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Good day, everyone, and welcome to The Rocket Company Second Quarter 2026 Earnings Conference Call. Just a reminder that today's conference is being recorded. At this time, I would like to hand the call over to Ms. Sharon Ng. Please go ahead, ma'am.
Good afternoon, everyone, and thank you for joining us for Rocket Company's earnings call covering the second quarter 2026. With us this afternoon are Rocket Company's CEO, Varun Krishna, and our President and CFO, Brian Nicholas Brown. Earlier today, we issued our second quarter earnings release, which is available on our website at rocketcompanies.com under Investor Info. Also available on our website is an investor presentation. Before I turn things over to Varun, let me quickly go over our disclaimers. On today's call, we provide you with information regarding our second quarter performance as well as our financial outlook. This conference call includes forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from the expectations and the assumptions we mentioned today. We encourage you to consider the risk factors contained in our SEC filings for a detailed discussion of these risks and uncertainties. We undertake no obligation to update these statements as a result of new information or further events, except as required by law. This call is being broadcast online and is accessible on our investor relations website. A recording of the call will be posted later today. Our commentary today will also include non-GAAP financial measures. Reconciliations between GAAP and non-GAAP metrics for reported results can be found in our earnings release issued earlier today as well as in our filings with the SEC. And with that, I will turn things over to Varun Krishna to get us started. Varun?
Good afternoon, everyone, and thank you for joining our second quarter 2026 earnings call. Today, I will cover the market, our second quarter results, and Rocket's performance. Let's go ahead and start with the market. The industry expected a normal spring home buying season. Instead, affordability deteriorated as mortgage rates moved higher through May and June. Purchase and refinance demand, as a result, weakened during what is typically the strongest quarter of the year, and industry forecasts moved lower as the quarter progressed. Simply said, it was one of the toughest spring housing markets in years. Now against that backdrop, Rocket delivered one of its strongest quarters in recent memory. We gained market share in both purchase and refinance. We delivered our most profitable quarter in four years. We expanded adjusted EBITDA margins, and integration of Redfin and Mr. Cooper are well ahead of plan. Adjusted revenue was $2.8 billion, near the midpoint of our guidance. Adjusted EBITDA margin expanded to 28%, up from 26% in the first quarter. Adjusted diluted EPS increased to $0.16. Our North Star is profitable market share growth. And we reached a new record this quarter. Purchase share increased to 6.2%, up from 5.5% in Q4 of last year. Refinance share increased to 14.3%, up from 12.2%. This performance was not a coincidence. It was the result of years of deliberate investment, focused execution, and a business model that has fundamentally evolved. Today, more than 70% of our revenue comes from recurring or less rate-sensitive businesses. Servicing provides a durable recurring revenue foundation. Purchase mortgages, home equity, personal loans, and Redfin diversify us across broader parts of the housing market. Today, Rocket is the largest in both servicing and origination. And our recapture engine connects these two things. Just as importantly, all of our businesses reinforce one another. Redfin brings clients into the Rocket ecosystem earlier. Mortgage helps them finance one of life's biggest decisions. Servicing keeps that relationship alive for years. Additional products allow us to continue serving these same clients as their needs evolve. Artificial intelligence strengthens every step of that journey. It improves productivity, personalization, and conversion across the entire platform. So the important point is not that we have added new businesses. It is that we have changed the economics of the business fundamentally. Our recurring revenue base is larger. Our client relationships last longer. Our acquisition costs improve as these businesses reinforce one another. And our operating leverage expands as AI increases productivity across this platform. This is the business we have been building: one with a stronger floor in difficult markets, and significantly more upside when housing activity returns. That is what gives us confidence that Rocket's long-term earnings power is fundamentally stronger than it was just a few years ago. Now let me take a second and show you how that came to life during the second quarter. Homeownership begins long before a mortgage application. It begins with home search. That is what makes Redfin such an important part of Rocket's strategy. Historically, Rocket entered the relationship when a client decided to finance a home. Today, we are increasingly entering months earlier while they are still searching. That completely changes the economics of client acquisition. Redfin reaches roughly 50 million monthly active users, with some of the highest engagement and retention in online real estate. Those users are not casually browsing. They are actively preparing to buy or sell a home. We are turning that intent into action. Product improvements and proprietary AI models have increased lead conversion by roughly 30% over the past year, helping more clients move from searching to touring, financing, and closing. And when buyers are ready to finance, Rocket is already part of the experience. Eligible servicing clients who buy and sell through Redfin and finance with Rocket Mortgage can save up to $20,000. That is a meaningful affordability advantage in today's market. We are seeing it translate into results. In June, mortgage leads from Redfin more than doubled year over year. The mortgage attach rate with Redfin agents reached 47%, approaching our synergy target of 50%. Inventory is yet another differentiator. Through our Compass partnership, Redfin continues expanding unique inventory that is not available on other major home search portals. In markets like Chicago, that advantage is already driving meaningful increases in both homebuyer and mortgage leads. Nationally, Redfin now offers 25,000 exclusive listings. More inventory