UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30, 2021~~March 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________

Commission file number: 001-39432

Rocket Companies, Inc.

(Exact name of registrant as specified in its charter)


Delaware						84-4946470
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

1050 Woodward Avenue, Detroit, MI						48226
(Address of principal executive offices)						(Zip Code)

(313) 373-7990

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A common stock, par value $0.00001 per share

RKT

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐☒

Accelerated filer

☐

Non-accelerated filer

☒☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of ~~August 9, 2021, 138,406,108~~May 3, 2022, 118,539,560 shares of the registrant's Class A common stock, $0.00001 par value, and 1,848,879,483 shares of the registrant's Class D common stock, $0.00001 par value, were outstanding.

Rocket Companies, Inc.

Form 10-Q

For the period ended ~~June 30, 2021~~March 31, 2022


	Table of Contents

	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Income and Comprehensive Income	4
	Condensed Consolidated Statements of Changes in Equity	5
	Condensed Consolidated Statements of Cash Flows	76
	Notes to Condensed Consolidated Financial Statements	87
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	4033
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	6252
Item 4.	Controls and Procedures	6252

	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	6353
Item 1A.	Risk Factors	6353
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6354
~~Item 5.~~	~~Other Information~~	64
Item 6.	Exhibits	6555
Signatures		6656

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

Rocket Companies, Inc.

Condensed Consolidated Balance Sheets

(In Thousands, Except Shares and Per Share Amounts)


		June 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Assets	Assets	(Unaudited)				Assets	(Unaudited)
Cash and cash equivalents	Cash and cash equivalents	$	1,974,997	$	1,971,085	Cash and cash equivalents	$	2,310,661	$	2,131,174
Restricted cash	Restricted cash	77,454		83,018		Restricted cash	77,027		80,423
Mortgage loans held for sale, at fair value	Mortgage loans held for sale, at fair value	23,194,843		22,865,106		Mortgage loans held for sale, at fair value	10,685,144		19,323,568
Interest rate lock commitments (“IRLCs”), at fair value	Interest rate lock commitments (“IRLCs”), at fair value	907,978		1,897,194		Interest rate lock commitments (“IRLCs”), at fair value	213,210		538,861
Mortgage servicing rights (“MSRs”), at fair value	Mortgage servicing rights (“MSRs”), at fair value	4,644,172		2,862,685		Mortgage servicing rights (“MSRs”), at fair value	6,410,288		5,385,613
MSRs collateral for financing liability, at fair value		0		205,033

Notes receivable and due from affiliates	Notes receivable and due from affiliates	10,977		22,172		Notes receivable and due from affiliates	10,796		9,753
Property and equipment, net of accumulated depreciation and amortization of $531,281 and $497,812, respectively		242,599		211,161
Property and equipment, net of accumulated depreciation and amortization of $581,618 and $567,406, respectively						Property and equipment, net of accumulated depreciation and amortization of $581,618 and $567,406, respectively	260,042		254,376
Deferred tax asset, net	Deferred tax asset, net	592,909		519,933		Deferred tax asset, net	555,663		572,049
Lease right of use assets	Lease right of use assets	304,593		238,546		Lease right of use assets	414,201		427,895
Forward commitments, at fair value	Forward commitments, at fair value	22,339		20,584		Forward commitments, at fair value	667,908		17,337
Loans subject to repurchase right from Ginnie Mae	Loans subject to repurchase right from Ginnie Mae	2,769,911		5,696,608		Loans subject to repurchase right from Ginnie Mae	1,490,804		1,918,032
Other assets	Other assets	876,582		941,477		Other assets	2,152,276		2,115,814
Total assets	Total assets	$	35,619,354	$	37,534,602	Total assets	$	25,248,020	$	32,774,895
Liabilities and equity	Liabilities and equity					Liabilities and equity
Liabilities	Liabilities					Liabilities
Funding facilities	Funding facilities	$	17,221,229	$	17,742,573	Funding facilities	$	6,469,607	$	12,751,592
Other financing facilities and debt	Other financing facilities and debt					Other financing facilities and debt
Lines of credit	Lines of credit	75,000		375,000		Lines of credit	—		75,000
Senior Notes, net	Senior Notes, net	2,975,308		2,973,046		Senior Notes, net	4,023,861		4,022,491
Early buy out facility	Early buy out facility	2,148,959		330,266		Early buy out facility	1,698,167		1,896,784
MSRs financing liability, at fair value		0		187,794

