Rocket CEO says US mortgage industry is ‘a tale of two cities’

But the CEO of Rocket companiesIts subsidiary, Rocket Mortgage, said this week that there are signs that Americans are moving away from the margins and competing for home ownership. This comes on the heels of mortgage rates falling to just under 6%, Rocket CEO Varun Krishna said He said CNBC The company is poised to have its highest mortgage loan production volume and highest sale profit in four years.

Rocket’s current success differs greatly from what’s happening in the mortgage industry more broadly. While the Detroit-based lender is riding a wave of renewed demand, PennyMac, a major U.S. mortgage lender, is facing a slower and more painful reset.

“The way I would describe this last quarter is very simple: It’s a tale of two cities,” Krishna said. “When you look at the last quarter, mortgage rates were down to their lowest levels in the last three years, and Rocket was there to capitalize.”

But it also says something bigger about today’s housing market: While some current homeowners now have the ability to move and trade up for a more expensive or larger property — or as older generations feel more open to unleashing ownership, Golden handcuffs The housing market has held them back – and younger generations remain largely left behind.

This “Tale of Two Cities” illustrates what American families are experiencing today. For relatively high-income borrowers with strong credit, a modest drop in interest rates — to the low 6% range — can be enough to make a purchase possible, especially if they already own a home and can tap equity to make a down-payment purchase. These buyers are driving much of Rocket’s new activity, even as they replace the ultra-low interest rates of the past with more expensive loans.

“The mortgage market is expected to grow by up to 25%, and existing home sales are expected to rise by up to 10%,” Krishna said.

But for many hopeful renters and homebuyers, the math still doesn’t add up. Home prices are still well above pre-2020 levels — more than 40% higher — and even with prices down from their peak, monthly payments on a median-priced home ($427,000). According to Redfin) can easily exceed what a typical family earns ($83,000, Census data He appears.

Younger Americans, in particular, face tougher down payment hurdles, higher student loan payments, and competition from cash buyers and investors from older generations. All of this means that higher mortgage applications do not necessarily translate into a widespread improvement in housing affordability — although some economists and housing experts expect the market to become a little more bearable this year.

Lawrence Yun, chief economist for the National Association of Realtors He said recently They expect a “slightly better” situation for more home sales this year as inventory levels increase and the “lock-in effect” steadily disappears.

This is “because life-changing events are causing more people to list their properties to move on to their next home,” Yoon said in a statement. “(2026) should be better with lower mortgage rates, and that will qualify more buyers. We expect home sales to increase by about 14% nationwide in 2026.”

Why has Rocket’s business model been so successful recently?

Much of Rocket’s recent success can be attributed to how different its business model is from PennyMac.

While both companies originate and service mortgages, Rocket focuses on direct-to-consumer digital lending, handling more than half of its volume online without intermediaries. Rocket is also boosted by heavy technology investment, AI-based customer recovery, and diversification into real estate, car loans, and personal finance, which means they have more repeat customers.

PennyMac, on the other hand, distributes risk across correspondents, brokers, and direct-to-consumer channels, with a focus on government loans and non-agency securitizations. It partners with PennyMac Mortgage Investment Trust (its real estate investment trust) for capital-efficient mortgage servicing rights investments and third-party servicing, including delinquencies. In other words, PennyMac prioritizes scale over consumer-facing technology that can help them earn repeat business.

“The key difference is that we maintain our relationships with our customers because we associate service with construction at scale,” Krishna explained. “What is very unique about Rocket is that we are the largest service provider and we are also the largest originator, but we help our customers go from service to origination when they become part of their next transaction.”

By contrast, Pennymac has been more exposed to weaknesses in the mortgage industry: lower spreads in government-backed lending, a smaller direct-to-consumer footprint, and greater reliance on a mortgage servicing rights market that has been volatile since interest rates began rising in the wake of the pandemic. As mortgage loan application volumes dried up after the pandemic and the era of easy refinancing ended, lenders like PennyMac struggled to replace that business with profitable new assets.

“People were suddenly willing to not only refinance their mortgage, they were willing to move because they no longer felt tied down,” Krishna said. “It’s the volume we eventually expected to see.”