attracts more serious buyers. More serious buyers create more financing opportunities. That is why Redfin matters. It allows us to build relationships earlier, convert them more effectively, and increase the lifetime value of every client who enters the Rocket ecosystem. The advantages we are creating upstream continue through mortgage origination. Sales is still very much a human craft. It takes judgment, empathy, and timing. Technology does not replace that. It just makes our people better at it. Our loan officers provide judgment, advice, and trust, and they are the best in the business. Artificial intelligence only makes them better. By removing administrative work and helping our teams focus on the right opportunities at the right time, AI allows our loan officers to spend more time helping clients and less time managing processes. We are already seeing significant impact. Compared with just one year ago, our loan officers are serving nearly 40% more clients, while delivering double-digit improvements in conversion at the same time. Those gains really matter today, and they matter even more as the market recovers. As mortgage volumes increase, we believe we can expand profitability faster without growing our cost structure at the same pace. This is one of the biggest structural changes happening inside Rocket. AI is not simply making people more productive. It is actually increasing the earnings power of the business through operating leverage. We are applying that same approach across the entire company. Servicing remains one of Rocket's greatest competitive advantages. It generates durable recurring revenue while creating long-term relationships with millions of clients. Those relationships become more valuable every year they remain inside the Rocket ecosystem. During the second quarter of this year, we completed one of the largest servicing migrations in our industry's history, bringing our servicing clients onto a single platform. That milestone is about so much more than technology. It creates one foundation for how we serve clients, deploy AI, and identify opportunities across the business. Earlier this year, we launched Voice AI for inbound servicing calls. It has now handled more than one million calls with more than half resolved without requiring a servicing specialist. Clients receive faster service, and our servicing experts spend more time solving the complex situations where human judgment matters most. Every interaction improves our understanding of the client and helps us identify opportunities to refinance, access home equity, purchase another home, or use another Rocket product. That is what makes our servicing different. It is not just a recurring revenue business. It is the engine that continuously creates future origination opportunities. Today, Rocket is both the nation's largest mortgage servicer and the nation's largest mortgage lender. Very few companies have both. That combination allows us to deepen client relationships over time instead of rebuilding them with every new transaction. So the economics are fundamentally different. Every year we keep a client, we improve the probability of serving them again while reducing the cost of doing so. Artificial intelligence simply accelerates that advantage by improving client experiences, strengthening recapture, and increasing productivity across the entire platform. The result is a business with a stronger recurring earnings base today and even greater operating leverage when housing activity recovers. The power of this business model is what it allows us to build on top of this platform. Because we already have trusted client relationships, servicing scale, AI capabilities, and distribution, we can expand into adjacent businesses faster and more efficiently than any company starting from scratch. Home equity is one great example. We entered the category just four years ago. Today, Rocket is the nation's largest home equity lender. Since launch, we have helped 250,000 homeowners access over $24 billion of their home equity. Rocket is the first independent mortgage company to lead the category. That milestone demonstrates something far larger than just success in a single product. It shows the advantage of building new businesses on top of an existing client base rather than acquiring every new customer from the beginning. Rocket Loans tells a very similar story. Loan volume nearly doubled year over year during the first six months of 2026, culminating in a record month in June. More than half of those loans come from existing Rocket servicing clients. That simply reinforces the strategy we have been executing for years. Each additional product strengthens the client relationship. Each stronger relationship creates another opportunity to serve that client over time. Lifetime value increases while future acquisition costs decline. That is the economic engine we are building. We are not assembling a collection of products. We are building a business where every product makes every other product more valuable. The same dynamic extends to our partner ecosystem. Through our Compass partnership, RocketPro brokers have originated more than $2 billion of net rate lock volume. Consumers, agents, and brokers all benefit from a more connected experience and every additional participant strengthens that network. Those advantages compound over time. I will close with this. The second quarter tested the housing industry. Higher rates reduced affordability. Demand softened. The spring market fell well short of expectations. But against that backdrop, Rocket reached record market share in both purchase and refinance, delivered its most profitable quarter in four years, and continued executing ahead of plan. Those results reinforce what we have been building for years. Rocket today is fundamentally different from the company we were just a few years ago. We have a larger recurring revenue base, longer client relationships, higher operating leverage, and more opportunities to serve clients throughout the homeownership journey. We cannot control where mortgage rates go next quarter. We can control the business we build. Quarter after quarter, we are building one with a stronger floor in difficult markets and significantly more upside when housing activity returns. Competitors may have pieces of this model. No one has integrated it the way Rocket has. That is why we believe Rocket's long-term earnings power is stronger than at any point in our history. And with that, Brian, over to you.