Accounts payable	Accounts payable	287,533		251,960		Accounts payable	288,860		271,544
Lease liabilities	Lease liabilities	345,930		272,274		Lease liabilities	468,693		482,184
Forward commitments, at fair value	Forward commitments, at fair value	91,731		506,071		Forward commitments, at fair value	34,126		19,911
Investor reserves	Investor reserves	74,202		87,191		Investor reserves	80,759		78,888
Notes payable and due to affiliates	Notes payable and due to affiliates	76,869		73,896		Notes payable and due to affiliates	29,656		33,650
Tax receivable agreement liability	Tax receivable agreement liability	669,738		550,282		Tax receivable agreement liability	647,852		688,573
Loans subject to repurchase right from Ginnie Mae	Loans subject to repurchase right from Ginnie Mae	2,769,911		5,696,608		Loans subject to repurchase right from Ginnie Mae	1,490,804		1,918,032
Other liabilities	Other liabilities	697,136		605,485		Other liabilities	1,314,339		776,714
Total liabilities	Total liabilities	$	27,433,546	$	29,652,446	Total liabilities	$	16,546,724	$	23,015,363
Equity	Equity					Equity
Class A common stock, $0.00001 par value - 10,000,000,000 shares authorized, 135,978,914 and 115,372,565 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively.		$	1	$	1
Class B common stock, $0.00001 par value - 6,000,000,000 shares authorized, NaN issued and outstanding as of June 30, 2021 and December 31, 2020.		0		0
Class C common stock, $0.00001 par value - 6,000,000,000 shares authorized, NaN issued and outstanding as of June 30, 2021 and December, 31, 2020.		0		0
Class D common stock, $0.00001 par value - 6,000,000,000 shares authorized, 1,848,879,483 and 1,869,079,483 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively.		19		19
Class A common stock, $0.00001 par value - 10,000,000,000 shares authorized, 119,627,004 and 126,437,703 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively.						Class A common stock, $0.00001 par value - 10,000,000,000 shares authorized, 119,627,004 and 126,437,703 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively.	$	1	$	1
Class B common stock, $0.00001 par value - 6,000,000,000 shares authorized, none issued and outstanding as of March 31, 2022 and December 31, 2021.						Class B common stock, $0.00001 par value - 6,000,000,000 shares authorized, none issued and outstanding as of March 31, 2022 and December 31, 2021.	—		—
Class C common stock, $0.00001 par value - 6,000,000,000 shares authorized, none issued and outstanding as of March 31, 2022 and December 31, 2021.						Class C common stock, $0.00001 par value - 6,000,000,000 shares authorized, none issued and outstanding as of March 31, 2022 and December 31, 2021.	—		—
Class D common stock, $0.00001 par value - 6,000,000,000 shares authorized, 1,848,879,483 and 1,848,879,483 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively.						Class D common stock, $0.00001 par value - 6,000,000,000 shares authorized, 1,848,879,483 and 1,848,879,483 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively.	19		19
Additional paid-in capital	Additional paid-in capital	363,916		282,743		Additional paid-in capital	241,458		287,558
Retained earnings	Retained earnings	261,351		207,422		Retained earnings	305,794		378,005
Accumulated other comprehensive income	Accumulated other comprehensive income	431		317		Accumulated other comprehensive income	22		81
Non-controlling interest	Non-controlling interest	7,560,090		7,391,654		Non-controlling interest	8,154,002		9,093,868
Total equity	Total equity	8,185,808		7,882,156		Total equity	8,701,296		9,759,532
Total liabilities and equity	Total liabilities and equity	$	35,619,354	$	37,534,602	Total liabilities and equity	$	25,248,020	$	32,774,895

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

Rocket Companies, Inc.

Condensed Consolidated Statements of Income and Comprehensive Income

(In Thousands, Except Shares and Per Share Amounts)

(Unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Income
Revenue	Revenue									Revenue
Gain on sale of loans	Gain on sale of loans									Gain on sale of loans
Gain on sale of loans excluding fair value of MSRs, net	Gain on sale of loans excluding fair value of MSRs, net	$	1,484,378	$	4,083,661	$	3,863,656	$	5,370,351	Gain on sale of loans excluding fair value of MSRs, net	$	687,170	$	2,379,278
Fair value of originated MSRs	Fair value of originated MSRs	857,111		669,923		2,030,275		1,205,342		Fair value of originated MSRs	796,616		1,173,164
Gain on sale of loans, net	Gain on sale of loans, net	2,341,489		4,753,584		5,893,931		6,575,693		Gain on sale of loans, net	1,483,786		3,552,442
Loan servicing (loss) income
Loan servicing income										Loan servicing income
Servicing fee income	Servicing fee income	343,349		249,842		635,710		506,935		Servicing fee income	366,214		292,361
Change in fair value of MSRs	Change in fair value of MSRs	(414,745)		(552,844)		(168,824)		(1,544,096)		Change in fair value of MSRs	454,380		200,555
Loan servicing (loss) income, net		(71,396)		(303,002)		466,886		(1,037,161)
Loan servicing income										Loan servicing income	820,594		492,916
Interest income	Interest income									Interest income
Interest income	Interest income	86,645		78,039		181,890		152,081		Interest income	90,540		95,245
Interest expense on funding facilities	Interest expense on funding facilities	(64,378)		(53,757)		(132,222)		(93,216)		Interest expense on funding facilities	(41,696)		(67,844)
Interest income, net	Interest income, net	22,267		24,282		49,668		58,865		Interest income, net	48,844		27,401
Other income	Other income	376,388		560,949		842,500		804,725		Other income	317,372		466,112
Total revenue, net	Total revenue, net	2,668,748		5,035,813		7,252,985		6,402,122		Total revenue, net	2,670,596		4,538,871
Expenses	Expenses									Expenses
Salaries, commissions and team member benefits	Salaries, commissions and team member benefits	840,470		854,007		1,682,669		1,537,613		Salaries, commissions and team member benefits	853,915		842,199
General and administrative expenses	General and administrative expenses	262,815		289,183		554,234		483,257		General and administrative expenses	275,857		291,419
Marketing and advertising expenses	Marketing and advertising expenses	306,685		202,198		627,528		420,191		Marketing and advertising expenses	328,058		320,843
Depreciation and amortization	Depreciation and amortization	20,589		16,189		35,893		32,304		Depreciation and amortization	21,042		15,304
Interest and amortization expense on non-funding debt	Interest and amortization expense on non-funding debt	35,038		33,168		70,609		66,275		Interest and amortization expense on non-funding debt	38,664		35,571
Other expenses	Other expenses	142,454		155,538		378,185		276,673		Other expenses	90,603		190,365
Total expenses	Total expenses	1,608,051		1,550,283		3,349,118		2,816,313		Total expenses	1,608,139		1,695,701
Income before income taxes	Income before income taxes	1,060,697		3,485,530		3,903,867		3,585,809		Income before income taxes	1,062,457		2,843,170
Provision for income taxes	Provision for income taxes	(24,047)		(21,448)		(89,879)		(22,680)		Provision for income taxes	(25,849)		(65,832)
Net income	Net income	1,036,650		3,464,082		3,813,988		3,563,129		Net income	1,036,608		2,777,338
Net income attributable to non-controlling interest	Net income attributable to non-controlling interest	(975,530)		(3,464,082)		(3,629,166)		(3,563,129)		Net income attributable to non-controlling interest	(982,896)		(2,653,636)
Net income attributable to Rocket Companies	Net income attributable to Rocket Companies	$	61,120	$	0	$	184,822	$	0	Net income attributable to Rocket Companies	$	53,712	$	123,702

