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June 19, 2020  

Quicken IPO Spawns Bond-Issuing Push

As it prepares to go public, Quicken Loans is mapping a major increase in its jumbo-mortgage securitization volume.

The Detroit company was quietly filling in bond investors about its plans this week, suggesting it could price more than $1 billion of fresh paper backed by its private-label home loans before yearend.

CNBC reported on June 11 that Quicken had filed a confidential prospectus for an initial public offering that could raise tens of billions of dollars, with an official announcement possibly coming in July.

So what’s the securitization link? Quicken, which lends under the Rocket Mortgage brand, wants to demonstrate to potential shareholders that it can tap the mortgage-bond market at will to finance its jumbo loans. Proceeds from the deals also would boost the company’s capital position. “Showing it can programmatically sell private-label mortgage bonds is going to make the company very attractive,” one buysider said. “It’s always great to have multiple funding avenues.”

The effort would build on a securitization program that so far has produced a $350.1 million offering in October and a $364.8 transaction in February, both through an entity called RCKT Mortgage Trust with Bank of America and Credit Suisse as bookrunners. Another early-2020 offering had been in the works but was delayed as the coronavirus pandemic froze the market and Quicken set plans for its IPO and related funding strategies.

The new wave of bond issues is expected to start hitting the market in the coming weeks.

Quicken’s lending operation is best known for writing agency mortgages. But the company has developed a presence as an originator of jumbo loans that meet the Consumer Financial Protection Bureau’s “qualified-mortgage” standards as well, in many cases funding the accounts by selling them to securitization-funded operations including J.P. Morgan and Redwood Trust.

Across its mortgage products, Quicken wrote $146 billion of new loans in 2019, second only to Wells Fargo. Among online lenders, it has been the biggest for several years.

Overall production of jumbo-mortgage bonds entered 2020 on a solid growth trajectory but fell off steeply when widespread stay-at-home orders took effect in early March. There recently have been more signs of life, however, with issuers including Redwood preparing offerings.