Thank you, Varun, and good afternoon, everyone. Today, I will discuss our second quarter results and the record market share gains we delivered in a challenging market. I will also cover capital position and integration progress.
I will close with our outlook for the third quarter.
Let's start with the second quarter's results. Adjusted revenue was $2.8 billion, near the midpoint of our guidance range. We generated $47 billion in total net rate lock volume, and $49 billion in total closed loan volume. Gain on sale margin, excluding correspondent, was 311 basis points; that is compared to 22 basis points in the first quarter. Adjusted EBITDA was $766 million, representing an adjusted EBITDA margin of 28%, up from 26% in the first quarter. Adjusted diluted EPS was $0.16, up from $0.15 in the first quarter, making this our most profitable quarter in four years. Our market share gains in the second quarter were impressive. In fact, we achieved our highest ever quarterly market share in both purchase and refinance. Based on industry estimates, purchase market share came in at 6.2% and refinance market share was 14.3% in the second quarter. This represents a 13% increase in purchase market share from fourth quarter and a 17% increase in refinance market share. These results reflect the structural advantages of our business model. First, a diversified revenue base that provides stability with built-in upside. Second, unique assets, including the industry's largest servicing portfolio, and Redfin's purchase funnel that drives share gains at a very low cost of acquisition. Third, a cost advantage across origination and servicing where scalable capacity and expense synergies keep fixed costs flat while volume grows. Let me unpack each of these a little more. Starting with our balanced revenue model: more than 70% of our revenue is recurring or less rate sensitive. Servicing fee income and Rocket Money subscription revenue are recurring. The purchase business, cash-out refinance, home equity loans, as well as the Redfin business, operate in a large and less rate-sensitive category. The remaining 30% includes rate-and-term refinance, which carries the most rate exposure, but it is also our greatest source of upside when rates fall. And the good news is we have over $300 billion of origination capacity that is primed to capture this upside. In Q2, this balanced business model drove our operating results. Servicing generated $1 billion of steady cash flow while less rate-sensitive products, including purchase, cash-out refinance, and home equity loans, contributed to the majority of gain on sale revenue. Let's turn to our unique assets: the industry's largest servicing portfolio connected to a powerful recapture engine and Redfin's purchase top of funnel. These assets are hard to replicate and allow us to acquire clients at a fraction of the industry's average cost because these clients are already in our ecosystem. Those assets delivered in the second quarter. On the purchase side, the Redfin integration is paying dividends. Mortgage leads from Redfin in June doubled year over year. Mortgage attachment—the percentage of Redfin buy-side clients who finance with Rocket Mortgage—has reached 47%, approaching our 50% target. That momentum helped drive the direct-to-consumer purchase volume up 45% year-over-year. And on the refinance side, our servicing portfolio drove share gains across rate-and-term, cash-out, and home equity loans. Existing servicing clients accounted for 57% of refinance closed volume, up from 54% in Q1. And those closings come with near-zero client acquisition costs. Recapture rates on the Mr. Cooper portfolio reached another record, and we are more than halfway to realizing our Mr. Cooper revenue synergy target on an annualized run-rate basis. The clearest example of these assets working together is preferred pricing. Servicing clients who buy and sell with Redfin and finance with Rocket Mortgage can receive up to $20,000 in combined savings. We can offer an incentive of this size for one simple reason: we own the search portal, the real estate brokerage, the mortgage financing, the title and closing, and the servicing. Historically, these are four or five separate companies all with different experiences and different client acquisition models. As I mentioned, our cost to acquire these clients is nearly zero. We pass these structural advantages right back to the client, directly addressing affordability, which is the biggest barrier in today's housing market, while deepening relationships across the ecosystem. This brings me to the third advantage. We operate origination and servicing at a significant cost advantage when compared to industry averages, and that