Rocket Companies, Inc. Q2 FY2025 Earnings Call

Hello, and thank you for joining us. My name is Tiffany, and I will be your conference operator today. I would like to welcome everyone to the Rocket Companies, Inc. Second Quarter 2025 Earnings Call. I will now turn the call over to Sharon Ng, Head of Investor Relations.

Good afternoon, everyone, and thank you for joining us for Rocket Companies' earnings call covering the second quarter 2025. With us this afternoon are Rocket Companies' CEO, Varun Krishna; and our CFO, Brian 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. This conference call includes forward-looking statements about, among other matters, expected operating and financial results, strategic initiatives, the recent Up-C collapse and acquisition of Redfin and the anticipated acquisition of Mr. Cooper. 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 our 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'll turn things over to Varun Krishna to get us started. Varun?

Good afternoon, everybody, and thank you for joining our second quarter 2025 earnings call. There is a lot happening at Rocket these days. And today, I'm going to share our progress in a few key areas. First, I will recap our outstanding second quarter performance and the current market landscape. Next, I'll share a couple of execution wins from the quarter. And finally, I'll update you on the Redfin acquisition post close and what lies ahead. Let's start with the numbers. This was a very strong quarter for us. We demonstrated rock solid execution on the business as we closed the Redfin transaction and made progress on the integration of both Redfin and Mr. Cooper. Adjusted revenue reached $1.34 billion, above the high end of our guidance. Net rate lock volume increased by 13% year-over-year. We served over 100,000 origination clients, representing a 19% year-over-year increase with the growth of home equity loans being a key driver. Adjusted EBITDA was $172 million, representing a solid 13% margin and adjusted diluted EPS of $0.04. Given the Redfin transaction closed on July 1, Redfin's financials are not included in these second quarter results. I'm especially proud that we delivered these results in a tough housing market. Last quarter, we mentioned a delayed spring home buying season, and that's exactly what played out. April was particularly challenging for the industry and set the tone for a slow-forming season. June existing home sales came in 2.7% lower than May at an annualized pace of $3.9 million, more than 20% below pre-pandemic levels. This is a new normal. And while affordability remains a key challenge, we see signs of optimism. Consumer sentiment has recovered from the low point in April. Home price growth is beginning to slow. We're seeing prices soften in some areas, all signals that the market is slowly shifting in favor of buyers. With this backdrop, our second quarter performance was driven by the strength of our team's execution. Purchase volume increased month-over-month from April to June, supported by our affordability programs, including ONE+, RocketRentRewards and a host of seasonal promotions. We saw particularly strong growth in refinance volume quarter-over-quarter and year-over-year. During this time, we helped clients take full advantage when the 30-year mortgage rate dipped briefly to 6.6%. Most notably, home equity loan volume nearly doubled year-over-year, once again hitting a new record for units and volume. Home equity loans, which help homeowners tap record levels of home equity without impacting their first lien, continue to attract new customers to Rocket, making up nearly half of all home equity loan clients. In summary, one word to describe the quarter's results: execution. We focused on acquiring clients efficiently, delighting them, recapturing them for their next loan and earning the right to be their lender for life in line with our core strategy. Next, let's turn to our execution wins. Since I became CEO, I have consistently communicated how AI is transforming our business. This quarter, I'd like to share a few more examples of how our momentum in this space is accelerating. Let's start with our bankers. The greatest value our bankers bring is their empathy, helping clients achieve homeownership and building strong relationships with real estate agents. To enable our bankers to provide 10-star service to even more clients and agents, we've built an AI-powered communication platform that handles dialing, texting, follow-ups, and chat, which fully automates administrative tasks. Recent enhancements we've made now dynamically prioritize the client follow-up pipeline for our refinance bankers and offer AI-recommended next steps and text messages to streamline communication. As a result, daily refinance client follow-ups have increased by nearly 20%. On the operations side, agentic AI is transforming underwriting beyond traditional automation. Agentic AI breaks down complex manual processes into actionable steps that AI agents can handle autonomously. We are now launching new solutions in days instead of months. The Rocket agentic AI is powered by a technology called Model Context Protocol or MCP. MCP turns our tech stack into a dynamic interconnected system. Unlike siloed AI tools, MCP enables intelligent agents to access company-wide data instantly through deep integration with legacy systems and our years of technology investment. An example of agentic AI at work is the reviewing of earnest money deposits or EMD. Managing EMDs used to require tedious manual work for tracking, validation, and reconciliation. Today, agentic AI verifies EMD documentation and traces funds automatically, bringing only exceptions to underwriters. This technology now processes EMD for over 80% of purchase agreements and is estimated to save our operations team nearly 20,000 hours annually. The key result is that clients move through the process faster with fewer delays. Let's turn to our clients. AI-powered chat and fully digital refinance options are redefining what it means to have a seamless and fully digital experience. Our agentic chat capabilities continue to be up-leveled. The power of chat lies in its ability to meet clients where they are, providing an experience they love, enabling us to scale efficiently and operate around the clock. This approach is reshaping client engagement. More than 80% of clients now choose to continue their application through chat with over 10% of leads arriving outside traditional business hours. What's more? Clients who begin their