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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________

Commission file number: 001-39432

Rocket Companies, Inc.
(Exact name of registrant as specified in its charter)
Delaware84-4946470
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
1050 Woodward Avenue, Detroit, MI
48226
(Address of principal executive offices)(Zip Code)

(313) 373-7990
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A common stock, par value $0.00001 per shareRKTNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No
As of April 30, 2024, 139,476,240 shares of the registrant's Class A common stock, $0.00001 par value, and 1,848,879,483 shares of the registrant's Class D common stock, $0.00001 par value, were outstanding.







Rocket Companies, Inc.
Form 10-Q
For the period ended March 31, 2024














2



PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)
Rocket Companies, Inc.
Condensed Consolidated Balance Sheets
($ In Thousands, Except Per Share Amounts)
March 31,
2024
December 31,
2023
Assets(Unaudited)
Cash and cash equivalents$861,410 $1,108,466 
Restricted cash31,975 28,366 
Mortgage loans held for sale, at fair value9,416,229 6,542,232 
Interest rate lock commitments (“IRLCs”), at fair value202,873 132,870 
Mortgage servicing rights (“MSRs”), at fair value6,691,341 6,439,787 
Notes receivable and due from affiliates18,574 19,530 
Property and equipment, net of accumulated depreciation and amortization of $556,734 and $536,196, respectively
243,476 250,856 
Deferred tax asset, net543,896 550,149 
Lease right of use assets313,408 347,696 
Forward commitments, at fair value496 26,614 
Loans subject to repurchase right from Ginnie Mae1,601,648 1,533,387 
Goodwill and intangible assets, net1,245,907 1,236,765 
Other assets1,047,942 1,015,022 
Total assets$22,219,175 $19,231,740 
Liabilities and equity
Liabilities
Funding facilities6,145,452 $3,367,383 
Other financing facilities and debt
Senior Notes, net4,034,818 4,033,448 
Early buy out facility171,748 203,208 
Accounts payable189,038 171,350 
Lease liabilities357,524 393,882 
Forward commitments, at fair value22,785 142,988 
Investor reserves95,041 92,389 
Notes payable and due to affiliates31,325 31,006 
Tax receivable agreement liability584,695 584,695 
Loans subject to repurchase right from Ginnie Mae1,601,648 1,533,387 
Other liabilities375,650 376,294 
Total liabilities$13,609,724 $10,930,030 
Equity
Class A common stock, $0.00001 par value - 10,000,000,000 shares authorized, 138,811,617 and 135,814,173 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively.
$1 $1 
Class B common stock, $0.00001 par value - 6,000,000,000 shares authorized, none issued and outstanding as of March 31, 2024 and December 31, 2023.
  
Class C common stock, $0.00001 par value - 6,000,000,000 shares authorized, none issued and outstanding as of March 31, 2024 and December 31, 2023.
  
Class D common stock, $0.00001 par value - 6,000,000,000 shares authorized, 1,848,879,483 shares issued and outstanding as of March 31, 2024 and December 31, 2023.
19 19 
Additional paid-in capital350,811 340,532 
Retained earnings300,494 284,296 
Accumulated other comprehensive income72 52 
Non-controlling interest7,958,054 7,676,810 
Total equity8,609,451 8,301,710 
Total liabilities and equity$22,219,175 $19,231,740 
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
3



Rocket Companies, Inc.
Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
($ In Thousands, Except Per Share Amounts)
(Unaudited)

Three Months Ended March 31,
20242023
Revenue
Gain on sale of loans
Gain on sale of loans excluding fair value of MSRs, net$476,429 $265,003 
Fair value of originated MSRs222,797 204,560 
Gain on sale of loans, net699,226 469,563 
Loan servicing income (loss)
Servicing fee income345,746 366,385 
Change in fair value of MSRs56,508 (398,279)
Loan servicing income (loss), net402,254 (31,894)
Interest income
Interest income88,980 66,744 
Interest expense on funding facilities(51,443)(35,112)
Interest income, net37,537 31,632 
Other income244,699 196,767 
Total revenue, net1,383,716 666,068 
Expenses
Salaries, commissions and team member benefits541,096 603,775 
General and administrative expenses236,665 195,390 
Marketing and advertising expenses206,296 181,604 
Depreciation and amortization27,017 30,685 
Interest and amortization expense on non-funding debt38,365 38,333 
Other expenses35,907 32,268 
Total expenses1,085,346 1,082,055 
Income (loss) before income taxes298,370 (415,987)
(Provision for) benefit from income taxes(7,656)4,504 
Net income (loss)290,714 (411,483)
Net (income) loss attributable to non-controlling interest(274,499)392,960 
Net income (loss) attributable to Rocket Companies$16,215 $(18,523)
Earnings (loss) per share of Class A common stock
Basic$0.12 $(0.15)
Diluted$0.11 $(0.16)
Weighted average shares outstanding
Basic136,991,743 124,732,722 
Diluted1,991,982,680 1,974,629,808 
Comprehensive income (loss)
Net income (loss)$290,714 $(411,483)
Cumulative translation adjustment314 7 
Unrealized loss on investment securities (1,589)
Comprehensive income (loss)291,028 (413,065)
Comprehensive (income) loss attributable to non-controlling interest(274,792)394,441 
Comprehensive income (loss) attributable to Rocket Companies$16,236 $(18,624)
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
4

Rocket Companies, Inc.
Condensed Consolidated Statements of Changes in Equity
($ In Thousands)
(Unaudited)
Class A Common
Stock Shares
Class A Common
Stock Amount
Class D Common
Stock Shares
Class D Common
Stock Amount
Additional
Paid-in Capital
Retained
Earnings
Accumulated Other
Comprehensive
Income (Loss)
Total
Non-controlling
Interest
Total
Equity
Balance, December 31, 2022123,491,606 $1 1,848,879,483 $19 $276,221 $300,394 $69 $7,898,845 $8,475,549 
Net loss— — — — — (18,523)— (392,960)(411,483)
Cumulative translation adjustment— — — — — — — 7 7 
Unrealized loss on investment securities— — — — — — (101)(1,488)(1,589)
Share-based compensation, net1,390,650 — — — 3,217 — — 47,596 50,813 
Distributions for state taxes on behalf of unit holders (members), net of refunds— — — — — (209)— 326 117 
Forfeitures of Special Dividend to Class A Shareholders— — — — — 23 — 347 370 
Taxes withheld on team members' restricted share award vesting
— — — — (444)— — (6,550)(6,994)
Issuance of Class A common Shares under stock compensation and benefit plans878,817 — — — 456 — — 6,794 7,250 
Change in controlling interest of investment, net— — — — 15,268 (688) (19,275)(4,695)
Balance, March 31, 2023125,761,073 $1 1,848,879,483 $19 $294,718 $280,997 $(32)$7,533,642 $8,109,345 
Balance, December 31, 2023135,814,173 $1 1,848,879,483 $19 $340,532 $284,296 $52 $7,676,810 $8,301,710 
Net income— — — — — 16,215 — 274,499 290,714 
Cumulative translation adjustment— — — — — — 21 293 314 
Share-based compensation, net2,458,761 — — — 2,060 — — 27,722 29,782 
Distributions for state taxes on behalf of unit holders (members)
— — — — — (19)— (255)(274)
Forfeitures of Special Dividend to Class A Shareholders— — — — — 2 — 29 31 
Taxes withheld on team members' restricted share award vesting
— — — — (1,152)— — (15,410)(16,562)
Issuance of Class A common Shares under stock compensation and benefit plans538,683 — — — 454 — — 6,161 6,615 
Change in controlling interest of investment, net— — — — 8,917 — (1)(11,795)(2,879)
Balance, March 31, 2024138,811,617 $1 1,848,879,483 $19 $350,811 $300,494 $72 $7,958,054 $8,609,451 

