Rising Mortgage Rates May Impact Lenders Less Than You Think: Rocket Companies CEO Talks Market Strength

The surge in mortgage rates has put pressure on mortgage lenders. Rocket Companies Inc RKT, the largest mortgage originator in the United States, has seen its stock fall more than 30% year-to-date, but that may not be an accurate reflection of the strength of the business.

"Yes, we are off record highs from a market perspective, but we're still looking at $2 trillion to $2.5 trillion of mortgages being done this year," Rocket Companies CEO Jay Farner said Wednesday on CNBC's "The Exchange."

What To Know: As capacity comes out of the mortgage market, Farner is confident that there will be opportunities ahead for lenders who continue to focus on the business and deliver great service to customers.

Farner noted that verified approval letters were up 50% in January compared to a year ago, and the company saw the most pre-approvals to start a year. He also mentioned that the fourth quarter represented the strongest period ever for cash-out refinancing.

"We have about 2.6 million clients that we service on a monthly basis, so that's a great book of business for us, throwing out monthly cash flow," Farner said.

There is about $25 trillion of equity locked up in individual's homes currently, so lenders can help clients utilize their equity as well, he added.

"Although up a bit, [mortgages] are still really competitive compared to other ways you can borrow money," Farner said. "If clients are thinking about making improvements or paying off debt or doing other things, a mortgage still makes a ton of sense right now."

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During the company's most recent earnings report, Rocket provided first-quarter closed loan volume guidance of $52 billion to $57 billion. Sale margins are expected to gain 2.8% to 3.1%, according to data from Benzinga Pro.

"If you are thinking about selling, this summer is going to be a great time to do that," Farner said. "In January, we had more verified approval clients in our pipeline than ever before. That tells me that clients want to be viewed as cash buyers, and they're going to be very active this spring."

RKT Price Action: Rocket Companies has traded between $9.42 and $23.30 over a 52-week period.

The stock was up 0.79% at $9.63 at time of publication.

Photo: Erik Drost from Flickr.