Earnings per share of Class A common stock	Earnings per share of Class A common stock									Earnings per share of Class A common stock
Basic	Basic	$	0.45	N/A		$	1.47	N/A		Basic	$	0.44	$	1.07
Diluted	Diluted	$	0.40	N/A		$	1.46	N/A		Diluted	$	0.40	$	1.07

Weighted average shares outstanding	Weighted average shares outstanding									Weighted average shares outstanding
Basic	Basic	136,139,400		N/A		125,961,094		N/A		Basic	122,691,728		115,673,524
Diluted	Diluted	1,991,267,972		N/A		132,100,103		N/A		Diluted	1,975,379,132		122,011,916

Comprehensive income	Comprehensive income									Comprehensive income
Net income	Net income	$	1,036,650	$	3,464,082	$	3,813,988	$	3,563,129	Net income	$	1,036,608	$	2,777,338
Cumulative translation adjustment	Cumulative translation adjustment	494		719		801		(1,041)		Cumulative translation adjustment	588		307
Unrealized gain on investment securities		527		7,087		163		7,087
Unrealized loss on investment securities										Unrealized loss on investment securities	(1,495)		(364)
Comprehensive income	Comprehensive income	1,037,671		3,471,888		3,814,952		3,569,175		Comprehensive income	1,035,701		2,777,281
Comprehensive income attributable to non-controlling interest	Comprehensive income attributable to non-controlling interest	(976,486)		(3,471,888)		(3,630,072)		(3,569,175)		Comprehensive income attributable to non-controlling interest	(982,049)		(2,653,586)
Comprehensive income attributable to Rocket Companies	Comprehensive income attributable to Rocket Companies	$	61,185	$	0	$	184,880	$	0	Comprehensive income attributable to Rocket Companies	$	53,652	$	123,695

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

Rocket Companies, Inc.

Condensed Consolidated Statements of Changes in Equity

(In Thousands, Except Shares and Per Share Amounts)

(Unaudited)

~~See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.~~

~~Rocket Companies, Inc.~~

~~Condensed Consolidated Statements of Changes in Equity (Continued)~~

~~(In Thousands, Except Shares and Per Share Amounts)~~

~~(Unaudited)~~

Class A Common Stock Shares Class A Common Stock Amount Class D Common Stock Shares Class D Common Stock Amount Additional Paid-in Capital Retained Earnings Net Parent Investment Accumulated Other Comprehensive Income (Loss) Total Non-controlling Interest Total
Equity
Balance, December 31, 2020 115,372,565 $ 1 1,869,079,483 $ 19 $ 282,743 $ 207,422 $ 0 $ 317 $ 7,391,654 $ 7,882,156
Net income — — — — — 123,702 — — 2,653,636 2,777,338
Other comprehensive income — — — — — — — 14 293 307
Share-based compensation, net 2,300 — — — 2,116 — — — 37,033 39,149
Unrealized loss on investment securities — — — — — — �� (21) (343) (364)
Distributions for state taxes on behalf of unit holders (members), net — — — — — (281) — — (4,559) (4,840)
Distributions to unit holders (members) from subsidiary investment — — — — — — — — (2,242,999) (2,242,999)
Special Dividend to Class A Shareholders — — — — — (145,903) — — — (145,903)
Increase in controlling interest of investment, net of income taxes and Tax receivable agreement liability 20,200,000 — (20,200,000) — 85,351 (1) — 55 (84,420) 985
Balance, March 31, 2021 135,574,865 $ 1 1,848,879,483 $ 19 $ 370,210 $ 184,939 $ 0 $ 365 $ 7,750,295 $ 8,305,829
Net income — — — — — 61,120 — — 975,530 1,036,650
Other comprehensive income — — — — — — — 29 465 494
Share-based compensation, net 4,177 — — — 2,621 — — — 35,622 38,243
Unrealized gain on investment securities — — — — — — — 36 491 527
Distributions for state taxes on behalf of unit holders (members), net — — — — — (1,346) — — (18,255) (19,601)
Distributions to unit holders (members) from subsidiary investment — — — — — — — — (1,188,294) (1,188,294)
Special Dividend to Class A Shareholders — — — — — 211 — — 111 322
Pushdown of dividend equivalent — — — — — 16,427 — — (16,427) 0
Issuance of Class A Common Shares under stock compensation and benefit plans 896,701 — — — 1,369 — — — 18,582 19,951
Repurchase of Class A Common Shares (496,829) — — — (8,313) — — — — (8,313)
Increase in controlling interest of investment, net of income taxes and Tax receivable agreement liability — — — — (1,971) — — 1 1,970 0
Balance, June 30, 2021 135,978,914 $ 1 1,848,879,483 $ 19 $ 363,916 $ 261,351 $ 0 $ 431 $ 7,560,090 $ 8,185,808