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
5


Rocket Companies, Inc.
Condensed Consolidated Statements of Cash Flows
($ In Thousands)
(Unaudited)
Three Months Ended March 31,
20242023
Operating activities
Net income (loss)$290,714 $(411,483)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization27,017 30,685 
Provision for (benefit from) deferred income taxes3,907 (8,505)
Origination of MSRs
(222,797)(204,560)
Change in fair value of MSRs, net(52,525)397,681 
Gain on sale of loans excluding fair value of MSRs, net(476,429)(265,003)
Disbursements of mortgage loans held for sale(19,739,707)(16,785,731)
Disbursements of non-mortgage loans held for sale
(36,599)(32,838)
Change in fair value of non-mortgage loans held for sale
1,956 348 
Proceeds from sale of loans held for sale17,168,741 15,970,958 
Share-based compensation expense30,997 51,960 
Change in assets and liabilities
Due from affiliates956 2,722 
Other assets(20,142)(10,989)
Accounts payable17,688 18,708 
Due to affiliates324 (3,187)
Other liabilities(6,823)(82,071)
Total adjustments$(3,303,436)$(919,822)
Net cash used in operating activities$(3,012,722)$(1,331,305)
Investing activities
Proceeds from sale of MSRs$56,707 $81,539 
Net purchase of MSRs(17,364)(3,285)
Decrease in mortgage loans held for investment10,144 3,190 
Purchases of investment securities, available for sale (5,472)
Sales of investment securities, available for sale 6,479 
Purchase and other additions of property and equipment, net of disposals(14,027)(18,210)
Net cash provided by investing activities$35,460 $64,241 
Financing activities
Net borrowings on funding facilities$2,778,069 $1,687,335 
Net payments on early buy out facility(31,460)(249,051)
Net (payments) borrowings on notes payable from unconsolidated affiliates(5)174 
Stock issuance5,403 6,122 
Taxes withheld on team members' restricted share award vesting
(16,562)(6,994)
Distributions to other unit holders (members of Holdings)(1,944)(1,938)
Net cash provided by financing activities$2,733,501 $1,435,648 
Effects of exchange rate changes on cash and cash equivalents314 7 
Net (decrease) increase in cash and cash equivalents and restricted cash(243,447)168,591 
Cash and cash equivalents and restricted cash, beginning of period1,136,832 789,099 
Cash and cash equivalents and restricted cash, end of period$893,385 $957,690 
Non-cash activities
Loans transferred to other real estate owned$1,248 $726 
Supplemental disclosures
Cash paid for interest on related party borrowings$429 $424 

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.
6

Rocket Companies, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)

1. Business, Basis of Presentation and Accounting Policies

Rocket Companies, Inc. (the “Company”, and together with its consolidated subsidiaries, “Rocket Companies”, “we”, “us”, “our”) was incorporated in Delaware on February 26, 2020 as a wholly owned subsidiary of Rock Holdings Inc. (“RHI”) for the purpose of facilitating an initial public offering (“IPO”) of its Class A common stock, $0.00001 par value (the “Class A common stock”) and other related transactions in order to carry on the business of RKT Holdings, LLC (“Holdings”) and its wholly owned subsidiaries.

We are a Detroit‑based fintech company including mortgage, real estate and personal finance business. We are committed to delivering industry-best client experiences through our AI-fueled homeownership strategy. Our full suite of products empowers our clients across financial wellness, personal loans, home search, mortgage finance, title and closing. We believe our widely recognized “Rocket” brand is synonymous with simple, fast, and trusted digital experiences. Through these businesses, we seek to deliver innovative client solutions leveraging our Rocket platform. Our business operations are organized into the following two segments: (1) Direct to Consumer and (2) Partner Network, refer to Note 11, Segments.

Rocket Companies, Inc. is a holding company. Its primary material asset is the equity interest in Holdings which, including through its direct and indirect subsidiaries, conducts a majority of the Company's operations. Holdings is a Michigan limited liability company and wholly owns the following entities, with each entity's subsidiaries identified in parentheses: Rocket Mortgage, LLC, Amrock Holdings, LLC (“Amrock”), Amrock Title Insurance Company (“ATI”), LMB HoldCo LLC (“Core Digital Media”), RCRA Holdings LLC (Rock Connections LLC dba “Rocket Connections”), Rocket Homes Real Estate LLC (“Rocket Homes”), RockLoans Holdings LLC (“Rocket Loans”), Rock Central LLC dba Rocket Central, Rocket Money, Inc.(“Rocket Money”), Rocket Worldwide Holdings Inc. (EFB Holdings Inc. (“Rocket Mortgage Canada”) and Lendesk Canada Holdings Inc. (“Lendesk Technologies”)), Woodward Capital Management LLC, and Rocket Card, LLC. As used herein, “Rocket Mortgage” refers to either the Rocket Mortgage brand or platform, or the Rocket Mortgage business, as the context allows.

Effective April 1, 2024, Rock Central LLC dba Rocket Central merged into RKT Holdings, LLC.

Basis of Presentation and Consolidation

As the sole managing member of Holdings, the Company operates and controls all of the business affairs of Holdings, and through Holdings and its subsidiaries, conducts its business. Holdings is considered a variable interest entity (“VIE”) and we consolidate the financial results of Holdings under the guidance of ASC 810, Consolidation. A portion of our Net income (loss) is allocated to Net (income) loss attributable to non-controlling interest. For further details, refer below to Variable Interest Entities and Note 12, Non-controlling Interest.

All significant intercompany transactions and accounts between the businesses comprising the Company have been eliminated in the accompanying condensed consolidated financial statements.

The Company's derivatives, IRLCs, MSRs, mortgage and non-mortgage loans held for sale, and trading investment securities are measured at fair value on a recurring basis. Additionally, other assets may be required to be measured at fair value in the condensed consolidated financial statements on a nonrecurring basis. For further details of the Company's transactions refer to Note 2, Fair Value Measurements.

All transactions and accounts between RHI and other related parties with the Company have a history of settlement or will be settled for cash and are reflected as related party transactions. For further details of the Company’s related party transactions refer to Note 6, Transactions with Related Parties.

7

Rocket Companies, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)
Our condensed consolidated financial statements are unaudited and presented in U.S. dollars. They have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The interim financial information should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC. In our opinion, these condensed consolidated financial statements include all normal and recurring adjustments considered necessary for a fair statement of our results of operations, financial position and cash flows for the periods presented. Certain prior period amounts have been reclassified to conform to the current period financial statement presentation. However, our results of operations for any interim period are not necessarily indicative of the results that may be expected for a full fiscal year or for any other future period.

