We have all heard the stories about Detroit. It was already struggling before the financial crisis and that episode eventually led to the city going bankrupt. You would never know it today as it has a downtown as vibrant as any mid-sized city in the country.
I was in Detroit recently at the invitation of Rocket Loans CEO, Bill Parker. I do visits to fintech companies quite regularly but usually in the big hubs of New York, San Francisco or London. This was my first visit to Detroit for a couple of decades so I was excited to see how the city had changed. And you can’t really tell the story of Rocket Loans without also talking about the city of Detroit.
Rocket Loans is part of billionaire Dan Gilbert’s family of companies, many of which are based in downtown Detroit. This group of over 100 companies includes Quicken Loans, Rocket Mortgage, Rapid Finance, StockX, Fathead as well as some Cleveland sports teams such as the NBA’s Cleveland Cavaliers.
Bill invited myself and my colleague, Bladimir Estevez, not just to their offices for a meeting but to do a formal tour of downtown Detroit. This is something that Rock Holdings (the holding company) conducts on a daily basis and it is done to impress upon visitors that Detroit is back.
To say that Dan Gilbert has been important to the resurgence of Detroit would be a massive understatement. He moved Quicken Loans downtown in 2010 (from the suburbs) and has bought dozens of downtown office buildings, some of which were abandoned or nearly empty, and redeveloped them into modern Class A offices. What was amazing to see was the before and after photos of some of these buildings.
Quicken Loans is the crown jewel of the financial component of Rock Ventures. It is now the largest mortgage lender in the country, bigger than even the largest banks. They seem to be slowly moving away from that brand, though, and moving to Rocket Mortgage which has a much more modern and innovative feel. What Rocket Mortgage is to home loans, Rocket Loans wants to be to personal loans. And by the way, the Rocket Mortgage app on the Apple App Store has 4.8 stars on 39,000 reviews – pretty impressive traction.
Anyway, I sat down with Bill and several other members of the Rocket Loans management team to discuss the background of the company, where it is at today and how it fits with the other parts of the family of companies. It is still a young company, having made its first loan in 2016 and they have mostly stayed under the radar. But they are starting to make some waves in the personal loan space.
Bill is a Rock Holdings veteran having started at Quicken Loans in 2003. He was part of the founding team at Rocket Loans in 2016 and became CEO in 2017. He is very passionate about the city of Detroit, Rocket Loans and the personal loan space. He exudes enthusiasm as he describes his company, their mission and how they are changing the city.
Let’s discuss the loans themselves. They occupy a pretty familiar wheelhouse for consumer lenders. Loan amounts go as high as $45,000, interest rates range from 5.98% to 29.99%, loan terms are three or five years and they charge an origination fee from 1% to 6%. Borrowers can get same day funding via ACH up to $25,000 which is a unique feature. All loans are originated by Cross River Bank and a majority of the whole loans are then sold to investors.
One of the unique aspects of Rocket Loans is that they don’t have to play the customer acquisition game. Their sister company, Rocket Mortgage, is the largest mortgage lender in the country with millions of customers. These people are the main source of customers for Rocket Loans. Many are looking for personal loans, often to do home improvements, and Rocket Loans is able to market to them effectively. What this means is that, unlike most personal loan platforms, home improvement loans makes up a significant portion of their originations.
They would not disclose loan volume numbers or loan performance but suffice it to say they are happy with they are at. They are not a venture backed business, all funding has come from the parent company, so they only have to answer to one shareholder. This also means they have been able to grow deliberately. They have not broken any records for fast growth, but Bill was pleased to report that they have been profitable for some time now.
Looking to move beyond their core offering Rocket Loans recently launched a new product, a point of sale loan for the contractor market. This is a direct competitor to GreenSky, but Bill thinks their product has a number of advantages such as lower merchant discount rates and the ability to approve a broader set of consumers across the credit spectrum. They are actively marketing to contractors now as they build out this new offering.
Rocket Loans was one of the co-founders of the Online Lending Policy Institute along with Cross River Bank and Boston University. So, they are strong supporters of creating a dialogue with policy makers and they participate in the annual Online Lending Policy Summit in DC every year.
While they have kept a relatively low profile, I expect you will hear the Rocket Loans name more and more. Rocket Mortgage just hosted Detroit’s first ever PGA Tour event and so the brand got some huge exposure during that week. And it also shined a light on the fact that Detroit is a city that has been reborn. And Rocket Loans is now part of the story of the rebirth of Motor City. Maybe one day, in the distant future, it will become known as a finance capital.