journey in AI chat convert at 3x higher rates for purchase applications and 2.5x higher for refinance applications compared to those who don't use chat. We've expanded agentic chat capabilities to collect essential income, property, asset, and credit information upfront. This accelerates client qualification and enables seamless handoffs to our bankers with AI supplying complete context and handling the administrative work behind the scenes. We've taken a big step forward by launching a fully digital refinance experience. Clients are now able to complete a digital refinance from application to rate lock in under 30 minutes entirely online at any time of day, even outside of traditional business hours. From pulling credit and selecting a product and rate to completing the application, receiving automated approval updates, uploading documents, e-signing and even scheduling the closing; all happen seamlessly online. And if clients need support, a banker is just one click away. Looking ahead, we're focused on making the process even faster and more frictionless, aiming for completion in under 10 minutes and making refinancing as simple as pressing a refi button on any mortgage we service. All of these examples show how AI has led to higher team member productivity and expanded capacity while elevating client experiences. We put our AI-powered capacity to the test when we run seasonal promotions that spike daily volume 2 to 3x. We manage this surge without adding a single team member, demonstrating our ability to flex and scale operations in response to market activities such as rate drops while maintaining efficiency and client satisfaction. I believe we are building a foundation for infinite capacity at Rocket where our growth is supercharged by AI and human capacity is no longer a limiting factor. Okay. Now let's turn to Redfin. Rocket and Redfin together represent a redefinition of the category. Redfin gives Rocket a new foothold in purchase and takes our presence in local markets to another level. Relationships with 50 million consumers every month reflect a deep connection with demand right at the top of the funnel and create new purchase opportunities from both directions: from Redfin to Rocket and Rocket to Redfin. Despite the early days, integration has moved at a rapid pace. Within our first month, we executed a comprehensive brand update designed to bring a unified look to our digital presence. Today, Redfin's digital pages carry the unified Redfin powered by Rocket co-brand. We also made home buying easier by introducing prequalification buttons on every home listing, allowing clients to take action seamlessly. In addition, we introduced Rocket preferred pricing, giving qualified clients who finance with Rocket Mortgage and work with a Redfin agent, a 1-point rate reduction in their first year or up to $6,000 in closing credits. This delivers meaningful dollars to buyers and helps make homeownership more attainable. On the product side, we expanded our lending portfolio to address more specialized needs. Super jumbo loans and non-qualified mortgage products are now available, supporting clients with unique financial profiles. These solutions extend not just to Redfin clients but to our retail bankers and our mortgage broker partners as well, empowering more professionals to serve a much wider array of buyers. Additionally, we added nearly 150 Bay Equity loan officers to our retail banking force this quarter, further expanding our presence in local markets. Our momentum is strong, and our team remains focused on execution. We're already seeing some exciting early results. Our very first Redfin client closed on a home in Colorado in just 10 days. And since July 1, we've seen over 65 Redfin clients close on their dream home with Rocket Mortgage. Plus in the first 3 weeks, there's been a nice jump at the top of the funnel. Nearly 200,000 people have clicked on the get prequalified button within Redfin, indicating interest in home financing. Of those users with a Redfin account, 23% became a contactable lead at Rocket and 12% of all users who enter the funnel go on to start an application, taking a significant step towards homeownership. Now I have spent most of my career working on consumer fintech conversion funnels, and seeing such a positive response for a V1 that's not optimized is very promising. In addition, 7,000 agent referrals have been sent to Rocket Mortgage. What's even better is that clients referred from Rocket to Redfin are 30% more likely than those from other channels to upgrade to verified approval letters, which is the strongest sign that they're moving toward closing. These results, while early, highlight the art of the possible when the Redfin and Rocket platforms are fully connected. Together, we're meeting our clients at their moment of intent and providing a seamless experience from home search to financing, fundamentally changing the way homes are bought, sold and financed. In summary, we had a very productive quarter, balancing short- and long-term execution, and I also want to thank our teams for their speed, discipline and heart. A huge shout-out also to our servicing team for winning our 11th J.D. Power Award for servicing earlier this month. This recognition is a testament to our enduring commitment to loving, protecting, and amazing our clients. It is this dedication that underpins our industry-leading recapture rate and will be force multiplied with Mr. Cooper. Looking ahead, our teams are fully engaged in the integration work needed to realize the full potential of our integrated homeownership platform. We are delivering on our milestones and remain on track to close the Mr. Cooper transaction in Q4. At Rocket, we live by an ism: you'll see it when you believe it. As we bring Rocket, Redfin and soon Mr. Cooper together under one roof, we are building a homeownership experience that is simpler, faster and more affordable. And we're building a stronger company with an all-weather business model that thrives in any market and interest rate environment. We are positioning Rocket to be in a category of its own, a business with a significantly larger lead funnel, a massive data lake, and AI-powered capacity with a client acquisition cost to lifetime value model unseen in this industry. All designed to eliminate waste from the system, lower cost for consumers and create a more frictionless experience. The pieces are coming together, and we are working relentlessly to make this vision a reality we believe. Thank you. And with that, I'll turn it over to Brian.