gap is widening. Technology advancements are expanding the capacity of every production team member. Our tools help loan officers drive double-digit conversion improvement while working with nearly 40% more clients than just one year ago. This allows us to keep fixed costs flat while volume grows. And once fixed costs are covered, incremental revenue drops to the bottom line at a very high rate. Expense synergies are amplifying this advantage. This quarter, we realized $100 million of annualized Mr. Cooper expense synergies in line with our expectations. We remain on track to achieve the full $400 million target by year end. This is how our business model delivers in tough markets and in more favorable ones. Since completing the Redfin and Mr. Cooper transactions in the back half of last year, we have grown share and expanded profitability for three straight quarters across both rising and falling rate environments. Everything I just described runs on a foundation of balance sheet strength. In a market like this, capital is not just defense; it is offense. It is what allows us to invest through the cycle and move quickly when opportunities arise while others are forced to pull back. We ended the quarter with $11.2 billion of liquidity, up $1.8 billion from the first quarter. In June, we refinanced existing debt through a successful senior note offering. That execution was supported by our investment-grade rating and credit profile that keeps getting stronger. Net corporate leverage ended the quarter at 0.9x, 20% lower since year end. Part of maintaining that balance sheet strength is treating our MSR portfolio as the strategic asset it is: actively managed, not passively held. During the quarter, we sold a portion of our low-coupon MSRs at attractive market prices. But we did not sell off the client relationship. We retain the subservicing on those MSRs, and, even more importantly, we retain the ability to do recapture and the related economics. Even after these sales, our servicing portfolio ended the second quarter at $2 trillion of unpaid principal balance. These sales also rebalance the composition of our portfolio toward higher average note rates. Today, 26% of our owned MSR portfolio, or $320 billion of unpaid principal balance, carries a note rate above 6%. This is a large pool of clients who are first in line to refinance when rates fall and are high-value recapture opportunities. Looking ahead, we expect the housing market to remain challenging in the near term. In recent weeks, expectations of higher future inflation pushed the 30-year fixed rate to 6.85%, 50 basis points higher than the average rate during the first half of the year and the highest level in more than a year. These pressures are weighing on both purchase and refinance activity. Existing home sales remain near 4 million on an annualized basis, while pending sales and purchase applications continue to decline. The expected housing recovery in 2026 has not materialized as increasing rates continue to pressure affordability. Last quarter, we told you our real-time data indicated a tougher market than industry forecast suggested, and that is exactly how the second quarter played out. Today, the same data leads us to expect the third quarter mortgage market to be smaller than the second, something the industry has not seen since 2022. With that context in mind, we expect adjusted revenue to be between $2.5 billion and $2.7 billion in the third quarter. This guidance implies continued market share gains in both purchase and refinance. At the midpoint of the guidance, we expect expenses to be approximately $2.35 billion. That includes approximately $110 million of intangible amortization, $90 million of stock-based compensation, and $100 million of one-time acquisition-related costs. Excluding those items, expenses are expected to decrease approximately $100 million quarter over quarter. I am also happy to report that our progress on integration synergies will continue beyond the third quarter. With the major Mr. Cooper integration milestones complete, we now have line of sight into approximately $100 million of annualized expense savings above our original goal of $400 million. We expect to realize these in the first half of 2027. Let me close with this. Rocket's platform is performing as designed. We expanded profitability in a volatile market. We gained share. We realized synergies and increased our goal. We strengthened the balance sheet. And we continue to invest through the cycle. Rocket is built to perform today and accelerate when the market recovers with growth converting into operating leverage, margin expansion, and stronger earnings power. With that, I will turn it back to the operator.
