Rocket Companies Inc (NYSE: RKT) witnessed a pronounced increase in its stock price during Thursday's after-hours session, catalyzed by a statement from President Donald Trump on the social media platform Truth Social. In this announcement, the President articulated an extensive strategy aimed at decreasing mortgage interest rates across the country, a development that has direct implications for companies like Rocket that operate within the mortgage lending sector.
Central to the President's plan is the assertion that, since his administration chose not to sell the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, these entities currently maintain approximately $200 billion in liquid cash. Trump indicated that he is directing his representatives to utilize these funds to purchase $200 billion worth of mortgage-backed securities. According to his message, this action is expected to suppress mortgage rates, reduce monthly mortgage payments, and thereby improve the affordability of home ownership.
This initiative is presented as part of a broader objective to revive housing affordability in the United States. The direct purchasing of mortgage bonds by GSEs would likely influence the yields on these instruments, which in turn affect the end mortgage rates available to consumers on the housing market.
Rocket Companies, with its business closely linked to mortgage origination volumes and refinancing activity, stands to benefit from such a scenario. Typically, declines in mortgage rates lead to higher refinancing activity, as existing homeowners seek to replace older, higher-rate loans with new, cheaper ones. Also, lower rates generally broaden the pool of eligible homebuyers, thereby sustaining or increasing loan origination volumes.
Rocket’s operating model is characterized by largely fixed costs, coupled with technology-driven platforms that process mortgage applications and originations, making it responsive to volume changes without a proportional increase in expenses. This operational structure implies that increases in mortgage volume can positively impact the company’s fee income and profit margins.
The prospect of the government injecting $200 billion into mortgage bond purchases has been interpreted by market participants as a trigger that could push down mortgage bond yields and thus mortgage interest rates. The implications of this policy intention have likely contributed to the upward reassessment of Rocket Companies’ future earnings potential by investors, who consequently bid up the stock in after-hours trading.
Supporting this momentum, Benzinga Edge rankings currently reflect a high Momentum score of 94.04 for Rocket Companies, indicating robust recent price performance aligned with market expectations of beneficial developments in the mortgage sector.
While the announcement underscores a promising prospect for Rocket Companies, the plan's implementation details and actual impact on mortgage rates remain to be seen. Therefore, investors will closely monitor further developments related to this governmental strategy and its translation into market conditions.