Management Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Although management is not currently aware of any factors that would significantly change its estimates and assumptions, actual results may differ from these estimates.

Subsequent Events

In preparing these condensed consolidated financial statements, the Company evaluated events and transactions for potential recognition or disclosure through the date these condensed consolidated financial statements were issued. Refer to Note 5, Borrowings for disclosures on changes to the Company's debt agreements that occurred subsequent to March 31, 2024. In addition, on May 7, 2024, Rocket Mortgage entered into a new Master Repurchase Agreement among Morgan Stanley Bank, N.A., as buyer, Morgan Stanley Mortgage Capital Holdings LLC, as agent and Rocket Mortgage as seller. The facility amount is $1.0 billion.

Revenue Recognition

Gain on sale of loans, net — includes all components related to the origination and sale of mortgage loans, including (1) net gain on sale of loans, which represents the premium we receive in excess of the loan principal amount and certain fees charged by investors upon sale of loans into the secondary market, (2) loan origination fees (credits), points and certain costs, (3) provision for or benefit from investor reserves, (4) the change in fair value of interest rate locks and loans held for sale, (5) the gain or loss on forward commitments hedging loans held for sale and interest rate lock commitments (IRLCs), and (6) the fair value of originated MSRs. An estimate of the Gain on sale of loans, net is recognized at the time an IRLC is issued, net of a pull-through factor. Subsequent changes in the fair value of IRLCs and mortgage loans held for sale are recognized in current period earnings. When the mortgage loan is sold into the secondary market, any difference between the proceeds received and the current fair value of the loan is recognized in current period earnings in Gain on sale of loans, net. Included in Gain on sale of loans, net is the Fair value of originated MSRs, which represents the estimated fair value of MSRs related to loans which we have sold and retained the right to service. Refer to Note 3, Mortgage Servicing Rights for information related to the gain/(loss) on changes in the fair value of MSRs.

Loan servicing income (loss), net — includes income from servicing, sub-servicing and ancillary fees, and is recorded to income as earned, which is upon collection of payments from borrowers. This amount also includes the Change in fair value of MSRs, which is the adjustment for the fair value measurement of the MSR asset as of the respective balance sheet date.

Interest income, net — includes interest earned on mortgage loans held for sale and mortgage loans held for investment net of the interest expense paid on our loan funding facilities. Interest income is recorded as earned and interest expense is recorded as incurred. Interest income is accrued and credited to income daily based on the unpaid principal balance (“UPB”) outstanding. The accrual of interest is generally discontinued when a loan becomes 90 days past due.

Other income — is derived primarily from deposit income, personal finance subscription revenue, closing fees, net appraisal revenue, net title insurance fees, personal loans business, real estate network referral fees, and professional service fees.

The following significant revenue streams fall within the scope of ASC Topic 606 — Revenue from Contracts with Customers and are disaggregated hereunder. The remaining revenue streams within the scope of ASC 606 are immaterial, both individually and in aggregate.
8

Rocket Companies, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)

Rocket Money subscription revenue — The Company recognizes subscription revenue ratably over the contract term beginning on the commencement date of each contract. We have determined that subscriptions represent a stand-ready obligation to perform over the subscription term. These performance obligations are satisfied over time as the customer simultaneously receives and consumes the benefits. Contracts are one month to one year in length. Subscription revenues were $60,591 and $39,185 for the three months ended March 31, 2024 and 2023, respectively.

Amrock closing fees — The Company recognizes closing fees for non-recurring services provided in connection with the origination of the loan. These fees are recognized at the time of loan closing for purchase transactions or at the end of a client's three-day rescission period for refinance transactions, which represents the point in time the loan closing services performance obligation is satisfied. The consideration received for closing services is a fixed fee per loan that varies by state and loan type. Closing fees were $21,512 and $17,488 for the three months ended March 31, 2024 and 2023, respectively.

Amrock appraisal revenue, net — The Company recognizes appraisal revenue when the appraisal service is completed. The Company may choose to deliver appraisal services directly to its client or subcontract such services to a third-party licensed and/or certified appraiser. In instances where the Company performs the appraisal, revenue is recognized as the gross amount of consideration received at a fixed price per appraisal. The Company is an agent in instances where a third-party appraiser is involved in the delivery of appraisal services and revenue is recognized net of third-party appraisal expenses. Appraisal revenue, net of intercompany eliminations, were $8,857 and $11,866 for the three months ended March 31, 2024 and 2023, respectively.

Rocket Homes real estate network referral fees — The Company recognizes real estate network referral fee revenue based on arrangements with partner agencies contingent on the closing of a transaction. As this revenue stream is variable, and is contingent on the successful transaction close, the revenue is constrained until the occurrence of the transaction. At this point, the constraint on recognizing revenue is deemed to have been lifted and revenue is recognized for the consideration expected to be received. Real estate network referral fees, net of intercompany eliminations, were $10,870 and $6,971 for the three months ended March 31, 2024 and 2023, respectively.

Cash, Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. We maintain our bank accounts with a relatively small number of high-quality financial institutions.

Restricted cash as of March 31, 2024 and 2023 consisted of cash on deposit for a repurchase facility and client application deposits, title premiums collected from the insured that are due to the underwritten, and principal and interest received in collection accounts for purchased assets.

March 31,
20242023
Cash and cash equivalents$861,410 $893,383 
Restricted cash31,975 64,307 
Total cash, cash equivalents, and restricted cash in the statement of cash flows$893,385 $957,690 

Loans subject to repurchase right from Ginnie Mae

For certain loans sold to Ginnie Mae, the Company as the servicer has the unilateral right to repurchase any individual loan in a Ginnie Mae securitization pool if that loan meets defined criteria, including being delinquent more than 90 days. Once the Company has the unilateral right to repurchase the delinquent loan, the Company has effectively regained control over the loan and must re-recognize the loan on the Condensed Consolidated Balance Sheets and establish a corresponding finance liability regardless of the Company's intention to repurchase the loan. The asset and corresponding liability are recorded at the unpaid principal balance of the loan, which approximates its fair value.


9

Rocket Companies, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)

Variable Interest Entities

Rocket Companies, Inc. is the managing member of Holdings with 100% of the management and voting power in Holdings. In its capacity as managing member, Rocket Companies, Inc. has the sole authority to make decisions on behalf of Holdings and bind Holdings to signed agreements. Further, Holdings maintains separate capital accounts for its investors as a mechanism for tracking earnings and subsequent distribution rights. Accordingly, management concluded that Holdings is a limited partnership or similar legal entity as contemplated in ASC 810, Consolidation.

Furthermore, management concluded that Rocket Companies, Inc. is Holdings’ primary beneficiary. As the primary beneficiary, Rocket Companies, Inc. consolidates the results and operations of Holdings for financial reporting purposes under the variable interest consolidation model guidance in ASC 810.

Rocket Companies, Inc.’s relationship with Holdings results in no recourse to the general credit of Rocket Companies, Inc. Holdings and its consolidated subsidiaries represents Rocket Companies, Inc.’s sole investment. Rocket Companies, Inc. shares in the income and losses of Holdings in direct proportion to Rocket Companies, Inc.'s ownership percentage. Further, Rocket Companies, Inc. has no contractual requirement to provide financial support to Holdings.