分析師問答
Thank you, sir. At this time, we will take your questions. If you have a question today, press 1 on your telephone keypad. We do ask that you limit your questions to one. Once again, that is 1 if you have a question. And your first question will come from Ryan McKeveny, Zelman.
Hey, thank you for all the details and for taking the questions. Maybe just a high-level one. You called out the tough industry conditions in the second quarter that have continued into the third quarter. Rates, as I think Brian just mentioned, are now up year over year. So can you talk a bit more about the macro backdrop that you see playing out right now—the macro backdrop that is embedded within the guidance? And lastly, maybe on the expense side, probably also for Brian, I think what I heard you say is that the expectation for Q3 is for expenses to be down $100 million sequentially from Q2. Obviously, the revenue guide is down sequentially as well. So should we think about that step down in expenses as just a function of the revenue side? Or should we think of that Q3 as a decent run rate going forward? Thank you, guys so much.
Ryan, thanks for the question. It's great to hear from you. Let me start with the market and the macro backdrop, then I'll ask Brian to talk us through the quarter and our guide as well as your question around expense. There is no question that Q2 was tougher than the industry expected. Rates rose 26 basis points from their April lows. Rate-and-term refinance was under more pressure. And we all saw that this normal spring and summer purchase season was just weaker than in prior years. But I would emphasize the bottom line is that this was not a huge surprise to us. On our last call, we shared that this market was shaping up to be smaller than the forecast, and that is exactly what happened. The good news is that we saw this coming and we were ready. Our results show it unequivocally: we gained share in purchase and refinance and expanded profitability for the third quarter in a row. What you're starting to see is what is unique about Rocket: more than 70% of our revenue is now less rate-sensitive. That allows us to keep investing while others are forced to react. We expect that to be a structural advantage that will continue in Q3, which is why we feel good about our guide. With that market backdrop, Brian, maybe you can unpack the Q2 performance, the guide, and the expense question.
Thanks, Varun. Ryan, good to hear from you. Let me double-click on Q2 because it was impressive for many reasons—particularly the increase in market share coupled with the increase in profitability. On the refinance side, which had significant increases, it was largely attributable to recapture increases and being ahead of goal on that synergy value. On the purchase side, it is really twofold: additional lead flow coming from the Redfin site to Rocket Mortgage, which was up double year over year, and the Compass partnership in the pro space, which has gained traction. That contributed to purchase share gains. Now, on Q3 guidance: we always include what we are seeing in real time. We told you last quarter that Q2 was going to be down, and it is a challenging market. Most industry forecasters see the second half being smaller, and that feels right based on what we're seeing. But the guide of $2.5 to $2.7 billion is still a very strong guide, and, all else equal, that will be another quarter of significant share gains. On gain-on-sale margin, margins are holding steady, with some improvements at the channel level. So all in all, we expect Q3 to be another strong share-gain quarter for Rocket. Regarding expenses, yes, expenses will be down in the second half of the year. The roughly $100 million improvement from Q2 to Q3 is primarily a result of synergy value coming through the P&L, with some variable expense reduction from lower volume. To put it in context, we are about halfway through realizing the $400 million goal as of the end of Q2, and the remaining $200 million we expect to realize in the second half of this year. That should give you more color on the expense side.
The next question will come from Jeffrey Adelson, Morgan Stanley.
I was hoping you could talk about the competitive state of the market today. Are you seeing any market share come your way perhaps given a tougher backdrop and some pressures on your larger peers? Or do you think more of that is a result of the execution Brian just talked about—Redfin and the recapture from the Mr. Cooper deal? And related to that, it looks like you have been pretty active in the Rocket Pro channel year to date. You had the Power Play initiative, the 12-business-day guarantee on closings. Can you talk about how that is driving your market share as well?