Thank you, Varun, and good afternoon, everyone. It's been a really busy and productive quarter to say the least. We drove strong execution while taking steps to integrate transformative acquisitions and balance short- and long-term objectives. We pride ourselves on allocating our resources with financial discipline and concurrently making bold investments in our future. We clearly demonstrated this in the second quarter. Today, I will highlight our second quarter performance, provide an update on the integration planning with Redfin and Mr. Cooper, and discuss the cost actions we took to drive higher operational leverage. I'll conclude with our outlook for the third quarter. Let's start with our financial performance. First, I want to echo Varun's remarks about how proud we are of the team's performance in the second quarter. We demonstrated strong execution in a volatile quarter that got off to a really slow start. All the while, we closed the Redfin transaction on July 1 and are working very hard towards the close of the Mr. Cooper transaction in Q4 of this year. This quarter's execution was truly a team effort. From a top line standpoint, adjusted revenue reached $1.34 billion, beating the high end of our guidance range and achieving 9% year-over-year growth. Net rate lock volume exceeded $28 billion, an increase of 13% over the same period. Our gain on sale margin for Q2 was healthy at 280 basis points, in line with our average over the past 12 months. On an adjusted EBITDA basis, we delivered $172 million or a 13% adjusted EBITDA margin. We reported adjusted net income of $75 million and adjusted diluted EPS came in at $0.04. We delivered these results despite ongoing market headwinds. As we noted last quarter, extreme volatility in April delayed the start of the spring home buying season. While the purchase season was indeed slow forming and the market conditions remain challenging, we were right alongside our clients, supporting them with our affordability solutions like ONE+ and RocketRentRewards. As a result, our purchase volume grew sequentially from April to June. Refinance volume was also a bright spot with home equity loans doubling year-over-year. The market is gradually rebalancing in favor of homebuyers. In 11 of the 50 largest U.S. metro areas including several in Texas, Florida and California, home prices are softening and the income needed to purchase a home is declining. Home price growth is moderating, inventory is expanding by double digits year-over-year and affordability is improving, albeit with elevated 30-year fixed mortgage rates. After years of constrained supply and rising prices, buyers are finally starting to gain more leverage in the market. Now let's turn to Redfin. The acquisition is already enhancing our platform and expanding our reach and strengthening our position in the purchase market. Redfin brings direct access to 50 million monthly consumers and deep relationships with real estate agents across the country. Together, we're significantly growing our top of funnel and fueling purchase lead generation from both brands. Our combined 14-petabyte data lake also enhances our AI capabilities, enabling more personalized experiences at scale. As I shared, when we announced the acquisition of Redfin in March, we expect $200 million in total synergies. That's $140 million on the expense side and $60 million in revenue. On revenue synergies, it's early, but we are encouraged by the results we're seeing so far. Varun highlighted the surge in leads and higher conversion rates we're already seeing from Rocket and Redfin's cross-pollination of leads, agent referrals, and mortgage applications. This early momentum is exciting and points to tremendous growth potential ahead. On the expense side, we have line of sight into the target synergies and have already started to take action in the first 4 weeks since closing. We'll plan to provide more details in future quarters. Regarding Mr. Cooper, the integration planning is in full force, and our teams are meeting and collaborating closely. We remain on track to close the Mr. Cooper transaction in Q4. Now let's cover our capital position. It provides a competitive advantage, a robust funding profile and the flexibility to invest in our business over the short and long term. In June, we successfully issued $4 billion in unsecured bonds to refinance Mr. Cooper's debt upon change of control. This transaction was nearly 3x oversubscribed with strong participation from a diverse investor base, including significant demand from investment-grade funds, signaling confidence in our credit profile. If in the unlikely case, the Mr. Cooper transaction doesn't close, the debt is extinguished and the cash is returned to investors. Additionally, subsequent to June 30, we repaid approximately $250 million of the Redfin term loan debt in connection with the change of control provisions, an outcome that also enabled us to further streamline our capital structure. Taken together, these actions position us well for a successful close and integration with Mr. Cooper in Q4. As of June 30, inclusive of the $4 billion in unsecured bonds related to Mr. Cooper, we