	Class A Common Stock Shares	Class A Common Stock Amount		Class D Common Stock Shares	Class D Common Stock Amount		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Non-controlling Interest		Total Equity
Balance, December 31, 2020	115,372,565	$	1	1,869,079,483	$	19	$	282,743	$	207,422	$	317	$	7,391,654	$	7,882,156
Net income	—	—		—	—		—		123,702		—		2,653,636		2,777,338
Cumulative translation adjustment	—	—		—	—		—		—		14		293		307
Unrealized loss on investment securities	—	—		—	—		—		—		(21)		(343)		(364)
Share-based compensation, net	2,300	—		—	—		2,116		—		—		37,033		39,149
Distributions for state taxes on behalf of unit holders (members), net	—	—		—	—		—		(281)		—		(4,559)		(4,840)
Distributions to unit holders (members) from subsidiary investment	—	—		—	—		—		—		—		(2,242,999)		(2,242,999)
Special Dividend to Class A Shareholders	—	—		—	—		—		(145,903)		—		—		(145,903)
Change in controlling interest of investment, net	20,200,000	—		(20,200,000)	—		85,351		(1)		55		(84,420)		985
Balance, March 31, 2021	135,574,865	$	1	1,848,879,483	$	19	$	370,210	$	184,939	$	365	$	7,750,295	$	8,305,829

Balance, December 31, 2021	126,437,703	$	1	1,848,879,483	$	19	$	287,558	$	378,005	$	81	$	9,093,868	$	9,759,532
Net income	—	—		—	—		—		53,712		—		982,896		1,036,608
Cumulative translation adjustment	—	—		—	—		—		—		31		557		588
Unrealized loss on investment securities	—	—		—	—		—		—		(92)		(1,403)		(1,495)
Share-based compensation, net	186,891	—		—	—		3,288		—		—		50,093		53,381
Distributions for state taxes on behalf of unit holders (members), net	—	—		—	—		—		(2,171)		—		(33,536)		(35,707)
Distributions to unit holders (members) from subsidiary investment, net	—	—		—	—		725		—		—		(1,856,575)		(1,855,850)
Special Dividend to Class A Shareholders	—	—		—	—		—		(123,752)		—		(31,830)		(155,582)
Taxes withheld on employees' restricted share award vesting	—	—		—	—		(77)		—		—		(1,220)		(1,297)
Issuance of Class A common Shares under stock compensation and benefit plans	1,018,875	—		—	—		930		—		—		12,743		13,673
Repurchase of Class A common Shares	(8,016,465)	—		—	—		(100,162)		—		—		—		(100,162)
Change in controlling interest of investment, net	—	—		—	—		49,196		—		2		(61,591)		(12,393)
Balance, March 31, 2022	119,627,004	$	1	1,848,879,483	$	19	$	241,458	$	305,794	$	22	$	8,154,002	$	8,701,296

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

Rocket Companies, Inc.

Condensed Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)

Six Months Ended June 30,
2021 2020
Operating activities
Net income $ 3,813,988 $ 3,563,129
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization 35,893 32,304
Provision for deferred income taxes 52,321 0
Origination of mortgage servicing rights (2,030,275) (1,205,342)
Change in fair value of MSRs 168,824 1,544,096
Gain on sale of loans excluding fair value of MSRs, net (3,863,656) (5,370,351)
Disbursements of mortgage loans held for sale (187,979,171) (122,056,424)
Proceeds from sale of loans held for sale 192,053,145 121,563,404
Share-based compensation expense 83,002 60,312
Change in assets and liabilities
Due from affiliates 11,195 0
Other assets (15,486) (200,685)
Accounts payable 35,574 62,343
Due to affiliates 2,619 24,679
Premium recapture and indemnification losses paid 980 (738)
Other liabilities 188,738 72,203
Total adjustments $ (1,256,297) $ (5,474,199)
Net cash provided by (used in) operating activities $ 2,557,691 $ (1,911,070)
Investing activities
Proceeds from sale of MSRs $ 93,398 $ 185,768
Net decrease in notes receivable from affiliates 0 60,516
(Increase) decrease in mortgage loans held for investment (30,687) 5,130
Net increase in investment securities 0 (2,500)
Purchase and other additions of property and equipment, net of disposals (67,665) (48,031)
Net cash (used in) provided by investing activities $ (4,954) $ 200,883
Financing activities
Net (payments) borrowings on funding facilities $ (521,343) $ 3,643,982
Net payments on lines of credit (300,000) (5,000)
Net borrowings on early buy out facility 1,818,693 45,504
Net borrowings notes payable from unconsolidated affiliates 353 384
Proceeds from MSRs financing liability 21,635 14,121
Stock issuance 17,591 0
Share repurchase (8,313) 0
Distributions to other unit holders (members) of Holdings (3,583,806) 0
Net transfer to parent 0 (1,591,595)
Net cash (used in) provided by financing activities $ (2,555,190) $ 2,107,396
Effects of exchange rate changes on cash and cash equivalents 801 (1,040)
Net (decrease) increase in cash and cash equivalents and restricted cash (1,652) 396,169
Cash and cash equivalents and restricted cash, beginning of period 2,054,103 1,455,725
Cash and cash equivalents and restricted cash, end of period $ 2,052,451 $ 1,851,894
Non-cash activities
Loans transferred to other real estate owned $ 877 $ 688
Supplemental disclosures
Cash paid for interest on related party borrowings $ 2,127 $ 2,023


