Rocket Companies, Inc.RKT
Rocket Companies, Inc. Fair Value Disclosure
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.
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 December 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: (i) 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, and (ii) recent observable market trades from similar loans, adjusted for credit risk and other individual loan characteristics. 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 internal models using assumptions at the measurement date that a market participant would use.
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.
Non-mortgage loans held for sale: Non-mortgage loans held for sale are personal loans. 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 of the consolidated CFE: Assets and liabilities represent non-mortgage loans and investment debt certificates at the consolidated CFE, respectively. The Company has elected the fair value option and to measure both the assets and liabilities of the consolidated CFE using the more observable of the fair value of the financial assets or the fair value of the financial liabilities. The Company determined inputs to the fair value measurement of the financial assets to be more observable. The fair value of the assets and liabilities of the consolidated CFE are determined using an internal valuation model that calculates the present value of estimated net future cash flows and are classified as Level 3. The net equity in the consolidated CFE represents the fair value of the Company’s beneficial interest in the entity.
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 years ended December 31, 2024 or December 31, 2023.
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
Balance at December 31, 2024 | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
Mortgage loans held for sale (1) | $ | — | $ | 8,778,087 | $ | 242,089 | $ | 9,020,176 | |||||||||||||||
| IRLCs | — | — | 103,101 | 103,101 | |||||||||||||||||||
| MSRs | — | — | 7,633,371 | 7,633,371 | |||||||||||||||||||
| Forward commitments | — | 89,332 | — | 89,332 | |||||||||||||||||||
Investment securities (2) | — | 40,841 | — | 40,841 | |||||||||||||||||||
Non-mortgage loans held for sale (2) | — | — | 261,702 | 261,702 | |||||||||||||||||||
Assets of the consolidated CFE (3) | — | — | 112,238 | 112,238 | |||||||||||||||||||
| Total assets | $ | — | $ | 8,908,260 | $ | 8,352,501 | $ | 17,260,761 | |||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Forward commitments | $ | — | $ | 11,209 | $ | — | $ | 11,209 | |||||||||||||||
Liabilities of the consolidated CFE (3) | — | — | 92,650 | 92,650 | |||||||||||||||||||
| Total liabilities | $ | — | $ | 11,209 | $ | 92,650 | $ | 103,859 | |||||||||||||||
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 December 31, 2024 and 2023, $114.5 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. The fair value of these level 3 mortgage loans held for sale was $99.7 million and $166.1 million as of December 31, 2024 and 2023, respectively.
(2) Included in Other assets on the Consolidated Balance Sheets.
(3) Asset and Liabilities of the consolidated CFE are included in Other assets and Other liabilities, respectively, on the Consolidated Balance Sheets. These financial instruments transferred into Level 3 during the year ended December 31, 2024.
The following tables present the quantitative information about material recurring Level 3 fair value financial instruments and the fair value measurements as of:
| December 31, 2024 | December 31, 2023 | ||||||||||||||||||||||
| Unobservable Input | Range | Weighted Average | Range | Weighted Average | |||||||||||||||||||
| Mortgage loans held for sale | |||||||||||||||||||||||
Model pricing | 69% - 104% | 89 | % | 68% - 100% | 87% | ||||||||||||||||||
| IRLCs | |||||||||||||||||||||||
Pull-through probability | 0% - 100% | 73 | % | 0% - 100% | 72% | ||||||||||||||||||
| MSRs | |||||||||||||||||||||||
Discount rate | 9.5% - 12.5% | 9.9 | % | 9.5% - 12.5% | 9.9% | ||||||||||||||||||
Conditional prepayment rate | 6.7% - 21.8% | 7.6 | % | 6.6% - 37.0% | 7.5% | ||||||||||||||||||
| Non-mortgage loans held for sale | |||||||||||||||||||||||
| Discount rate | 0% - 9.3% | 7.6 | % | 8.5% - 9.3% | 8.6% | ||||||||||||||||||
Assets and Liabilities of the consolidated CFE | |||||||||||||||||||||||
Discount rate | 8.0% - 8.0% | 8.0 | % | N/A | N/A | ||||||||||||||||||
