S&P cuts Rocket Mortgage

S&P said it downgraded its ratings on Rocket Mortgage LLC and its unsecured debt to BB from BB+. The recovery rating on the unsecured debt remains 3, indicating meaningful recovery in a default scenario.

“The rise in residential mortgage rates from near 3% at the beginning of this year to around 7% currently has caused mortgage origination volumes to plunge, weighing heavily on the performance of Rocket Mortgage and other companies that rely on origination volumes. The Mortgage Bankers Association forecasts full-year originations to fall by about half from the high levels of 2021 with mortgages originated for refinancing to drop by almost three-quarters,” S&P said in a press release.

The agency said that in its base case it forecasts Rocket’s leverage, as measured by net debt to EBITDA on a three-year averaged weighted basis, to rise to above 5x versus S&P’s prior expectation of 2x-3x.

The outlook is stable.

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