Rocket Companies, Inc.’s financial position, performance and cash flows effectively represent those of Holdings and its subsidiaries as of and for the period ended March 31, 2024.

Recently Adopted Accounting Standards

In March 2023, the FASB issued ASU 2023-01: Leases (Topic 842) – Common Control Arrangements. The new guidance requires all lessees in a lease with a lessor under common control to amortize leasehold improvements over the useful life of the common control group and provides new guidance for recognizing a transfer of assets between entities under common control as an adjustment to equity when the lessee no longer controls the use of the underlying asset. This guidance is effective for fiscal years beginning after December 15, 2023. There was no impact to the Company’s Consolidated Financial Statements and related disclosures upon adoption in January of 2024.

Accounting Standards Issued but Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07: Improvements to Reportable Segment Disclosures. The new guidance requires additional disclosures around significant segment expenses and the chief operating decision maker. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods with fiscal years beginning after December 15, 2024. The Company is in the process of evaluating the requirements of the update, which is expected to result in expanded disclosures upon adoption.

In December 2023, the FASB issued ASU 2023-09: Income Taxes (Topic 740) – Improvements to Income Tax Disclosures. The new guidance requires additional disclosures relating to the tax rate reconciliation and the income taxes paid information. The guidance is effective for fiscal years beginning after December 15, 2024. The Company is in the process of evaluating the requirements of the update, which is expected to result in expanded disclosures upon adoption.

2. Fair Value Measurements

Fair value is the price that would be received if an asset were sold or the price that would be paid to transfer a liability in an orderly transaction between willing market participants at the measurement date. Required disclosures include classification of fair value measurements within a three-level hierarchy (Level 1, Level 2, and Level 3). Classification of a fair value measurement within the hierarchy is dependent on the classification and significance of the inputs used to determine the fair value measurement. Observable inputs are those that are observed, implied from, or corroborated with externally available market information. Unobservable inputs represent the Company’s estimates of market participants’ assumptions.

Fair value measurements are classified in the following manner:

Level 1—Valuation is based on quoted prices in active markets for identical assets or liabilities at the measurement date.

10

Rocket Companies, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)
Level 2—Valuation is based on either observable prices for identical assets or liabilities in inactive markets, observable prices for similar assets or liabilities, or other inputs that are derived directly from, or through correlation to, observable market data at the measurement date.

Level 3—Valuation is based on the Company’s internal models using assumptions at the measurement date that a market participant would use.

In determining fair value measurement, the Company uses observable inputs whenever possible. The level of a fair value measurement within the hierarchy is dependent on the lowest level of input that has a significant impact on the measurement as a whole. If quoted market prices are available at the measurement date or are available for similar instruments, such prices are used in the measurements. If observable market data is not available at the measurement date, judgment is required to measure fair value.

The following is a description of measurement techniques for items recorded at fair value on a recurring basis. There were no material items recorded at fair value on a nonrecurring basis as of March 31, 2024 or December 31, 2023.

Mortgage loans held for sale: Loans held for sale that trade in active secondary markets are valued using Level 2 measurements derived from observable market data, including market prices of securities backed by similar mortgage loans adjusted for certain factors to approximate the fair value of a whole mortgage loan, including the value attributable to mortgage servicing and credit risk. Loans held for sale for which there is little to no observable trading activity of similar instruments are valued using Level 3 measurements based upon dealer price quotes and internal models.

IRLCs: The fair value of IRLCs is based on current market prices of securities backed by similar mortgage loans (as determined above under mortgage loans held for sale), net of costs to close the loans, subject to the estimated loan funding probability, or “pull-through factor”. Given the significant and unobservable nature of the pull-through factor, IRLCs are classified as Level 3.

MSRs: The fair value of MSRs is determined using an internal valuation model that calculates the present value of estimated net future cash flows. The model includes estimates of prepayment speeds, discount rate, cost to service, float earnings, and contractual servicing fee income, among others. MSRs are classified as Level 3.

Forward commitments: The Company’s forward commitments are valued based on quoted prices for similar assets in an active market with inputs that are observable and are classified within Level 2 of the valuation hierarchy.

Investment securities: Investment securities are trading debt securities that are recorded at fair value using observable market prices for similar securities or identical securities that are traded in less active markets, which are classified as Level 2 and include highly rated municipal, government, and corporate bonds. During the three months ended March 31, 2023, these securities were classified as available for sale and then subsequently in 2023 transferred to trading securities which reflects the more active buying and selling of these investment securities.

Non-mortgage loans held for sale: Non-mortgage loans held for sale are personal loans, including loans to finance solar panel installation projects. The fair value of non-mortgage loans is determined using an internal valuation model that calculates the present value of estimated net future cash flows. Non-mortgage loans are classified as Level 3.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The table below shows a summary of financial statement items that are measured at estimated fair value on a recurring basis, including assets measured under the fair value option. There were no material transfers of assets or liabilities recorded at fair value on a recurring basis between Levels 1, 2 or 3 during the three months ended March 31, 2024 or the year ended December 31, 2023.

11

Rocket Companies, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)
Level 1Level 2Level 3Total
Balance at March 31, 2024
Assets:
Mortgage loans held for sale (1) $ $9,030,443 $385,786 $9,416,229 
IRLCs  202,873 202,873 
MSRs  6,691,341 6,691,341 
Forward commitments 496  496 
Investment securities (2) 39,388  39,388 
Non-mortgage loans held for sale (2)  197,661 197,661 
Total assets$ $9,070,327 $7,477,661 $16,547,988 
Liabilities:
Forward commitments$ $22,785 $ $22,785 
Total liabilities$ $22,785 $ $22,785 
Balance at December 31, 2023
Assets:
Mortgage loans held for sale (1)$ $6,103,714 $438,518 $6,542,232 
IRLCs  132,870 132,870 
MSRs  6,439,787 6,439,787 
Forward commitments 26,614  26,614 
Investment securities (2) 39,518  39,518 
Non-mortgage loans held for sale (2)  163,018 163,018 
Total assets$ $6,169,846 $7,174,193 $13,344,039 
Liabilities:
Forward commitments$ $142,988 $ $142,988 
Total liabilities$ $142,988 $ $142,988 
(1)     As of March 31, 2024 and December 31, 2023, $176.0 million and $195.6 million of unpaid principal balance of the level 3 mortgage loans held for sale were 90 days or more delinquent and were considered in non-accrual status.

(2)    These are included in Other assets on the Condensed Consolidated Balance Sheets.

