauren Tara LaCapra and Brian Thevenot