	Three Months Ended March 31,
	2022		2021
Operating activities
Net income	$	1,036,608	$	2,777,338
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	21,042		15,304
Provision for deferred income taxes	1,786		38,457

Origination of mortgage servicing rights	(796,616)		(1,173,164)
Change in fair value of MSRs, net	(478,655)		(245,921)
Gain on sale of loans excluding fair value of MSRs, net	(687,170)		(2,379,278)
Disbursements of mortgage loans held for sale	(54,173,353)		(104,103,499)
Proceeds from sale of loans held for sale	63,189,908		110,280,681
Share-based compensation expense	55,593		42,072
Change in assets and liabilities
Due from affiliates	(1,044)		10,272

Other assets	(37,034)		132,324
Accounts payable	17,316		45,499
Due to affiliates	(4,168)		(302)
Premium recapture and indemnification losses paid	(515)		1,399
Other liabilities	628,602		832,332
Total adjustments	$	7,735,692	$	3,496,176
Net cash provided by operating activities	$	8,772,300	$	6,273,514
Investing activities
Proceeds from sale of MSRs	$	253,946	$	10,204
Net purchase of MSRs	(15,581)		—

Decrease (increase) in mortgage loans held for investment	7,107		(12,462)


Purchase and other additions of property and equipment, net of disposals	(26,742)		(36,633)
Net cash provided by (used in) investing activities	$	218,730	$	(38,891)
Financing activities
Net payments on funding facilities	$	(6,281,985)	$	(3,289,901)
Net payments on lines of credit	(75,000)		—


Net (payments) borrowings on early buy out facility	(198,617)		305,446
Net borrowings on notes payable from unconsolidated affiliates	174		175
Proceeds from MSRs financing liability	—		11,704





Stock issuance	11,575		—
Share repurchase	(100,162)		—
Taxes withheld on employees' restricted share award vesting	(1,297)		—
Distributions to other unit holders (members) of Holdings, net	(2,170,216)		(2,375,904)

Net cash used in financing activities	$	(8,815,528)	$	(5,348,480)
Effects of exchange rate changes on cash and cash equivalents	589		307
Net increase in cash and cash equivalents and restricted cash	176,091		886,450
Cash and cash equivalents and restricted cash, beginning of period	2,211,597		2,054,103
Cash and cash equivalents and restricted cash, end of period	$	2,387,688	$	2,940,553
Non-cash activities
Loans transferred to other real estate owned	$	435	$	578
Supplemental disclosures
Cash paid for interest on related party borrowings	$	1,231	$	1,460

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

Rocket Companies, Inc.

Notes to Unaudited Condensed ~~Combined~~Consolidated Financial Statements

(Dollars in Thousands, Except Shares and Per Share)

1. Business, Basis of Presentation and Accounting Policies

Rocket Companies, Inc. (the "Company", and together with its consolidated subsidiaries, "Rocket Companies", "we", "us", "our") was incorporated in Delaware on February 26, 2020 as a wholly owned subsidiary of Rock Holdings Inc. ("RHI") for the purpose of facilitating an initial public offering ("IPO") of its Class A common stock, $0.00001 par value (the “Class A common stock”) and other related transactions in order to carry on the business of RKT Holdings, LLC ("Holdings") and its wholly owned subsidiaries.

We are a Detroit-based FinTech holding company consisting of tech-driven real estate, mortgage and ~~eCommerce~~financial services businesses. We are committed to providing an industry-leading client experience powered by our platform. In addition to Rocket Mortgage, the nation’s largest mortgage lender, we have expanded into complementary industries, such as real estate services, personal lending, ~~and~~ auto sales, solar, and personal finance where we seek to deliver innovative client solutions leveraging our Rocket platform. Our business operations are organized into the following 2 segments: (1) Direct to Consumer and (2) Partner Network, refer to Note 12, Segments.

Rocket Companies, Inc. is a holding company. Its primary material asset is the equity interest in Holdings which, through its direct and indirect subsidiaries, conducts all of the Company's operations. Holdings is a Michigan limited liability company and wholly owns the following entities, with each entity's subsidiaries identified in parentheses: Rocket Mortgage, LLC, ~~(formerly known as Quicken Loans, LLC),~~ Amrock Holdings, LLC (“Amrock”, "Amrock Title Insurance Company" ("ATI") and "Nexsys Technologies LLC"), LMB HoldCo LLC (“Core Digital Media”), RCRA Holdings LLC (“Rock Connections” and “Rocket Auto”), Rocket Homes Real Estate LLC (“Rocket Homes”), RockLoans Holdings LLC (“Rocket Loans” and "Rocket Solar"), Rock Central LLC dba Rocket Central ("Truebill, Inc."), EFB Holdings Inc. (“Edison Financial”), Lendesk Canada Holdings Inc. ("Lendesk Technologies"), RockTech Canada Inc., and Woodward Capital Management LLC. As used herein, “Rocket Mortgage” refers to either the Rocket Mortgage brand or platform, or the ~~Quicken Loans~~Rocket Mortgage business, as the context allows.

Quicken Loans, LLC, changed its name to “Rocket Mortgage, LLC.”, effective as of July 31, 2021, pursuant to the filing of a Certificate of Amendment to the Articles of Organization with the Michigan Department of Licensing and Regulatory Affairs, Corporations, Securities & Commercial Licen~~sing Bureau.~~

~~Initial Public Offering~~

On August 10, 2020 we completed the IPO of our common stock pursuant to a Registration Statement on Form S-1 (File No. 333-239726), which closed on August 10, 2020. In the IPO, we sold an aggregate of 115,000,000 shares of Class A common stock, including 15,000,000 shares purchased by the underwriters on September 9, 2020. Rocket Companies, Inc. received net proceeds from the IPO of approximately $2,023,000 after deducting underwriting discounts and commissions, all of which was used to purchase 115,000,000 non-voting membership units of Holdings (the “Holdings Units”) and shares of Class D common stock from RHI.