The following tables present the quantitative information about recurring Level 3 fair value financial instruments and the fair value measurements as of:
March 31, 2024December 31, 2023
Unobservable InputRangeWeighted AverageRangeWeighted Average
Mortgage loans held for sale
Model pricing
69% - 100%
86 %
68% - 100%
87 %
IRLCs
Pull-through probability
0% - 100%
75 %
0% - 100%
72 %
MSRs
Discount rate
9.5% - 12.5%
9.9 %
9.5% - 12.5%
9.9 %
Conditional prepayment rate
6.7% - 36.7%
7.5 %
6.6% - 37.0%
7.5 %
Non-mortgage loans held for sale
Discount rate
8.5% - 9.3%
8.6 %
8.5% - 9.3%
8.6 %
12

Rocket Companies, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)
The table below presents a reconciliation of Level 3 assets measured at fair value on a recurring basis for the three months ended March 31, 2024 and 2023. Mortgage servicing rights are also classified as a Level 3 asset measured at fair value on a recurring basis and its reconciliation is found in Note 3, Mortgage Servicing Rights.
Mortgage Loans Held for SaleIRLCsNon-Mortgage Loans Held for Sale
Balance at December 31, 2023
$438,518 $132,870 $163,018 
Transfers in (1)109,170  60,296 
Transfers out/principal reductions (1)(155,715) (23,697)
Net transfers and revaluation gains 70,003  
Total losses included in net income (loss) for assets held at the end of the reporting date(6,187) (1,956)
Balance at March 31, 2024$385,786 $202,873 $197,661 
Balance at December 31, 2022
$1,082,730 $90,635 $ 
Transfers in (1)211,058  32,838 
Transfers out/principal reductions (1)(511,310)  
Net transfers and revaluation gains 91,477  
Total losses included in net income (loss) for assets held at the end of the reporting date(18,717) (348)
Balance at March 31, 2023$763,761 $182,112 $32,490 
(1)    Transfers in represent loans repurchased from investors or loans originated for which an active market currently does not exist. Transfers out primarily represent loans sold to third parties and loans paid in full.

Fair Value Option

The following is the estimated fair value and UPB of mortgage and non-mortgage loans held for sale that have contractual principal amounts and for which the Company has elected the fair value option. The fair value option was elected for mortgage and non-mortgage loans held for sale as the Company believes fair value best reflects their expected future economic performance:
Fair ValuePrincipal Amount Due Upon MaturityDifference (1)
Balance at March 31, 2024
Mortgage loans held for sale$9,416,229 $9,283,728 $132,501 
Non-mortgage loans held for sale$197,661 $205,171 $(7,510)
Balance at December 31, 2023
Mortgage loans held for sale$6,542,232 $6,418,082 $124,150 
Non-mortgage loans held for sale$163,018 $168,573 $(5,555)
(1)    Represents the amount of gains (losses) included in Gain on sale of loans, net for Mortgage loans held for sale and Other income for Non-mortgage loans held for sale, due to changes in fair value of items accounted for using the fair value option.

Disclosures of the fair value of certain financial instruments are required when it is practical to estimate the value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques.

The following table presents the carrying amounts and estimated fair value of financial liabilities that are not recorded at fair value on a recurring or nonrecurring basis. This table excludes cash and cash equivalents, restricted cash, warehouse borrowings, and line of credit borrowing facilities as these financial instruments are highly liquid or short-term in nature and as a result, their carrying amounts approximate fair value:
13

Rocket Companies, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)
March 31, 2024December 31, 2023
Carrying AmountEstimated Fair ValueCarrying AmountEstimated Fair Value
Senior Notes, due 10/15/2026$1,144,288 $1,063,094 $1,143,716 $1,064,520 
Senior Notes, due 1/15/202861,496 60,254 61,463 60,469 
Senior Notes, due 3/1/2029745,070 674,378 744,819 679,455 
Senior Notes, due 3/1/20311,240,649 1,089,612 1,240,311 1,105,088 
Senior Notes, due 10/15/2033843,315 719,619 843,139 725,458 
Total Senior Notes, net$4,034,818 $3,606,957 $4,033,448 $3,634,990 

The fair value of Senior Notes was calculated using the observable bond price at March 31, 2024 and December 31, 2023, respectively. The Senior Notes are classified as Level 2 in the fair value hierarchy.

3. Mortgage Servicing Rights

Mortgage servicing rights are recognized as assets on the Condensed Consolidated Balance Sheets when loans are sold, and the associated servicing rights are retained. The Company maintains one class of MSRs asset and has elected the fair value option. These MSRs are recorded at fair value, which is determined using an internal valuation model that calculates the present value of estimated future net servicing fee income. The model includes estimates of prepayment speeds, discount rate, cost to service, float earnings, and contractual servicing fee income, among others.

The following table summarizes changes to the MSR assets:

Three Months Ended March 31,
20242023
Fair value, beginning of period$6,439,787 $6,946,940 
MSRs originated222,797 204,560 
MSRs sales(51,344)(81,538)
MSRs purchases16,695  
Changes in fair value:
Due to changes in valuation model inputs or assumptions (1)
227,369 (217,802)
Due to collection/realization of cash flows(163,963)(182,221)
Total changes in fair value63,406 (400,023)
Fair value, end of period$6,691,341 $6,669,939 

(1)    Reflects changes in market interest rates and assumptions, including discount rates and prepayment speeds, and the effects of contractual prepayment protection associated with sales or purchases of MSRs. It does not include the change in fair value of derivatives that economically hedge MSRs identified for sale or the effects of contractual prepayment protection resulting from sales or purchases of MSRs.

The Company retains the right to service a majority of these loans upon sale through ownership of servicing rights. The total UPB of mortgage loans serviced, excluding subserviced loans, at March 31, 2024 and December 31, 2023 was $468,544,964 and $468,237,971, respectively. The portfolio primarily consists of high-quality performing agency and government (FHA and VA) loans. As of March 31, 2024 and December 31, 2023, delinquent loans (defined as 60-plus days past-due) were 1.17% and 1.23%, respectively, of our total portfolio.






14

Rocket Companies, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)
The following is a summary of the weighted average discount rate and prepayment speed assumptions used to determine the fair value of MSRs as well as the expected life of the loans in the servicing portfolio:

March 31, 2024December 31, 2023
Discount rate9.9 %9.9 %
Prepayment speeds7.5 %7.5 %
Life (in years)7.827.83

The key assumptions used to estimate the fair value of MSRs are prepayment speeds and the discount rate. Increases in prepayment speeds generally have an adverse effect on the value of MSRs as the underlying loans prepay faster. In a declining interest rate environment, the fair value of MSRs generally decreases as prepayments increase and therefore, the estimated life of the MSRs and related cash flows decrease. Decreases in prepayment speeds generally have a positive effect on the value of MSRs as the underlying loans prepay less frequently. In a rising interest rate environment, the fair value of MSRs generally increases as prepayments decrease and therefore, the estimated life of the MSRs and related cash flows increase. Increases in the discount rate result in a lower MSRs value and decreases in the discount rate result in a higher MSRs value. MSRs uncertainties are hypothetical and do not always have a direct correlation with each assumption. Changes in one assumption may result in changes to another assumption, which might magnify or counteract the uncertainties.

The following sensitivity analysis shows the potential impact on the fair value of the Company’s MSRs based on hypothetical changes in key assumptions, including the discount rate and prepayment speeds:

Discount RatePrepayment Speeds
100 BPS Adverse Change200 BPS Adverse Change10% Adverse Change20% Adverse Change
March 31, 2024
Mortgage servicing rights
$(292,585)$(561,494)$(185,079)$(358,893)
December 31, 2023
Mortgage servicing rights$(279,493)$(536,573)$(183,254)$(356,871)

4. Mortgage Loans Held for Sale

The Company sells substantially all of its originated mortgage loans into the secondary market. Mortgage loans held for sale are loans originated that are expected to be sold into the secondary market. Below is a roll forward of the activity in mortgage loans held for sale:

Three Months Ended March 31,
20242023
Balance at the beginning of period$6,542,232 $7,343,475 
Disbursements of mortgage loans held for sale19,739,707 16,785,731 
Proceeds from sales of mortgage loans held for sale (1)(17,154,297)(15,963,604)
Gain on sale of mortgage loans excluding fair value of other financial instruments, net (2)288,587 273,112 
Balance at the end of period
$9,416,229 $8,438,714 

(1)    The proceeds from sales of loans held for sale on the Condensed Consolidated Statements of Cash Flows includes amounts related to the sale of non-mortgage loans.

