Rocket Companies has announced that it’s providing its 2.6 million mortgage servicing customers with free premium access to its recently acquired personal finance softwarewhich will be rebranded as Rocket Money.
In addition, 3.4 million members using the former TrueBill software, which will be officially renamed late next month, will be able to opt in, in order to access Rocket’s mortgage and auto loan products.
“Where we’re evolving is yes, you want to improve your finances, but that’s not an end unto itself. You want to improve your finances toward some goal. That goal could be to purchase a home, it could be to get a car or to refinance,” said Haroon Mokhtarzada, co-founder and CEO of Rocket Money, in an interview. “The platform then actually closes that loop and offers you that product.”
The latest plans for the company’s personal finance technology raises questions as to whether the broader home lending industry, which has been known to take a page from Rocket’s more innovative digital strategies in the pastmight do so when it comes to this one.
Acquiring the former TrueBill created a countercyclical advantage by bringing in recurring revenue from customers not working with Rocket’s lending units, analysts at Keefe, Bruyette & Woods have noted. Those cash-flows are separate from, but complementing, servicing revenue that mortgage companies will be dependent on if rates keep rising and originations continue falling.
Also, with rising rates diminishing rate-and-term refinancing, the potential mortgage leads personal finance software can generate are attractive in the current market environment.
“Lenders are looking for excellent consumer databases to market their product to. With this technology, they can see opportunity for people who are perhaps, say, too leveraged on debt who may be candidates for a consolidation loan,” said Brett McCracken, a senior consultant with Stratmor Group, in an interview. “They key is you want to reach them before they reach out to their competitors. When you can amass a number of signals from your existing customers, you can do that before your competitors are aware.”
However, Rocket’s acquisition of TrueBill had a $1.28 billion price tag, suggesting at least one potential barrier to entry for the typical nonbank seeking to pursue a similar strategy. Although mortgage companies did amass some cash during an early refinance boom the last two years, few have Rocket’s scale and resources or breadth of financial products. In addition, the industry has been contending with thinner margins more recently and many have been in cost-cutting mode.
While other big players in the industry may not offer a resource exactly like Rocket Money, they have either been making some efforts to support borrowers who use similar technologies or provide related information like quarterly updates of credit scores and property values, said Greg Self, mortgage practice director at consultancy CC Pace. He sees room for improvement when it comes to customer experience involved.
“Larger servicers are more likely to interface with personal finance software but in my experience this process is still clunky,” he said in an email. “Smaller servicers aren’t usually connected.”
The industry generally runs mortgage and personal-finance software systems more or less separately, but some information does get exchanged between players that could benefit from automation. Self, for example, recounted updating information in his personal finance software because of a servicing transfer, and noted he was able to do so after a code generation, retrieval and submission process.
“You want to control the experience, but it has to be a great experience,” said McCracken. “You want to provide an experience that adds value, saves time and makes a complicated experience much more simplistic.”
What Rocket is doing involves a higher degree of automation and more data points than are typically exchanged between personal finance and servicing systems, Mokhtarzada said, noting that the company is starting with access through a single account and will be further integrating customer experiences over time.
“For example, when you go to look at your mortgage, you’ll be able to look at your finances as well. We’re working toward a kind of a singular view and a dashboard or a control panel for your financial life,” he said. “You’ll see every asset, every liability you have, full visibility over your credit. It makes sense to be able to look at these things together…It’s even a broader picture than just connecting mortgage and personal finance.”
The current mortgage market requires investment in leads over a longer period of time, which this type of big-picture approach is conducive to, Mokhtarzada said. Both Rocket and TrueBill have said they have had high customer retention rates, with the former reporting a 92% 12-month net client retention as of the end of the first quarter. (Second quarter earnings had not yet been released at the time of this writing.)
“If they’re not ready to buy, the question is how do you maintain and establish a relationship and loyalty with that person so that when they are ready to buy you don’t have to acquire them all over again? That’s…what we have to offer,” Mokhtarzada said. “There are times when the mortgage business is more difficult, and what we’re seeing is the vast majority of [companies] are retrenching, but Rocket is investing.”