Comment by gadflyinyoureye | Hacker News Reader

Comment by gadflyinyoureye | Hacker News Reader

gadflyinyoureye

I use to be a shareholder of Rocket. Then I tried to get a mortgage with them.

I'm self-employed. I make about 200k/year. I had 0 debt (I paid off my house the prior year). I had 20% for up to 350k. I had an 812 credit score.

When I applied they asked for my P&R statements for 2 years. The current year showed a $400 deficit (which was due to charitable giving). They said that I was losing money.Therefore I was too great of a risk.

I explained to them why the numbers were $400 lowers. I told them that I already had another $20k in receivables. I told them my present house was on the market. All to no avail. I was too great of a risk.

It was at this point that I knew they had little idea how to work in the industry. If they turned me down, they were turning other stable individuals down. I promptly sold my shares and moved on.

The realtor of the condo I eventually purchased recommended a broker. They looked at the same info and laughed at Rocket. The new broker gladly took the loan.

It’s not rare for large volume companies like this to fail on edge cases. I’m sure they have an algorithm to calculate rates and risk and there was little anyone could do to change the output. I imagine it wasn’t designed with the self employed as a high priority. I’m not convinced any of that means they are destined to fail.

My issue is that they have apparently no wiggle room or advance underwriters for the loan. They have a lot of employees that don't do data entry (because the process does that for you), that don't really think, that do take up money to be paid to be the voice on the other side of the phone. Given this, they could probably reduce staffing by another 10%.

As times get tougher, the edge cases will probably become a lucrative section of market. Rocket's been troublesome before. I doubt they have the capacity to pivot (given, again, their apparent lack of skilled brokers/underwriters).

Exactly. If I had a choice to invest at arms-length at a company who had good underwriting standards but loaned only based on liquid assets and W-2 income or in a company who very carefully underwrote loans by looking in careful detail at every applicants’ unique situation, I’m more inclined to invest in the former.

And now your company you invested is worth half because they were too strict on loaning and have entered the death spiral where they aren’t bringing enough new loans in and fold or get bought out for much less then your original stock price.

What percentage of mortgages are given to self employed folks? Genuine question, I have no idea. But I wouldn’t assume it’s enough that it could rescue any company from a death spiral.

You are making the assumption that they are also not overly strict for w2. Ive found that if one is not willing to budge on one thing its usually like that across the board

That requires the profit from the number of loan originations to non-W2 workers to be enough higher than the costs and errors produced by detailed human underwriting (against adversarial applicants, which both W2 and non-W2 applicants are, but W2s are harder to fudge).

It’s surely possible for that assumption to be true, but I start out skeptical.

You are making the assumption that they are also not overly strict for w2. Ive found that if one is not willing to budge on one thing its usually like that across the board

Eh I would agree with OC. If they got flagged up on something as small as that they are going to take a massive hit when the applications really dry up later this year. That means 1 of 2 things will happen. They will decide to massively swing towards the other direction panicking and taking on loans they never should have aka 2008. 2) They keep losing out activity and market share decreasing their stock price to a point well below where she/he bought making it a bad investment currently. Neither looks great from an investors stand point.

Rocket mortgage is a Fannie/Freddie mortgage mill. If the mortgage doesn't tick all the conventional mortgage boxes and can't be instantly sold the government, they won't write it. You're much better off working with local banks or credit unions, who may be willing to keep the loan on their books.

Yep. But looking at it as a shareholder, I don't think this should have been a negative.

Spending a lot of time to work with an individual client in order to make $1k-$2k or whatever they make ushering a loan over to fannie or freddie is not good business- especially during the recent market.

^ This.

They should have been honest with OP about what the limitations are. Conforming loans (i.e. Fannie & Freddie) are notoriously tricky for self-employed borrowers. Salespeople gonna salesperson, though.

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