held $6 billion in available cash and $7.6 billion in mortgage servicing rights, totaling $13.6 billion in balance sheet value. Total liquidity stood at $9.1 billion, including $5.1 billion of cash on the balance sheet, $0.9 billion in corporate cash to self-fund originations, $1.1 billion in undrawn lines of credit, and $2 billion in undrawn MSR credit facilities. Before I discuss our third quarter outlook, I'd like to take a moment to focus on a very important topic, operational efficiency. We take a very disciplined approach to expense management and capital allocation, which are foundational to how we operate. These principles guide every decision we make as we scale and optimize across search, origination, and servicing with the customer always front and center. We recently took further actions to streamline our operations. In the second quarter, we completed the shutdown of Rocket Mortgage Canada. Also in July, we initiated the wind down of the Rocket Visa Signature Card program. While there will be a financial benefit from these decisions, our primary objective is to sharpen our focus and double down on our homeownership platform and our mission to help everyone home. Beyond discontinuing these two business lines, earlier this month, we restructured G&A teams that support the mortgage origination business. These changes were a result of our investments in AI and automation, which have allowed us to reduce redundant roles and retire legacy workflows. We expect these actions to collectively deliver approximately $80 million in annualized savings, the majority of which will be recognized on a full quarter run rate basis starting in Q4. It's also worth emphasizing that these efficiencies are separate from the synergies previously announced as part of the Redfin and Mr. Cooper transactions. As we look ahead to the third quarter, we're cautiously optimistic about the summer home buying season as the market continues to shift in favor of buyers. While we know that the home buying season typically slows around Labor Day, as kids return to school and families settle down, our current approval letter pipeline indicates that the summer home buying season will be extended with strong activity continuing through the third quarter. This trend is reflected in our sequential month-over-month growth in approval letters over the past couple of months, bucking the typical seasonal slowdown we see this time of year. This is the first quarter that we will be incorporating Redfin into our guidance. For the third quarter, inclusive of Redfin, we expect adjusted revenue to be between $1.600 billion and $1.750 billion. On a Rocket stand-alone basis, we expect adjusted revenue to be in the range of $1.325 billion to $1.475 billion. Now with regard to expenses, let me walk you through a couple of the key cost drivers expected in the third quarter. On a consolidated basis, including Redfin and nonrecurring items, we expect total expenses to increase by approximately $335 million compared to the second quarter. Importantly, this projected increase is based on revenue at the midpoint of our guidance. It reflects $275 million in Redfin-related costs and $90 million in nonrecurring items, partially offset by a reduction in Rocket's stand-alone expenses. The decline in Rocket's stand-alone expense reflects the planned step-down in brand marketing as we transition out of the upfront investment phase of our brand restage. We are now operating at a more optimized run rate while continuing to build on the elevated brand awareness established earlier this year. The $90 million increase in nonrecurring items relates to the Redfin and Mr. Cooper transactions. Of that, $30 million reflects severance and transaction costs, which will be classified as one-time expenses. The remaining $60 million reflects interest expense incurred from refinancing Mr. Cooper's debt ahead of closing. Post-close, the newly issued bonds will substitute Mr. Cooper's existing debt and the associated interest expense. Lastly, to reiterate, the internal cost actions, including the reduction in headcount at Rocket paired with the wind down of the Rocket Mortgage Canada and credit card businesses are expected to yield $80 million in annualized savings. Due to the timing of these actions, there will only be minimal impact in the third quarter, and the full run rate savings are expected to be realized in the fourth quarter. In summary, our results in the second quarter show the impact of our execution and focus as we continue to deliver value for our clients, team members, and stakeholders. We are even more excited about what we can achieve going forward with the combined strength of Rocket, Redfin, and soon Mr. Cooper. We are building an integrated homeownership platform the industry has never seen, one that delivers modern, seamless, and more affordable homeownership experiences and one with an all-weather business that is both resilient and thrives across market conditions. We will continue to prioritize operational efficiency, move with speed and agility and execute with a focus on our mission to help everyone home. Operator, we're now ready to open it up for questions.