Holdings is treated as a partnership for U.S. federal income tax purposes and, as such, is itself generally not subject to U.S. federal income tax under current U.S. tax laws. Each member of Holdings will be required to take into account for U.S. federal income tax purposes its distributive share of the items of income, gain, loss and deduction of Holdings. As indicated in ~~Note 8, Income Taxes,~~ ~~the Company is party to a Tax Receivable Agreement.~~

Basis of Presentation and Consolidation

Prior to the completion of the initial public offering, RHI, Holdings and its subsidiaries consummated an internal reorganization in which Rocket Companies, Inc. became the sole managing member of Holdings. Prior to the reorganization, Rocket Companies, Inc. had no operations.

As the sole managing member of Holdings, the Company operates and controls all of the business affairs of Holdings, and through Holdings and its subsidiaries, conducts its business. Holdings is considered a variable interest entity (“VIE”) and we consolidate the financial results of Holdings under the guidance of ASC 810, Consolidation. A portion of our ~~net~~Net income is allocated to ~~the~~Net income attributable to non-controlling ~~interest holders.~~interest. For further details, refer below to ~~Note 13~~, Variable Interest Entities and Note 1413, Non-controlling Interests.

~~Rocket Companies, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements (Continued)~~

~~(In Thousands, Except Shares and Per Share Amounts)~~

Income from Holdings and its subsidiaries prior to the reorganization and IPO has been accounted for as a non-controlling interest in our Condensed Consolidated Statements of Income and Comprehensive Income. Accumulated net income prior to the reorganization and IPO is presented in net parent investment in our Condensed Consolidated Statements of Changes in Equity as the financial statements prior to the reorganization and IPO reflect combined subsidiaries operating as part of RHI.

We have accounted for the reorganization as one of entities under common control and the net parent investment was allocated between non-controlling interest and additional paid-in capital based on the ownership of Holdings.

Our condensed consolidated financial statements for periods prior to the reorganization and IPO reflect the combined subsidiaries that historically operated as part of RHI. We have further adjusted the prior period results for the three and ~~six months ended June 30, 2020,~~ ~~to retrospectively reflect the acquisition of Amrock Title Insurance Company (“ATI”) which qualified as a common control transaction as discussed further below in t~~he ~~Acquisition Agreement~~ ~~section.~~

All significant intercompany transactions and accounts between the businesses comprising the Company have been eliminated in the accompanying condensed consolidated financial statements.

The Company's derivatives, IRLCs, mortgage loans held for sale, MSRs (including MSRs collateral for financing liability and MSRs financing liability), and investments are measured at fair value on a recurring basis. Additionally, other assets may be required to be measured at fair value in the consolidated financial statements on a nonrecurring basis. Examples of such measurements are mortgage loans transferred between held for investment and held for sale, certain impaired loans, and other real estate owned. For further details of the Company's transactions refer to Note 2, Fair Value Measurements.

All transactions and accounts between RHI and other related parties with the Company have a history of settlement or will be settled for cash and are reflected as related party transactions. For further details of the Company’s related party transactions refer to Note 6, Transactions with Related Parties.

Our condensed consolidated financial statements are unaudited and presented in U.S. dollars. They have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The interim financial information should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, as filed with the SEC. In our opinion, these condensed consolidated financial statements include all normal and recurring adjustments considered necessary for a fair statement of our results of operations, financial position and cash flows for the periods presented. Certain prior period amounts have been reclassified to conform to the current period financial statement presentation. However, our results of operations for any interim period are not necessarily indicative of the results that may be expected for a full fiscal year or for any other future period.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

(In Thousands, Except Shares and Per Share Amounts)

Truebill Acquisition ~~Agreement~~

On ~~August 5, 2020, Rocket Companies,~~December 23, 2021 (“Acquisition Date”), we completed the acquisition of Truebill, Inc. ~~entered into an acquisition agreement with RHI and its direct subsidiary Amrock Holdings Inc. pursuant to which we acquired ATI, a title insurance underwriting business,~~(“Truebill Acquisition”) for total ~~aggregate~~cash consideration of ~~$14,400 that consisted~~approximately $1.2 billion. The Truebill acquisition was accounted for as a business combination under ASC 805, Business Combinations. We recorded the preliminary allocation of ~~800,000 Holdings Units and shares of Rocket Companies, Inc. Class D common stock valued at the initial public offering price of $18.00 per share (the number of shares issued equals~~ the purchase price ~~divided by the price~~ to the ~~public in our initial public offering), the acquisition closed~~tangible and intangible assets acquired and liabilities assumed based on ~~August 14, 2020 subsequent to the IPO date on August 10, 2020. ATI's net income for the year ended December 31, 2019 was $4,700. Because~~their fair values as of the Acquisition ~~was a transaction between commonly controlled entities, U.S. GAAP requires~~Date. The Company is finalizing the ~~retrospective combination~~valuation of the ~~entities for all periods presented~~intangible assets acquired as if the combination had been in effect since the inception of common control. Accordingly, the Company’s condensed consolidated financial statements included in this Form 10-Q, including for the three and six months ended June 30, 2020, reflect the retrospective combinationpart of the ~~entities as if~~business combination, including the ~~combination had been~~assignment of goodwill to reporting units. As the purchase price allocation is preliminary in ~~effect since inception of common control.~~nature our estimates and assumptions are subject to change within the measurement period.