(2)    The Gain on sale of loans excluding fair value of MSRs, net on the Condensed Consolidated Statements of Cash Flows includes amounts related to the sale of non-mortgage loans, interest rate lock commitments, forward commitments, and provision for investor reserves.

15

Rocket Companies, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)
Credit Risk

The Company is subject to credit risk associated with mortgage loans that it purchases and originates during the period of time prior to the sale of these loans. The Company considers credit risk associated with these loans to be minimal as it holds the loans for a short period of time, which for the three months ended March 31, 2024 is generally less than 45 days from the date of borrowing, and the market for these loans continues to be highly liquid. The Company is also subject to credit risk associated with mortgage loans it has repurchased as a result of breaches of representations and warranties during the period of time between repurchase and resale.

5. Borrowings

The Company maintains various funding facilities, financing facilities, and unsecured senior notes, as shown in the tables below. Interest rates typically have two main components; a base rate - most commonly SOFR, which is sometimes subject to a minimum floor, plus a spread. Some funding facilities have a commitment fee, which can be up to 50 basis points per year. The commitment fee charged by lenders is calculated based on the committed line amount multiplied by a negotiated rate. The Company is required to maintain certain covenants, including minimum tangible net worth, minimum liquidity, maximum total debt or liabilities to net worth ratio, pretax net income requirements, and other customary debt covenants, as defined in the agreements. The Company was in compliance with all covenants as of March 31, 2024 and December 31, 2023.

The amount owed and outstanding on the Company’s loan funding facilities fluctuates based on its origination volume, the amount of time it takes the Company to sell the loans it originates, and the Company’s ability to use its cash to self-fund loans. In addition to self-funding, the Company may use surplus cash to “buy-down” the effective interest rate of certain loan funding facilities or to self-fund a portion of our loan originations. Buy-down funds are included in Cash and cash equivalents on the Condensed Consolidated Balance Sheets. We have the ability to withdraw these funds at any time, unless a margin call has been made or a default has occurred under the relevant facilities. We will also deploy cash to self-fund loan originations, a portion of which can be transferred to a mortgage loan funding facility or the early buy out line, provided that such loans meet the eligibility criteria to be placed on such lines. The remaining portion will be funded in normal course over a short period of time, generally less than 45 days.

The terms of the Senior Notes restrict our ability and the ability of our subsidiary guarantors among other things to: (1) merge, consolidate or sell, transfer or lease assets, and; (2) create liens on assets.

16

Rocket Companies, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)
Mortgage Funding Facilities
Facility TypeCollateralMaturityLine AmountCommitted Line Amount
Outstanding Balance as of March 31, 2024
Outstanding Balance as of December 31, 2023
Mortgage Loan funding:
1) Master Repurchase Agreement (6)
Mortgage loans held for sale (5)
11/27/20241,000,000 100,000 984,409 397,265 
2) Master Repurchase Agreement (6)
Mortgage loans held for sale (5)
8/9/20242,000,000 250,000 570,200 429,976 
3) Master Repurchase Agreement (1)(6)
Mortgage loans held for sale (5)
1/24/20251,500,000 550,000 544,191 552,079 
4) Master Repurchase Agreement (6)
Mortgage loans held for sale (5)
9/8/20251,000,000 250,000 991,311 547,016 
5) Master Repurchase Agreement (2)(6)
Mortgage loans held for sale (5)
11/6/20251,500,000 250,000 176,694 106,063 
6) Master Repurchase Agreement (6)
Mortgage loans held for sale (5)
7/21/20251,000,000 100,000 270,294 241,574 
7) Master Repurchase Agreement (6)
Mortgage loans held for sale (5)
9/26/2025800,000 100,000 799,659 507,302 
$8,800,000 $1,600,000 $4,336,758 $2,781,275 
Mortgage Loan Early Funding:
8) Early Funding Facility (3)(6)
Mortgage loans held for sale (5)
(3)
$5,000,000 $ $1,018,918 $286,594 
9) Early Funding Facility (4)(6)
Mortgage loans held for sale (5)
(4)
2,000,000  646,676 183,414 
7,000,000  1,665,594 470,008 
Total Mortgage Funding Facilities$15,800,000 $1,600,000 $6,002,352 $3,251,283 
Personal Loan funding:
10) Revolving Credit and Security Agreement (6)
Personal loans held for sale
1/30/2025$175,000 $175,000 $143,100 $116,100 
Total Funding Facilities$15,975,000 $1,775,000 $6,145,452 $3,367,383 

(1)    This facility has a 12-month initial term, which can be extended for 3-months at each subsequent 3-month anniversary from the initial start date. Subsequent to March 31, 2024, this facility was extended to April 25, 2025.

(2)    This facility has an overall line size of $1,500,000. This facility also includes a $1,500,000 sublimit for MSR financing; Capacity is fully fungible and is not restricted by these allocations.

(3)    This facility is an evergreen agreement with no stated termination or expiration date. This agreement can be terminated by either party upon written notice.

(4)    This facility has an overall line size of $2,000,000, which is reviewed every 90 days. This facility is an evergreen agreement with no stated termination or expiration date. This agreement can be terminated by either party upon written notice.

(5)    The Company has multiple borrowing facilities in the form of asset sales under agreements to repurchase. These borrowing facilities are secured by mortgage loans held for sale at fair value as the first priority security interest.    

(6)    The interest rates charged by lenders on funding facilities included the applicable base rate plus a spread ranging from 1.00% to 1.80% for the three months ended March 31, 2024, and for the year ended December 31, 2023.

17

Rocket Companies, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)
Financing Facilities
Facility TypeCollateralMaturityLine AmountCommitted Line AmountOutstanding Balance as of March 31, 2024Outstanding Balance as of December 31, 2023
Line of Credit Financing Facilities
1) Unsecured line of credit (1)
7/27/2025$2,000,000 $ $ $ 
2) Unsecured line of credit (1)
7/31/2025100,000    
3) Revolving credit facility (4)
8/10/20251,250,000 1,250,000   
4) MSR line of credit (4)
MSRs11/8/2024500,000    
5) MSR line of credit (2)(4)
MSRs11/6/20251,500,000 250,000   
$5,350,000 $1,500,000 $ $ 
Early Buyout Financing Facility
6) Early buy out facility (3)(4)
Loans/ Advances4/15/2024$1,500,000 $ $171,748 $203,208 
(1)    Refer to Note 6, Transactions with Related Parties for additional details regarding this unsecured line of credit.

(2)    This facility is a sublimit of Master Repurchase Agreement 5, found above in Mortgage Funding Facilities. Refer to Subfootnote 2, Mortgage Funding Facilities for additional details regarding this financing facility.