Jeff, great to hear from you. Competition in any market is healthy; it pushes companies to do their best and creates better outcomes for clients. We respect our competitors, but we focus on building the company we believe should exist. This market exposes where competitors' business models are narrow. For example, if you only originate you get exposed when rates rise and volume falls. If you only service but you do not have recapture, you don't participate fully in the next transaction. If you only have traffic and cannot convert it into mortgages, you own a small fraction of the economics. If you don't bet big on technology, you will be commoditized. If you do not manage your capital well, you may become distressed. You are starting to see a separation across the landscape, and that separation should accelerate as the market improves. Rocket is built differently: we originate, we service, we recapture, our technology makes the platform work as one, and our capital structure is robust. That is the core reason we expect to benefit as dynamics evolve. Brian, maybe you want to add some commentary on the pro business?
Jeff, I want to emphasize the capital point because it matters, especially this quarter. We are the only mortgage company with an investment-grade rating among the publicly traded mortgage companies, and we are the only publicly traded mortgage company with less than 1x leverage. We have over $11 billion of liquidity, and we strengthened that position with a successful $1.5 billion senior note offering. That capital differentiation keeps widening, and it is important for both defense and offense. On the pro side, the business is an important part of our ecosystem. We have done over $2 billion in locks related to the Compass partnership. Offering a pricing incentive is the right thing to do when entering a big partnership to excite agents and brokers. Momentum signing up new brokers has never been greater. Many of the brokers joining us have relationships with Compass agents, which creates a network effect: more Compass agents lead to more brokers, and more brokers lead to more agents—a true demonstration of a network.
Great. Thanks for taking my question.
Up next, we will hear from Ryan Nash, Goldman Sachs.
Hey, good afternoon, guys. There are a lot of moving pieces on the Q3 guide. Costs are coming down with revenues, and there may be some cost saves. The company was very aggressive in managing costs during the 2022 to 2024 time frame when the market was challenging. As we enter this next phase of higher rates, maybe just talk about what is left to do on the cost side and, given all the AI investments, how meaningful can you bring down costs from here if revenues prove to be more challenging than expected? Thank you.
Thanks, Ryan. The biggest takeaway is the additional $100 million of synergy value we discussed at the end of the prepared remarks, which is above and beyond the $400 million previously stated goal. That's a significant increase. Where is that coming from? We completed the biggest servicing loan integration in recorded history and now that we're beyond many of the big milestones, we have line of sight to additional synergy value, which we expect to achieve in the first half of 2027. We've always taken a disciplined approach to costs, and our technology and AI advancements are only increasing that discipline. Importantly, these are true synergy savings from three companies coming together and not reductions that impair capacity. We still have over $300 billion of capacity to take advantage of upside if rates move favorably.
And maybe a follow-up: it's good to see the market share increases—over 6% in purchase and over 14% in refinance. Can you talk about the drivers of reaching the 8% and 20% targets you had laid out several years back? How does the new rate environment impact your ability to achieve these?
We feel very good about the progress toward our market share goals. Let me break down some key building blocks and levers. First is recapture: connecting servicing and origination is a core, differentiated part of our strategy. We know the client and have already serviced the loan, which creates a meaningful advantage when the client is ready for their next transaction. Mr. Cooper refinance recapture reached another record, and we remain well on track against our revenue synergy target. Second is Redfin: think of Redfin as the doorway to all of Rocket. Mortgage leads have doubled year over year, and the attachment rate for mortgage is approaching nearly 50%. Redfin brings high-intent purchase clients into the Rocket ecosystem. The third is home equity: we are the largest home equity lender in the country. These building blocks—recapture, Redfin, home equity—are major drivers of our progress. We're still early in the journey. We're taking share in a difficult environment and not sacrificing profitability to chase share. Historically, when rates cooperate, we have tended to take even more share. Our North Star—profitable market share growth—does not change based on the market. We feel very good about the progress and the way we're building the business.
Thanks, Varun.
Your next question is from Bose George, KBW.
Hey, good afternoon. As you noted, on the refinance recapture loans there is near-zero customer acquisition cost. I wanted to ask how you think about the customer acquisition cost (CAC) on purchase loans that you acquire through Redfin or Compass. When you offer the incentive, how is that reflected in your P&L?