I wanted to ask about your outlook for 3Q and the rest of 2025. On costs, what do you view as the core run rate from here in 3Q and beyond? And how are you thinking about the pacing of revenue growth and expenses from here?

I'm going to start by just talking a little bit about the outlook. And then I think, Brian, you can jump in on anything related to cost and our guide. So let me start by just taking you back to our last quarter. We were on the same call, we were talking about the home buying season. And what we shared was at that point, it was going to be a slower forming season, but that momentum would build up over time. So ultimately, that basically leads to a longer spring home buying season, and that's pretty much what we've seen play out this quarter. April was pretty abnormal. There's a lot of volatility. You had tariffs, you had rates dipping and climbing, you had consumer sentiment dropping. And so in general, affordability was a little bit challenged. And so in terms of the start of the season, it was a little bit laggy. But as we look ahead, we're definitely seeing signals that suggest momentum. And I'll give you two interesting stats that actually come from Redfin. The first one is around nationwide home price growth, and that's actually been cut in half year-over-year. So it's gone from 6.9% to about 3.4%. The other thing is that in about 11 major markets, Redfin has actually seen home prices come down. And so the good news is that the market is starting to shift in favor of buyers, and that's a great signal that the purchase season will extend. So it's a great opportunity for buyers who have been on the sidelines, and we expect that demand to extend. We expect it to carry through the traditional Labor Day drop-off. And again, that gives us optimism. And you see that optimism and confidence reflected in our outlook and our guide, and our guide is up 6% year-over-year. And so maybe, Brian, you can unpack a little further in terms of guide and expense.

Thank you, Lucas, for the question. I want to emphasize that Q2 was a strong quarter, and I am proud of our team's performance. As Varun mentioned, the quarter started off a bit shaky, but the good news is that the third quarter began strong, picking up from where we left off in Q2. This momentum is ongoing. Regarding the pre-approval pipeline for home purchases, we believe that the home buying season will continue, despite its slow start, likely extending beyond the typical September Labor Day holiday. This expectation is reflected in our guidance, which includes Redfin for the first time, contributing $270 million. Looking at our quarterly guidance, we anticipate revenues between $1.6 billion and $1.75 billion, with Redfin's contribution included. Excluding Redfin, we see a year-over-year increase of 6% and a quarter-over-quarter increase of 4%, while the MBA forecast predicts flat performance. We see this as a strong guide demonstrating another quarter of growth. In terms of volume and margins, we expect margins to be stable compared to Q2, meaning our revenue growth on a stand-alone basis is generated through production and gaining market share. On the expense side, we pride ourselves on operational excellence and financial discipline, which was evident this quarter. We also expect Q3 expenses to rise by approximately $335 million, including an estimated $275 million for Redfin expenses. Additionally, we estimate a $30 million decrease in Rocket Mortgage marketing due to the brand restage we discussed in the first half of the year, which is starting to yield results as we transition back to traditional spending levels. Also, we project around $120 million in nonrecurring expenses for Q3, which is $90 million more than last quarter, stemming from severance and one-time costs related to the Cooper and Redfin transactions, among other factors. We also anticipate about $60 million in interest expense from our $4 billion bond issuance, which will help reduce Cooper's unsecured debt. Lastly, we've taken steps to streamline our business, including a headcount reduction in July within our G&A teams and the wind down of our Canadian mortgage and credit card operations. The combined impact of these actions is approximately $80 million on an annual basis, which we expect to realize fully by Q4. While there is a small financial benefit from shutting down those operations since they were losing money, our main focus is on ensuring product market fit and concentrating on enhancing our homeownership platform.

