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Jay Farner, Vice Chairman and CEO of Rocket Companies, joins Yahoo Finance to discuss Rocket Comapnies recent earnings report.
EMILY MCORMICK: Rocket Companies posted quarterly sales and profits that topped estimates yesterday as a still hot housing market helped fuel results for the largest mortgage lender in the US. Jay Farner, vice chairman and CEO of Rocket Companies, joins us now. Jay, thank you so much for being here this morning. And taking a look at Rocket Mortgage specifically, that part of the company has seen some major growth in closed loan origination volume. I saw that was up nearly 120% compared to the same quarter in 2019. What are you seeing that's really been driving this kind of growth?
JAY FARNER: Yeah, this growth is all about our platform, Emily, and the work that we've been doing the last few years to really be able to scale. And so in 2020, we demonstrated we could do that. In 2021, we're calling for another record year. We're pacing to do about $30 billion more in '21 in terms of closed loan volume than we did in 2020. And we're also talking about making sure that in 2022, we actually cross over 10% market share. So the scale, the client experience, the brand, and of course, our team members, all those things together, have allowed for exceptional growth these last few years.
BRIAN SOZZI: Jay, why is there disconnect? I look at these results, another quarter of very large numbers in many areas. But the stock hasn't reacted accordingly. What's the market missing here?
JAY FARNER: Yeah, you know, we are an interesting player in the market when you think about the Rocket platform. Of course, we're the largest mortgage lender here in the country. We're setting purchase records. Q3 was the largest purchase mortgage volume that we'd ever done. We've got Rocket Auto, which is now pacing to be one of the top 10 used car platforms in the country. We've got Rocket Homes, which is on pace to be in the top 20 of all real estate brokerages in the country. But there's really no one else like us in the industry.
And so I think we're starting to teach the world the difference between our platform and a traditional mortgage lender. And we're going to have to work through that process. But on the positive side, it creates a great buying opportunity for our stock. And as we've talked about for us, buying stock back at these levels is something that we've been doing and will continue to consider because we think it offers a great value. So, I've been here 26 years. We're investing in the long run. We'll keep doing that. And my firm belief is that over time, the stock will demonstrate the real value of the platform.
BRIAN SOZZI: Yeah, Jay, you have $5.1 billion in cash, and you talked a lot about this-- your cash allocation on the call last time. So you're going to-- sounds like you're about to get more aggressive and buy your stock.
JAY FARNER: Yeah, I love the value of the stock at the price that it's currently at. I'm also watching the market closely because as you think about where we've been the last 24 months, especially with fintechs, I think the opportunity to look for acquisitions that could fit in nicely to our platform will present itself as we go into 2022.
So, it's great to be sitting on that level of capital. As you know, we're a very capital light business. We don't require that capital. And so we can use it to buy shares back. We can use it to make key acquisitions. We can use it to do another dividend like we did in the spring of this year. A lot of opportunity here for us to add value to our platform.
EMILY MCORMICK: Jay, we're looking at a higher interest rate environment heading into next year and beyond. How are the different portions of your company going to be impacted by that kind of higher rate environment?
JAY FARNER: Yeah, our mission over the last decade has been to be able to diversify how we acquire our mortgage production. And so we started as a direct to consumer business. We built one of the largest and most recognizable brands, first with Quicken Loans and now Rocket.
But during that period of time, we've also been growing our ability to reach mortgage brokers, real estate agents, financial planners, insurance agents. We recently launched our Salesforce partnership so we can be plugged in to banks and credit unions across the country. So even if the mortgage market shrinks, let's say it goes to $3 trillion in 2022, our ability to flex and grow into that market and grow market share, we're incredibly well positioned to do that.
And so, I think of us as a different type of company than other traditional mortgage lenders. And so rates will go up, rates will go down, but as long as we stay on our path to grow these distribution channels and then engage our client base-- we've got 2 and 1/2 million people making mortgage payments to us right now. We've got equity that has gone from $19 trillion to $24 trillion, so there's a great opportunity for people to pull cash out. We can grow regardless of whether interest rates go up or down.
BRIAN SOZZI: Jay, obviously, you're tied to all trends in the housing market. And today is jobs day in America. Are you seeing any relief in the labor shortage amongst home builders? I mean, this has really held back that space. And I would argue it's held back your industry, too.
JAY FARNER: I think we're all facing this. If you're out looking to hire someone today, the challenges have been probably the most difficult we've seen in many, many years now. That's why there's less than 2 and 1/2 months' worth of housing inventory out there. And we expect that demand will stay strong into 2022. And so it's good to see that we're getting people back into the labor markets. But I think we've got another six months to a year of some challenges.
Where we focus is culture. If we can ensure that we've got a great culture for our 26,000 team members, they really see the vision of what we're building, they feel the passion of what we're doing, that what we know, we can attract great talent and keep the talent we have. And so we're just doubling down on that aspect of it. And it's worked. We've been able to grow. In fact, we've hired somewhere north of 5,000 people in the last two years based on that. And so I think that's the best place for us to put our energy as we go through this kind of labor challenge.
BRIAN SOZZI: You also made a good point on the call last night, Jay, that homeowners are sitting on a great deal of home equity. How do you see that impacting the economy next year?
JAY FARNER: Yeah, so whether the 30-year fixed interest rate is at 2.875 or 3% or 3 and 1/2%, this is still incredibly low interest rates. And it offers a great opportunity for consumers across America. And so, as we watch our non-rate sensitive mortgage production purchase term adjustment, a lot of folks are going from a 30-year to a 20-year or 15-year or cash out, a majority of our loan production falls into this non-rate sensitive bucket. We think that will accelerate in 2022, as people recognize the equity that's been built up in their home.
And so leveraging those distribution channels, I spoke about earlier leveraging our brand and our marketing so we can make people aware of this great opportunity. That's where our marketing team is focused. And again, that's going to help us get to north of 10% market share as we go into next year.
EMILY MCORMICK: And Rocket Companies has a new partnership now with Salesforce to provide mortgage as a service. I'm wondering what has the customer demand been like for these types of services, and what are you hoping to build out through this partnership?
JAY FARNER: Yeah, when you talk to banks, credit unions, in a great market like 2020, you'll see more people get involved in mortgage. But for the most part, it's a challenging industry for people to have it make sense. We've been able to be incredibly profitable and drive great client experience. So we thought about our technology, the investments we've made. We also have been partnered with Salesforce for quite some time. And we started recognizing the great benefit to having that client 360 view that Salesforce provides.
And so thinking about other banks and credit unions that are using the Salesforce financial services cloud and thinking about how we could plug Rocket Mortgage technology into that cloud, not only can they leverage the Salesforce tech, but they can leverage our tech, our experience. And so there are 10,000 banks and credit unions out there. Thousands already use the Salesforce financial services cloud.
And if we take the Salesforce, salesforce and the Rocket Companies salesforce and together, we go out and explain the great benefits of plugging in, we think we can have access, like I said, to nearly 10,000 banks and credit unions. They can provide their client this great mortgage experiencing, experience leveraging our technology. It should be a win-win, and it gives us access to nearly $1 trillion of mortgage volume that was done through those channels last year. So, really exciting for us, really exciting for Salesforce, and most importantly, exciting for the clients at these banks and credit unions.
EMILY MCORMICK: We'll leave it there. Jay Farner, vice chairman and CEO of Rocket Companies, thank you so much.