The table below presents a reconciliation of Level 3 assets and liabilities measured at fair value on a recurring basis for the years ended December 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 Sale | IRLCs | Non-Mortgage Loans Held for Sale | Assets of the consolidated CFE | Liabilities of the consolidated CFE | ||||||||||||||||||||||||||||
Balance at December 31, 2023 | $ | 438,518 | $ | 132,870 | $ | 163,018 | $ | — | $ | — | ||||||||||||||||||||||
Transfers in (1) | 418,274 | — | 280,655 | 128,314 | 107,456 | |||||||||||||||||||||||||||
Transfers out/principal reductions (1) | (605,132) | — | (169,835) | (15,835) | (14,806) | |||||||||||||||||||||||||||
Net transfers and revaluation losses | — | (29,769) | — | — | — | |||||||||||||||||||||||||||
Total losses included in net income (loss) for assets held at the end of the reporting date | (9,571) | — | (12,136) | (241) | — | |||||||||||||||||||||||||||
Balance at December 31, 2024 | $ | 242,089 | $ | 103,101 | $ | 261,702 | $ | 112,238 | $ | 92,650 | ||||||||||||||||||||||
Balance at December 31, 2022 | $ | 1,082,730 | $ | 90,635 | $ | — | $ | — | $ | — | ||||||||||||||||||||||
Transfers in (1) | 714,213 | — | 168,573 | — | — | |||||||||||||||||||||||||||
Transfers out/principal reductions (1) | (1,274,893) | — | — | — | — | |||||||||||||||||||||||||||
Net transfers and revaluation gains | — | 42,235 | — | — | — | |||||||||||||||||||||||||||
Total losses included in net income (loss) for assets held at the end of the reporting date | (83,532) | — | (5,555) | — | — | |||||||||||||||||||||||||||
Balance at December 31, 2023 | $ | 438,518 | $ | 132,870 | $ | 163,018 | $ | — | $ | — | ||||||||||||||||||||||
(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 or transferred to third parties and loans paid in full.
Investment Securities
Investment securities consist of debt securities that are classified as trading securities. During the year ended December 31, 2023, the Company transferred these investments from available for sale classification to the trading securities classification. The trading classification reflects the more active buying and selling of these investment securities. As a result of the transfer of classification, the Company recognized $1,589 of unrealized losses to Net Income on the Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) from Accumulated Other Comprehensive Income (Loss) within Consolidated Statements of Changes in Equity. The Company used the specific identification as the basis of recording trades of investment securities. During the year ended December 31, 2024, the Company had $191 of realized losses recognized in the Consolidated Statements of Income (Loss) and Comprehensive Income (Loss). As of December 31, 2024 there was $566 of unrealized losses on trading securities held.
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 Value | Principal Amount Due Upon Maturity | Difference (1) | |||||||||||||||
Balance at December 31, 2024 | |||||||||||||||||
| Mortgage loans held for sale | $ | 9,020,176 | $ | 8,889,199 | $ | 130,977 | |||||||||||
| Non-mortgage loans held for sale | $ | 261,702 | $ | 268,877 | $ | (7,175) | |||||||||||
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 on the Consolidated Statements of Income (Loss) and Comprehensive Income (Loss), 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, Loans subject to repurchase right from Ginnie Mae, Funding facilities and Other financing facilities as these financial instruments are highly liquid or short-term in nature and as a result, their carrying amounts approximate fair value:
| December 31, 2024 | December 31, 2023 | ||||||||||||||||||||||
| Carrying Amount | Estimated Fair Value | Carrying Amount | Estimated Fair Value | ||||||||||||||||||||
| Senior Notes, due 10/15/2026 | $ | 1,146,001 | $ | 1,091,385 | $ | 1,143,716 | $ | 1,064,520 | |||||||||||||||
| Senior Notes, due 1/15/2028 | 61,596 | 58,912 | 61,463 | 60,469 | |||||||||||||||||||
| Senior Notes, due 3/1/2029 | 745,823 | 680,295 | 744,819 | 679,455 | |||||||||||||||||||
| Senior Notes, due 3/1/2031 | 1,241,663 | 1,093,100 | 1,240,311 | 1,105,088 | |||||||||||||||||||
| Senior Notes, due 10/15/2033 | 843,843 | 708,195 | 843,139 | 725,458 | |||||||||||||||||||
| Total Senior Notes, net | $ | 4,038,926 | $ | 3,631,887 | $ | 4,033,448 | $ | 3,634,990 | |||||||||||||||
The fair value of Senior Notes was calculated using the observable bond price at December 31, 2024 and 2023, respectively. The Senior Notes are classified as Level 2 in the fair value hierarchy.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2024 | Mar 3, 2025 | Showing above |
| 2020 | Mar 24, 2021 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.