Actually, historically, you guys obviously didn't hedge your MSR given the very high recapture rates. But just given that the recapture rates on the Cooper MSR will be lower just given a lot of that is acquired, et cetera. Just what are your thoughts about the hedge strategy on a combined basis going forward?

Thanks for the question, Bose. To address your inquiry about the Cooper side, I’d like to provide some insight into the Rocket side as well. Regarding Cooper, our strategy is to continue hedging the combined portfolios effectively. Cooper manages this well and typically aims for around 70% coverage. Therefore, if you’re considering the day after the close, I don’t anticipate any changes there. This is important as we need to validate that the recapture synergies are indeed forthcoming. As we gather more data and insights, we will reassess our approach. There is a natural hedge between fluctuations in MSR value and the recapture business. On the Rocket side, however, we haven’t been hedging, and our focus has mainly been on hedging the MSR assets we intend to sell, which is more of a temporary hedge. As we refine our strategy, we did implement a hedge during the quarter concerning the float assumption, aimed at protecting the earnings component of the MSR value, particularly for those lower note rates that aren’t likely to pay off in the near term. You will see this reflected in our financials when we submit our quarterly report. We are being very deliberate about this, and we took steps to hedge our float earnings assumption based on the short-term curve.

I appreciate all the comments you made on Redfin. Just wondering if there are any other thoughts you'd want to share about what you've learned kind of post-closing of that deal? And how you're feeling about the synergy guidance?

Yes, absolutely. And I'll start by just sharing what we're seeing and some context around why we're so excited about the deal. And then, Brian, maybe you can comment further as well. Let me just start with why Redfin. And I think it's important just to really internalize that this is all about our strategy around purchase. And purchase is something that we have declared as a company-level imperative. We think purchase is a durable bet for the long-term growth of the company. And what's interesting about purchase is that there are a few things around the purchase funnel that really make it interesting and complex. The lead flow is expensive. It takes a long time to nurture relationships with the client. You need deep relationships with clients. You need relationships with realtors. You also have this kind of local dynamic where every market is a little bit different. And this is really why the connection with Redfin is so powerful because Redfin essentially solves all of those channels. This is a company with relationships with 50 million consumers at the top of the funnel. Most of those consumers are daily active users who use a mobile app. Redfin is incredibly connected, right, with the local ecosystem, thousands of local agents. And what's also interesting is that of all of the U.S. homebuyers that are purchasing a home this coming year, nearly 1 in 4 at some point are going to touch the Redfin platform during their search and real estate journey. The other thing is that Redfin is just beloved, right? It's a very trusted brand with high awareness, high affinity. And so those are the reasons that we love this integration, and we love this company. But in terms of the actual integration, I do want to share that I'm so proud of just the amount of work that was completed before and after close, leading us to just be integration ready on day 1. I'm super proud of the team. On day 1, we had co-branding, Redfin powered by Rocket. On day 1, we had launched prequalification buttons on every home listing page. On day 1, we launched a preferred pricing bundle, saving consumers' money. On day 1, we had the ability for realtors to refer to Rocket as well as the ability to create demand from Rocket to Redfin as well. And we're seeing some awesome early data. We're seeing that the quality of traffic is very high. In fact, clients that were actually referring from Rocket to Redfin are 30% more likely to upgrade to what we call a VAL or a verified approval letter. And that really matters. And what's important is that verified approvals are the strongest indicators of conversion and purchase. So it is early days, but I would say that we're very pleased with the integration. The last thing I would say before I ask Brian if there's anything he would want to add, is that it's all about culture. Brian and I actually were out in Seattle last week with our leadership team. We were meeting with Glenn Kelman and his leadership team. And just the energy and momentum of these companies is so inspiring. You can see the soul, you can see the culture of the company that's already becoming very deeply connected. And what I look at as a very healthy sign is that you just can't see where one company ends and the other company begins. So this is just the beginning, but we're very excited about the progress. Brian, is there anything you would add in terms of synergies or financial standpoint?