(3)    Subsequent to March 31, 2024, this facility was extended to May 31, 2024.

(4)    The interest rates charged by lenders on the financing facilities included the applicable base rate, plus a spread ranging from 1.45% to 3.25% for the three months ended March 31, 2024 and 1.45% to 4.00% for the year ended December 31, 2023.

Unsecured Senior Notes
Facility TypeMaturityInterest Rate
Outstanding
Principal
March 31, 2024
Outstanding
Principal December 31, 2023
Unsecured Senior Notes (1)
10/15/20262.875 %$1,150,000 $1,150,000 
Unsecured Senior Notes (2)
1/15/20285.250 %61,985 61,985 
Unsecured Senior Notes (3)
3/1/20293.625 %750,000 750,000 
Unsecured Senior Notes (4)
3/1/20313.875 %1,250,000 1,250,000 
Unsecured Senior Notes (5)
10/15/20334.000 %850,000 850,000 
Total Senior Notes
$4,061,985 $4,061,985 
Weighted Average Interest Rate3.59 %3.59 %

(1)    The 2026 Senior Notes are unsecured obligation notes with no asset required to pledge for this borrowing. Unamortized debt issuance costs are presented net against the Senior Notes reducing the $1,150,000 carrying amount on the Condensed Consolidated Balance Sheets by $5,712 and $6,284 as of March 31, 2024 and December 31, 2023, respectively.

(2)    The 2028 Senior Notes are unsecured obligation notes with no asset required to pledge for this borrowing. Unamortized debt issuance costs and discounts are presented net against the Senior Notes reducing the $61,985 carrying amount on the Condensed Consolidated Balance Sheets by $267 and $222 as of March 31, 2024, respectively, and $285 and $237, as of December 31, 2023, respectively.

18

Rocket Companies, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)
(3)    The 2029 Senior Notes are unsecured obligation notes with no asset required to pledge for this borrowing. Unamortized debt issuance costs are presented net against the Senior Notes reducing the $750,000 carrying amount on the Condensed Consolidated Balance Sheets by $4,930 and $5,181 as of March 31, 2024 and December 31, 2023, respectively.

(4)    The 2031 Senior Notes are unsecured obligation notes with no asset required to pledge for this borrowing. Unamortized debt issuance costs are presented net against the Senior Notes reducing the $1,250,000 carrying amount on the Condensed Consolidated Balance Sheets by $9,351 and $9,689 as of March 31, 2024 and December 31, 2023, respectively.

(5)    The 2033 Senior Notes are unsecured obligation notes with no asset required to pledge for this borrowing. Unamortized debt issuance costs are presented net against the Senior Notes reducing the $850,000 carrying amount on the Condensed Consolidated Balance Sheets by $6,685 and $6,861 as of March 31, 2024 and December 31, 2023, respectively.

Refer to Note 2, Fair Value Measurements for information pertaining to the fair value of the Company’s debt as of March 31, 2024 and December 31, 2023.

6. Transactions with Related Parties

The Company has entered into various transactions and agreements with RHI, its subsidiaries, certain other affiliates and related parties (collectively, “Related Parties”). These transactions include providing financing and services as well as obtaining financing and services from these Related Parties.

Financing Arrangements

On June 9, 2017, Rocket Mortgage and RHI entered into an unsecured line of credit, as further amended and restated on September 16, 2021 (“RHI Line of Credit”), pursuant to which Rocket Mortgage has a borrowing capacity of $2,000,000. The RHI Line of Credit matures on July 27, 2025. Borrowings under the line of credit bear interest at a rate per annum of the applicable base rate, plus a spread of 1.25%. The line of credit is uncommitted and RHI has sole discretion over advances. The RHI Line of Credit also contains negative covenants which restrict the ability of the Company to incur debt and create liens on certain assets. It also requires Rocket Mortgage to maintain a quarterly consolidated net income before taxes if adjusted tangible net worth meets certain requirements. The Company did not draw on the RHI Line of Credit during the period and there were no outstanding amounts due as of March 31, 2024 and December 31, 2023, respectively.

RHI and ATI are parties to a surplus debenture, effective as of December 28, 2015, and as further amended and restated on July 31, 2023 (the “RHI/ATI Debenture”), pursuant to which ATI is indebted to RHI for an aggregate principal amount of $21,500. The RHI/ATI Debenture matures on December 31, 2030. Interest under the RHI/ATI Debenture accrues at an annual rate of 8%. Principal and interest under the RHI/ATI Debenture are due and payable quarterly, in each case subject to ATI achieving a certain amount of surplus and payments of all interest before principal payments begin. Any unpaid amounts of principal and interest shall be due and payable upon the maturity of the RHI/ATI Debenture. ATI repaid an aggregate of $434 and $250 for the three months ended March 31, 2024 and 2023, respectively. The total amount of interest accrued was $429 and $424 for the three months ended March 31, 2024 and 2023, respectively. The aggregate amount due to RHI was $30,260 and $30,264 as of March 31, 2024 and December 31, 2023, respectively.

On July 31, 2020, Holdings and RHI entered into an agreement for an uncommitted, unsecured revolving line of credit (“RHI 2nd Line of Credit”), which will provide for financing from RHI to the Company of up to $100,000. The RHI 2nd Line of Credit matures on July 31, 2025. Borrowings under the line of credit will bear interest at a rate per annum of the applicable base rate plus a spread of 1.25%. The negative covenants of the line of credit restrict the ability of the Company to incur debt and create liens on certain assets. The line of credit also contains customary events of default. There Company did not draw on the RHI 2nd Line of Credit during the period and there were no amounts outstanding as of March 31, 2024 and December 31, 2023, respectively.

The Notes receivable and due from affiliates was $18,574 and $19,530 as of March 31, 2024 and December 31, 2023, respectively. The Notes payable and due to affiliates was $31,325 and $31,006 as of March 31, 2024 and December 31, 2023, respectively.

19

Rocket Companies, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)
Services, Products and Other Transactions

We have entered into transactions and agreements to provide certain services to Related Parties. We recognized revenue of $1,646 and $2,316 for the three months ended March 31, 2024 and 2023, respectively, for the performance of these services, which was included in Other income on the Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss). We have also entered into transactions and agreements to purchase certain services, products and other transactions from Related Parties. We incurred expenses of $625 and $499, which are included in Salaries, commissions and team member benefits; $12,222 and $11,771, which are included in General and administrative expenses; and $3,630 and $3,960, which are included in Marketing and advertising expenses, for the three months ended March 31, 2024 and 2023, respectively, on the Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss).

The Company has also entered into a Tax Receivable Agreement with RHI and our Chairman as described further in Note 7, Income Taxes. The Company has also guaranteed the debt of a related party as described further in Note 9, Commitments, Contingencies, and Guarantees.

Lease Transactions with Related Parties

The Company is a party to lease agreements for certain offices, including our headquarters in Detroit, with various affiliates of Bedrock Management Services LLC (“Bedrock”), a related party, and other related parties of the Company. The Company incurred expenses related to these arrangements of $19,570 and $17,897, which are included in General and administrative expenses, for the three months ended March 31, 2024 and 2023, respectively, on the Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss).