Bose, on the recapture side, we say near zero acquisition cost—there is a little bit that comes into that, but it's much lower than new-client acquisition cost. On purchase, regardless of the channel, we think about acquisition return the same way. There are different acquisition mechanisms—performance marketing costs, or pricing incentives. The pricing incentive comes out of the gain-on-sale margin. You can think of it as the cost of acquiring that client. There may be different P&L logistics—marketing versus gain-on-sale—but we think about the desired unit economics and return across channels and flex accordingly. Some business comes from referrals through Compass agents, some from direct-to-consumer Rocket Mortgage, and we can flex those channels.
And then, more and more, the servicing business is contributing to purchase growth as well. Also, when you were active in correspondent, you saw solid growth there—could that continue and support market share growth?
Absolutely. Correspondent was a good quarter for us. As we've said before, it's a way to grow the MSR portfolio. There are levers like bulk acquisitions, correspondent, and organic business. We saw a lot of opportunity this quarter in correspondent. The key point is that our recapture rates are the best in the business both on loans we've originated and on correspondent or bulk-acquisition loans. That best recapture rate turns into best returns and allows us to be more aggressive in correspondent and other channels because we see the returns through recapture.
Okay. Great. Thanks.
Mark DeVries, Deutsche Bank has the next question.
This past quarter was a particularly challenging environment for hedging MSR, yet you seem to emerge unscathed. Could you discuss your latest thoughts on how to hedge the MSR? Do the challenges peers faced incline you to rely primarily on recapture? Do you see a place for derivatives?
Mark, our hedge strategy is simple and consistent. Our goal is to hedge interest-rate volatility in the asset. Over time, Rocket and Mr. Cooper have performed well in both high-rate and low-rate environments. We use low-cost instruments like TBAs and Treasury futures. What is different for Rocket is that our recapture business provides a natural hedge, so we do not target the same 80% to 100% coverage that some might because that would make the hedge ineffective when you include recapture. That helps lower our cost of hedging. To be clear, we are not placing bets on rates going up or down; we are hedging the interest-rate volatility in the asset itself.
The next question is from Mihir Bhatia, Bank of America.
Hi, good afternoon. I wanted to ask about two regulatory changes that seem to favor Rocket: VantageScore and the trigger lead ban. Specifically on VantageScore, you were among the first to put it into production. What have you seen with it? What share of your volume is coming through it? Is the payoff more approvals or lower credit cost? Trying to understand how that is benefiting you. And on the trigger lead ban, given your servicing work and Redfin funnel, does that put you in a more advantageous position? Are you seeing it show up yet in lower lead cost or better recapture as competitors' acquisition cost rises?
Mihir, on VantageScore, it's early days but we were able to participate in the pilot and are farther along than others. Two positive things: one, competition in credit scoring is welcome because FICO costs have increased over the years; a competitive score can help drive down costs. Second, VantageScore can help clients who do not have a FICO profile—this indexes to first-time homebuyers who haven't built credit in traditional ways. That could be an outsized benefit to Rocket because we help more first-time homebuyers than anyone else. We are starting to see results, but it's early. On the trigger lead ban, the benefit we're seeing is not so much acquisition cost—Rocket was not a big user of trigger leads—but improved conversion in the mid-funnel because clients are not getting calls from other lenders at the time we pull credit. That improves the customer experience and conversion for businesses that want to take care of their consumers.
Your next question comes from Kyle Joseph from Stephens.
Hey, good afternoon. Thanks for taking my question. I wanted to dig in on the MSR sales. Was that opportunistic? It sounds like portfolio rotation—what is your appetite for that going forward, recognizing market conditions?
Kyle, this is not new for Rocket; we've done rebalancing and best-backs before. It was an opportunity to optimize the portfolio. A large portion of those sales—around 80%—went to partners to whom we already provide subservicing and recapture abilities. So it's a win-win: we collected proceeds and still subservice those loans and collect the recapture economics. Looking forward, there is $320 billion of unpaid principal in our book with note rates north of 6%, which is a strong pool for refinance and recapture if rates move.
Great. That is it for me. Thank you.
And, everyone, that is all the time we have for questions today. I would like to hand the conference back to Varun Krishna for any additional or closing remarks.
Well, thank you, everybody, for listening, and we look forward to seeing you next quarter.
And once again, ladies and gentlemen, that does conclude today's conference. We would like to thank you all for your participation. You may now disconnect.