Yes, sure. Mark, it's good to hear from you. So just as a reminder for the group, we said upon announcement that we expect $200 million in synergies, $60 million of that was revenue, $140 million of it was expense. And to Varun's point, it's early days. We're only 4 weeks in, but I agree it's exceeding our expectations, particularly on the demand and the lead creation side. So I'll probably reserve the right to comment more on revenue over the next couple of quarters since it's early days. And then on the expense side, look, we have direct line of sight into the $140 million. We've already started taking significant actions in July. And those actions are completely separate and distinct from the other things I mentioned at Rocket. So if I had to summarize it, we feel really good about achieving and dare I say, even exceeding our expectations on both the revenue and expense side of the synergy house.

Congrats on the quarter. Thanks for all the detail, as always. On the purchase side and also a bit of a tangential follow-up on the Redfin topic, really encouraging commentary on the initial traction with the pre-approval button. You called out the expansion of the local market presence. I guess one thing we've seen over time in the residential brokerage space is that the number of real estate agents can really influence market share at a brokerage. So with Redfin sitting at about 2,200 agents, I'm curious, as you and the team with Glenn strategize on the business, should we expect the agent count side of Redfin to potentially meaningfully expand or at least directionally continuing expanding as it has been over the last year? And then secondarily and kind of bigger picture on purchase. We're about a year removed from Investor Day. So I'm just curious if you can kind of refresh on conviction levels in the multiyear purchase market share targets that you laid out at that time?

Thank you for the question. I'll begin with the second part and outline our comprehensive purchase strategy. Purchase is a significant strategic focus for us as a company, representing a vast market that is highly inefficient, fragmented, costly, and filled with obstacles. It is crucial for us to address these issues as we aim to develop a strong platform for future growth. We see a substantial opportunity for transformation in this area. To recap our foundational elements for establishing a robust purchase strategy: First, we have Redfin, which offers an exceptionally efficient and high-quality experience at the top of the sales funnel. This will help us reach more consumers and realtors, allowing us to create an effective lead nurturing process for purchases. The second element is our servicing strategy, particularly focused on recapture. Rocket currently leads in recapture rates due to our outstanding servicing experience. The integration of Mr. Cooper will enhance our recapture process, crucial for our purchase growth, enabling us to serve more clients throughout their borrowing journey and provide an excellent experience with Rocket. Thirdly, our wholesale strategy is vital to our purchase engine. We are committed to expanding in this area and have launched on the ARIVE platform, seeing significant momentum in wallet share, which is increasing quarter-over-quarter and year-over-year. We're also introducing innovative solutions in the broker market, including more compensation flexibility, advanced pricing technology, and improved processes for handling various credit options. Regarding our agent strategy, Redfin features an in-house agent network along with a vast partner network of thousands of agents. We are also unifying the Rocket Homes agent network with Redfin's, enabling us to achieve greater scale. Additionally, the Redfin experience brings significant traffic and relationships to 50 million consumers at the top of the funnel, offering the ability to connect with them directly, alongside our agent network. These factors give us confidence in our scalable purchase strategy. We are on track to meet our goals and are optimistic about the progress we are making.

I wanted to discuss Mr. Cooper briefly. Although the deal hasn't closed yet, several months have passed. I'm curious if you still believe those synergies are on track. Additionally, could you elaborate on any further analysis regarding whether the 65% recapture rate assumption might be conservative or accurate?

Yes. Thanks for the question, Jeff. I'll start just by talking about the context and progress that we're making on the deal, and then I'll ask Brian to jump in as well. But let me just start by talking about why Mr. Cooper and Rocket makes sense. And at the heart of it is just our ability to build lifetime value, long-term relationships with clients, and that's essentially what servicing represents, right? It's the ability to serve a client for the entirety of their loan experience. And our thesis is that if we do a good job with that, we earn the right to recapture them for a new loan, which is core to our strategy. And ultimately, if we do that right, we end up reducing the cost of acquisition, which allows us to pass on more value, more savings directly to the client. Now I would say in terms of our progress towards closing, we're very pleased with the progress. We are on track for a Q4 close. We've received HSR approval. We're advancing with state-level regulators, with the GSEs and of course, with FHFA. It is a large complex transaction, but the process is moving as expected. And the teams from both organizations are collaborating very closely, and it is our #1 priority across the company. Brian, is there anything you would want to add?