7. Income Taxes

The Company had income tax expense of $7,656 on Income before income taxes of $298,370 for the three months ended March 31, 2024. The Company had an income tax benefit of $4,504 on Loss before income taxes of $415,987 for the three months ended March 31, 2023.

The Company’s income tax expense varies from the expense that would be expected based on statutory rates due principally to its organizational structure. Rocket Companies owns a portion of the units of Holdings, which is treated as a partnership for U.S. federal tax purposes and in most applicable jurisdictions for state and local income tax purposes. The remaining portion of Holdings is owned by RHI and our Chairman (“LLC Members”). As a partnership, Holdings is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by Holdings is passed through and included in the taxable income or loss of its members, including Rocket Companies, in accordance with the terms of the operating agreement of Holdings (the “Holdings Operating Agreement”). Rocket Companies is a C Corporation and is subject to U.S. federal, state, and local income taxes with respect to its allocable share of any taxable income of Holdings.

Several subsidiaries of Holdings, such as Rocket Mortgage, Amrock and other subsidiaries, are single member LLC entities. As single member LLCs of Holdings, all taxable income or loss generated by these subsidiaries passes through and is included in the income or loss of Holdings. A provision for state and local income taxes is required for certain jurisdictions that tax single member LLCs as regarded entities. Other subsidiaries of Holdings, such as Amrock Title Insurance Co., LMB Mortgage Services and others, are treated as C Corporations and separately file and pay taxes apart from Holdings in various jurisdictions including U.S. federal, state, local and Canada.

Tax Receivable Agreement

The Company expects to obtain an increase in its share of the tax basis in the net assets of Holdings when Holdings Units are redeemed from or exchanged by the LLC Members. The Company intends to treat any redemptions and exchanges of Holdings Units as direct purchases of Holdings Units for U.S. federal income tax purposes. These increases in tax basis may reduce the amounts that the Company would otherwise pay in the future to various tax authorities. They may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.

20

Rocket Companies, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)
The Company previously entered into a Tax Receivable Agreement (the “Tax Receivable Agreement”) with the LLC Members that will obligate the Company to make payments to the LLC Members generally equal to 90% of the applicable cash tax savings that the Company actually realizes or in some cases is deemed to realize as a result of the tax attributes generated by (i) certain increases in our allocable share of the tax basis in Holdings’ assets resulting from (a) the purchases of Holdings Units (along with the corresponding shares of our Class D common stock or Class C common stock) from the LLC Members (or their transferees of Holdings Units or other assignees) using the net proceeds from our initial public offering or in any future offering, (b) exchanges by the LLC Members (or their transferees of Holdings Units or other assignees) of Holdings Units (along with the corresponding shares of our Class D common stock or Class C common stock) for cash or shares of our Class B common stock or Class A common stock, as applicable, or (c) payments under the Tax Receivable Agreement; (ii) tax benefits related to imputed interest deemed arising as a result of payments made under the Tax Receivable Agreement and (iii) disproportionate allocations (if any) of tax benefits to Holdings as a result of section 704(c) of the Code that relate to the reorganization transactions. The Company will retain the benefit of the remaining 10% of these tax savings.

No payment was made to the LLC Members pursuant to the Tax Receivable Agreement during the three months ended March 31, 2024. A payment of $35,697 was made to the LLC Members pursuant to the Tax Receivable Agreement during the three months ended March 31, 2023.

The amounts payable under the Tax Receivable Agreement will vary depending upon a number of factors, including the amount, character, and timing of the taxable income of Rocket Companies in the future. Any such changes in these factors or changes in the Company’s determination of the need for a valuation allowance related to the tax benefits acquired under the Tax Receivable Agreement could adjust the Tax receivable agreement liability recognized and recorded within earnings in future periods.

Tax Distributions

The holders of Holdings’ Units, including Rocket Companies Inc., incur U.S. federal, state and local income taxes on their share of any taxable income of Holdings. The Holdings Operating Agreement provides for pro rata cash distributions (“tax distributions”) to the holders of the Holdings Units in an amount generally calculated to provide each holder of Holdings Units with sufficient cash to cover its tax liability in respect of the Holdings Units. In general, these tax distributions are computed based on Holdings’ estimated taxable income, multiplied by an assumed tax rate as set forth in the Holdings Operating Agreement.

For the three months ended March 31, 2024 and 2023, Holdings has not paid material tax distributions to holders of Holdings Units other than Rocket Companies.

8. Derivative Financial Instruments

The Company uses forward commitments to hedge the interest rate risk exposure on certain fixed and adjustable rate commitments. Utilization of forward commitments involves some degree of basis risk. Basis risk is defined as the risk that the hedged instrument’s price does not move in parallel with the increase or decrease in the market price of the hedged financial instrument. The Company calculates an expected hedge ratio to mitigate a portion of this risk. The Company’s derivative instruments are not designated as accounting hedging instruments, and therefore, changes in fair value are recorded in current period Net income (loss). Hedging gains and losses are included in Gain on sale of loans, net and Change in fair value of MSRs in the Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss).

Net hedging gains and losses were as follows:
Three Months Ended March 31,
20242023
Hedging gains (losses) (1)
$63,770 $(79,133)

(1)    Includes the change in fair value related to derivatives economically hedging MSRs identified for sale.

Refer to Note 2, Fair Value Measurements, for additional information on the fair value of derivative financial instruments.


21

Rocket Companies, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (Continued)
($ in Thousands, Except Per Share Amounts or Unless Otherwise Noted)
Notional and Fair Value

The notional and fair values of derivative financial instruments not designated as hedging instruments were as follows:
Notional ValueDerivative AssetDerivative Liability
Balance at March 31, 2024:
IRLCs, net of loan funding probability (1)$7,331,097 $202,873 $ 
Forward commitments (2)$14,008,897 $496 $22,785 
Balance at December 31, 2023:
IRLCs, net of loan funding probability (1)$4,728,040 $132,870 $ 
Forward commitments (2)$9,650,041 $26,614 $142,988 

(1)    IRLCs are also discussed in Note 9, Commitments, Contingencies, and Guarantees.

(2)    Includes the fair value and net notional value related to derivatives economically hedging MSRs identified for sale.

Counterparty agreements for forward commitments contain master netting agreements. The table below presents the gross amounts of recognized assets and liabilities subject to master netting agreements. Margin cash is cash that is exchanged by counterparties to be held as collateral related to these derivative financial instruments. Margin cash held on behalf of counterparties is recorded in Cash and cash equivalents, and the related liability is classified in Other liabilities in the Condensed Consolidated Balance Sheets. Margin cash pledged to counterparties is excluded from Cash and cash equivalents and instead recorded in Other assets as a margin call receivable from counterparties in the Condensed Consolidated Balance Sheets. The Company had $16,489 and $66,598 of margin cash pledged to counterparties related to these forward commitments at March 31, 2024 and December 31, 2023, respectively. As of March 31, 2024 and December 31, 2023, there was $950 and $250 of margin cash held on behalf of counterparties, respectively.

Gross Amount of Recognized Assets or Liabilities
Gross Amounts Offset in the Condensed Consolidated Balance Sheets
Net Amounts Presented in the Condensed Consolidated Balance Sheets
Offsetting of Derivative Assets
Balance at March 31, 2024:
Forward commitments$777 $(281)