Quicken Loans’ IPO would set the tone for fintech valuation and let mortgages cool again

A accelerate credit initial public offering A valuation of the company in the tens of billions could be imminent.

If true, that’s huge for two reasons: as America’s largest mortgage lender, Quicken Loans would set the tone when evaluating the challenger bank, and the public would give other fintech disruptors a vital insight into the most complex consumer finance product.

Let’s break it all down, including whether an IPO brand could be Quicken or not rocket.

Top challenger banks become established banks

Here’s how challenger banks have evolved as the fintech disruption cycle has matured:

  • Tout how [insert consumer finance products here] are broken and you will fix them.
  • Start with a single product such as personal or student loans, deposits or wealth management/trading.
  • Raise hundreds of millions of dollars.
  • Use most of those funds to attract millions of customers by telling them you’re better than a bank.
  • Raise hundreds of millions more dollars on multi-billion dollar valuations.
  • Expand to other products.
  • become a bank.
  • Or bought from a bank if your valuation is not too high.
  • Or warm up to IPO prospects when other IPOs play along.

Key challenger banks are accelerating in the wake of COVID-19, quickly becoming incumbents. Some examples:

  • Robin Hood fundraising and user growth are off the charts despite early COVID-19 failures.
  • revolution also raised crazy money, built his management team, reached 12 million customers and launched one super app to integrate other banking services.
  • chime won the day for quick response to get COVID-19 stimulus checks to people early.
  • Varo is so close to a fully-fledged bank.

These and other fintech leaders have done a lot for the how they are young.

Now the question is can they meet the lifetime budgeting, saving, borrowing and investing needs of clients. Part of the answer lies in the complexity of the large-scale mortgage origination that Quicken Loans has mastered over the past 35 years.

Is Quicken Loans Seriously America’s Largest Mortgage Lender?

In 2019, Quicken Loans funded a total of $145.8 billion in mortgages (according to Inside Mortgage Finance), ranking second behind Wells FargoThe total volume financed is 201.8 billion US dollars.

Julian Hebron

And on the IMF’s 2019 mortgage financing list (which excludes certain distribution channels), Quicken Loans funded $142.8 billion, topping Wells Fargo’s $94.25 billion. Also, Quicken Loans outperformed Wells in total mortgage financing for the first quarter of 2020 ($61.7 billion vs. $47.6 billion).

Do you have any idea how difficult it is to finance so many mortgages in one year?

To put this in perspective, when Zilov entered the mortgage business last year, its five-year Wall Street guidance Pencils to about $7 billion in annual funding, and at 18 months the company is still a long way from that, even with all its marketing prowess.

Extensive federal and state regulations in both housing and banking and credit make mortgages the gold standard for consumer financing difficulties. Collecting deposits or taking out student and personal loans is a breeze compared to mortgages. Like I said recently in this section:

“Funding even $5 billion is a lot harder than it looks. It gets exponentially harder as you go above $10 billion, and then again above $20 billion. Then, if you almost double that again, you’re among the top 10 mortgage lenders in the country, all of which took one to three decades to grow organically and through mergers and acquisitions.”

Quicken Loans is a good example here.

Accelerating Loan IPOs After Decades of Innovation?

Dan Gilbert founded and then sold Quicken Loans in 1985 as an industry-based mortgage lender Intuitive in 1999.

Yes, the same Intuit that Bought credit karma for $7.1 billion just before COVID-19 hit America.

Yes, the “Quicken” portion of the Quicken Loans brand has been licensed by Intuit for all these years.

And yes, that’s one of the reasons I still believe in it Quicken Loans should simply be renamed Rocket once and for all – with an IPO (more on that below).

But back to the timeline…

In 1999, Quicken Loans made an early shift from branch-based to Internet-based lending. This made them much more nimble through the years of re-regulation following the 2008 crisis.

The longest deadline of the Consumer Protection Regulation (TRID, also known as The Reason I Drink) came in October 2015.

Other lenders spent years and most of their resources dealing with TRID, but it was a no-brainer for Quicken Loans, and they launched Rocket Mortgage the very next month, in November 2015.

This gave them a multi-year leap in mortgage modernization and a growing market share.

The rest is history. America’s largest mortgage lender. Critical Lessons on Fintech Marketing at Scale. And a core executive bank that has been educating the industry for decades.

What Goes Into a Quicken Loans IPO Valuation?

Mortgage-only deals are great cash flow deals for owners, but mostly don’t have fintech-like valuations due to the highly cyclical rates market.

An IPO could Worth of Quicken Loans in the tens of billionssetting a new tone for reviews.

Being an industry leader in the direct customer business with proprietary technology and a well-known brand would certainly add fintech glamor to a Quicken Loans IPO.

They’ve spent billions building both the Quicken Loans and Rocket Mortgage brands, and my money is in a Rocket IPO, Rocket Mortgage Home Loans, Rocket Homes Home Buying/Selling, Rocket Loans Personal Loans, and Rocket HQ for credit includes monitoring and financial advice.

Credit management can also be helpful in the assessment. When interest rates bottom in 2020, today’s mortgages are less likely to pay off, making maintenance more valuable.

Quicken Loans services $343.6 billion in mortgages as of Q1 2020. While that pales in comparison to the $1.38 trillion in services provided by star powerhouse Wells Fargo, it’s still a strong base.

And Quicken Loans funded $61.7 billion in the first quarter of 2020 alone, so you can see how they could quickly build a services portfolio with record-low interest rates if they wanted to.

Then, of course, there’s the multi-billion dollar question for Quicken Loans — and other top mortgage lenders and challenger banks.

How Soon Will Quicken Loans & Challenger Banks Have Full Product Sets?

Massive client acquisition is one of the main reasons top VC-backed challenger banks have multi-billion dollar valuations. Attract millions of customers now, expand product offerings later.

To date, no challenger bank has made significant progress in expanding into mortgages because it’s a much tougher product and compliance game.

But Quicken Loans was a big customer acquisition dog years before the current generation of hot challenger banks. And Quicken/Rocket’s core businesses are deeply embedded in the customer’s home buying, financing, improving, selling and financially managing journey, which accomplishes three things:

  1. Diversifies revenue
  2. Makes core mortgage products stickier
  3. Allows them to reuse proprietary technology for non-mortgage products

Therefore, it is arguably easier for top mortgage companies to expand into non-mortgage products than it is for top challenger banks to expand into mortgages.

If America’s fifth-ranked mortgage lender credit depot was about to go public in 2017, founder-CEO Anthony Hsieh summarized this thesis with one catchphrase:

“We need to make mortgages cool again.”

Hsieh’s argument, then as now, is that certain sophisticated mortgage-first firms are worthy of fintech ratings.

Now it looks like we may finally find out.

And if we get a Quicken/Rocket IPO, challenger banks will learn more about the scale mortgage playbook.

About Gloria Skelton

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