Yes, thanks, Jeff. The only thing I would add is every day that we've made progress since the last update, we just keep building on the conviction around the synergy numbers. This is similar to the Redfin update other than the fact we're not closed here. I would say the line of sight on the expense side makes us feel really good. And the work that we're doing in terms of tearing apart the recapture only gives us more conviction. So as we sit here today, the only way I can probably answer that question is conviction continues to increase, and we're very confident in the numbers. Okay. Great. And if I could just circle back on the Redfin, I appreciate all the color and numbers you've provided thus far. I was just curious, do you have any early line of sight into how the attach rates that you highlighted in 2024 for Redfin? You mentioned the 27% on mortgage, 61% on title and escrow. Do you have any sort of update on how that's trended or how you performed on that since the deal closed? Yes, of course, I can give you an update on that. I mean I'll kind of take a step back. And if I look at Redfin's business model, again, to your point, it's early days, but we've seen a couple of really positive things. One has been an increase in traffic. Obviously, this is an exciting time of year for homebuyers, and you're expecting to see activity, but some of the Redfin brand and performance marketing is clearly paying off, and we're starting to see some nice returns there. So traffic is actually up, which is good. And then the second thing you mentioned, which is true is that we are starting to see some exciting green shoots on the attach rate side. We had to take the time to get the loan officers transitioned over, and that was really important, and we're happy to report we were successfully able to do that with the vast majority of the Bay Equity loan officers coming over to Rocket. And since that, and to Varun's point, we had a really good pre-planning exercise. So we were able to do a lot of that on day 1. We've seen the recapture rates actually improve from the historical Redfin recapture rates, which is obviously really good news for achieving those revenue synergies.

One of the pillars for market share growth that you laid out at Investor Day was MSR acquisitions. Obviously, a big part of the COOP transaction. But can you talk about your appetite to continue to acquire MSRs, both while waiting for the deal to close and after it closes?

Yes, thanks, Doug. I want to provide some market insight. When comparing the first half of this year to the same period last year, overall transfers have decreased by about 30% based on my latest observations. The market has been relatively subdued, particularly on the supply side. However, demand remains robust, which makes it competitive. Regarding our bidding strategy at Rocket, as we've discussed before, we are particularly interested in assets that show high recapture potential, and we will remain active in that part of the market. With the merger of Rocket and COOP, I'm genuinely excited because it creates a strong competitive bidding process, leveraging our capital and recapture capabilities. Additionally, we enjoy significant optionality due to the strengths of our combined entities, which feature a comprehensive fulfillment engine for servicing growth via organic means, as well as through wholesale, retail, correspondent, and co-issue channels. In simpler terms, we are not obligated to participate in the bulk market, allowing us to take advantage of opportunities while adhering to high expected return thresholds. If we can achieve those returns, we will proceed with bids; otherwise, we can abstain. Thus far this year, activity has been a bit subdued in terms of new market opportunities, but our bidding strategy at Rocket remains unchanged, albeit with less supply available.

Yes, thanks, Doug. I mean, I would say that I expect the longer-term trajectory to geometrically accelerate. We are building a platform where scale is basically no longer constrained by people or cost. Today, we easily handle $150 billion in originations without really any increase in fixed expenses. And that's not theoretical. It's happening. The results are measurable. You can see it in our operations with the thousands of hours saved. You see it in our communication platform and telephony. You see it in the client experience with now more and more fully digital flows from start to finish. So I don't view this as just kind of automation. I view it as a structural advantage. And it's a better experience. It's changing the shape of our business model, and we're very excited about it. We think that this foundation is a foundation for infinite capacity. It's not sort of a pipe dream; it's very real, and we're just getting started. So I expect that our progress will accelerate geometrically.

That concludes our question-and-answer session. I will now turn the call back over to Varun Krishna for closing remarks.

Thank you, everyone, for attending the call, and we look forward to seeing you next quarter.

Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.