Management Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Although management is not currently aware of any factors that would significantly change its estimates and assumptions, actual results may differ from these estimates.

Subsequent Events

In preparing these condensed consolidated financial statements, the Company evaluated events and transactions for potential recognition or disclosure through the date these condensed consolidated financial statements were issued. Refer to Note 5, Borrowings for disclosures on changes to the Company’s debt agreements that occurred subsequent to ~~June 30, 2021.~~March 31, 2022.

~~Rocket Companies, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements (Continued)~~

~~(In Thousands, Except Shares and Per Share Amounts)~~

Subsequent to June 30, 2021, the Company sold MSRs relating to certain single-family mortgage loans with an aggregate unpaid principal balance of approximately $35.3 billion and a fair market value of approximately $373 million as of June 30, 2021. The sales represented approximately 7.6% of the Company's total single-family mortgage servicing portfolio as of June 30, 2021.

In July 2021, the Company purchased MSRs relating to certain single-family mortgage loans with an aggregate unpaid principal balance of approximately $3.6 billion and a fair market value of approximately $38 million as of June 30, 2021.

Special Dividends

On February 24, 2022, our board of directors authorized and declared a cash dividend (the "2022 Special Dividend") of $1.01 per share to the holders of our Class A common stock. The 2022 Special Dividend was paid on March 22, 2022 to holders of the Class A common stock of record as of the close of business on March 8, 2022. The Company funded the 2022 Special Dividend from cash distributions of approximately $2.0 billion by Holdings to all of its members, including the Company.

On February 25, 2021, our board of directors authorized and declared a cash dividend (the ~~"Special~~"2021 Special Dividend") of $1.11 per share to the holders of our Class A common stock. The 2021 Special Dividend was paid on March 23, 2021 to holders of the Class A common stock of record as of the close of business on March 9, 2021. The Company funded the 2021 Special Dividend from cash distributions of approximately $2.2 billion by ~~RKT~~ Holdings ~~LLC~~ to all of its members, including the Company.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

(In Thousands, Except Shares and Per Share Amounts)

Revenue Recognition

Gain on sale of loans, ~~net—Gain on sale of loans,~~ net— includes all components related to the origination and sale of mortgage loans, including (1) net gain on sale of loans, which represents the premium we receive in excess of the loan principal amount and certain fees charged by investors upon sale of loans into the secondary market, (2) loan origination fees (credits), points and certain costs, (3) provision for or benefit from investor reserves, (4) the change in fair value of interest rate locks and loans held for sale, (5) the gain or loss on forward commitments hedging loans held for sale and interest rate lock commitments (IRLCs), and (6) the fair value of originated MSRs. An estimate of the ~~gain~~Gain on sale of loans, net is recognized at the time an IRLC is issued, net of a pull-through factor. Subsequent changes in the fair value of IRLCs and mortgage loans held for sale are recognized in current period earnings. When the mortgage loan is sold into the secondary market, any difference between the proceeds received and the current fair value of the loan is recognized in current period earnings in Gain on sale of loans, net. Included in Gain on sale of loans, net is the ~~fair~~Fair value of originated MSRs, which represents the estimated fair value of MSRs related to loans which we have sold and retained the right to service. Refer to Note 3, Mortgage Servicing Rights for information related to the ~~gain/(loss) on~~Total changes in ~~the~~ fair value of MSRs.

Loan servicing ~~(loss)~~ income ~~net~~— includes income from servicing, sub-servicing and ancillary fees, and is recorded to income as earned, which is upon collection of payments from borrowers. This amount also includes the Change in fair value of MSRs, which is the adjustment for the fair value measurement of the ~~MSRs~~MSR asset as of the respective balance sheet date.

Interest income, ~~net—Interest income~~net — includes interest earned on mortgage loans held for sale and mortgage loans held for investment net of the interest expense paid on our loan funding facilities. Interest income is recorded as earned and interest expense is recorded as incurred.

~~Other income—~~Other income— is derived primarily from lead generation revenue, professional service fees, real estate network referral fees, contact center revenue, personal loans business, closing fees, net appraisal revenue, ~~and~~ net title insurance ~~fees.~~fees and personal finance.

The following revenue streams fall within the scope of ASC Topic 606—Revenue from Contracts with Customers and are disaggregated hereunder:

Core Digital Media lead generation revenue—The Company recognizes online consumer acquisition revenue based on successful delivery of marketing leads to a client at a fixed fee per lead. This service is satisfied at the time the lead is delivered, at which time revenue for the service is recognized. Online consumer acquisition revenue, net of intercompany eliminations, were ~~$8,084~~$4,464 and ~~$5,504~~$6,680 for the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020, respectively and $14,764 and $13,064 for the six months ended June 30, 2021 and 2020,~~ respectively.

~~Rocket Companies, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements (Continued)~~

~~(In Thousands, Except Shares and Per Share Amounts)~~

Professional service fees—The Company recognizes professional service fee revenue based on the delivery of services (e.g., human resources, technology, training) over the term of a contract. Consideration for the promised services is received through a combination of a fixed fee for the period and incremental fees paid for optional services that are available at an incremental rate determined at the time such services are requested. The Company recognizes the annual fee ratably over the life of the contract, as the performance obligation is satisfied equally over the term of the contract. For the optional services, revenue is only recognized at the time the services are requested and delivered and pricing is agreed upon. Professional service fee revenues were ~~$3,198~~$3,004 and ~~$1,920~~$3,549 for the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020, respectively and $6,747 and $3,755 for the six months ended June 30, 2021 and 2020,~~ respectively and were rendered entirely to related parties.

Rocket Homes real estate network referral fees—The Company recognizes real estate network referral fee revenue based on arrangements with partner agencies contingent on the closing of a transaction. As this revenue stream is variable, and is contingent on the successful transaction close, the revenue is constrained until the occurrence of the transaction. At this point, the constraint on recognizing revenue is deemed to have been lifted and revenue is recognized for the consideration expected to be received. Real estate network referral fees, net of intercompany eliminations, were ~~$14,132~~$11,398 and ~~$11,837~~$9,578 for the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020, respectively and $23,709 and $19,825 for the six months ended June 30, 2021 and 2020,~~ respectively.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

(In Thousands, Except Shares and Per Share Amounts)

Rock Connections and Rocket Auto contact center revenue—The Company recognizes contact center revenue for communication services including client support and sales. Consideration received mainly includes a fixed base fee and/or a variable contingent fee. The fixed base fee is recognized ratably over the period of performance, as the performance obligation is considered to be satisfied equally throughout the service period. The variable contingent fee related to car sales is constrained until the sale of the car is completed. Contact center revenues, net of intercompany eliminations, were ~~$12,291~~$9,315 and ~~$5,816~~$11,632 for the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020, respectively and $23,922 and $13,157 for the six months ended June 30, 2021 and 2020,~~ respectively.

Amrock closing fees—The Company recognizes closing fees for non-recurring services provided in connection with the origination of the loan. These fees are recognized at the time of loan closing for purchase transactions or at the end of a client's three-day rescission period for refinance transactions, which represents the point in time the loan closing services performance obligation is satisfied. The consideration received for closing services is a fixed fee per loan that varies by state and loan type. Closing fees were ~~$117,962~~$76,978 and ~~$106,038~~$157,167 for the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020, respectively and $275,128 and $179,525 for the six months ended June 30, 2021 and 2020,~~ respectively.

Amrock appraisal revenue, net—The Company recognizes appraisal revenue when the appraisal service is completed. The Company may choose to deliver appraisal services directly to its client or subcontract such services to a third-party licensed and/or certified appraiser. In instances where the Company performs the appraisal, revenue is recognized as the gross amount of consideration received at a fixed price per appraisal. The Company is an agent in instances where a third-party appraiser is involved in the delivery of appraisal services and revenue is recognized net of third-party appraisal expenses. Appraisal revenue, net was ~~$23,079~~$22,022 and ~~$20,781~~$22,491 for the three months ended ~~June 30,~~March 31, 2022 and 2021, respectively.

Truebill subscription revenue — The Company recognizes subscription revenue ratably over the contract term beginning on the commencement date of each contract, which is the date the Truebill platform is made available to customers. We have determined that subscriptions to our platform represent a stand-ready obligation to perform over the subscription term. These performance obligations are satisfied over time as the customer simultaneously receives and ~~2020, respectively and $45,570 and $38,399~~consumes the benefits. Contracts are one month to one year in length. Subscription revenues were $25,754 for the ~~six~~three months ended ~~June 30, 2021 and 2020, respectively.~~March 31, 2022.

Cash, Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. We maintain our bank accounts with a relatively small number of high-quality financial institutions.

Restricted cash as of ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ consisted of cash on deposit for a repurchase facility and client application deposits, title premiums collected from the insured that are due to the underwritten, ~~insurance company~~principal and interest received in collection accounts for purchased assets, and a $25,000 bond.

~~Rocket Companies, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements (Continued)~~

~~(In Thousands, Except Shares and Per Share Amounts)~~


		June 30,					March 31,
		2021		2020			2022		2021
Cash and cash equivalents	Cash and cash equivalents	$	1,974,997	$	1,773,527	Cash and cash equivalents	$	2,310,661	$	2,864,906
Restricted cash	Restricted cash	77,454		78,367		Restricted cash	77,027		75,647
Total cash, cash equivalents, and restricted cash in the statement of cash flows	Total cash, cash equivalents, and restricted cash in the statement of cash flows	$	2,052,451	$	1,851,894	Total cash, cash equivalents, and restricted cash in the statement of cash flows	$	2,387,688	$	2,940,553

Loans subject to repurchase right from Ginnie Mae

For certain loans sold to Ginnie Mae, the Company as the servicer has the unilateral right to repurchase any individual loan in a Ginnie Mae securitization pool if that loan meets defined criteria, including being delinquent more than 90 days. Once the Company has the unilateral right to repurchase the delinquent loan, the Company has effectively regained control over the loan and must re-recognize the loan on the Condensed Consolidated Balance Sheets and establish a corresponding finance liability regardless of the Company's intention to repurchase the loan. The asset and corresponding liability are recorded at the unpaid principal balance of the loan, which approximates its fair value.

~~Accounting Standards Issued but Not Yet Adopted~~

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

(In Thousands, Except Shares and Per Share Amounts)

Variable Interest Entities

~~In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No. 2020-04, Reference Rate Reform (Topic 848): Facilitation~~Upon completion of the ~~Effects~~reorganization and IPO, Rocket Companies, Inc. became the managing member of ~~Reference Rate Reform~~Holdings with 100% of the management and voting power in Holdings. In its capacity as managing member, Rocket Companies, Inc. has the sole authority to make decisions on ~~Financial Reporting. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope~~behalf of Holdings and bind Holdings to ~~clarify~~signed agreements. Further, Holdings maintains separate capital accounts for its investors as a mechanism for tracking earnings and subsequent distribution rights. Accordingly, management concluded that ~~Topic 848~~Holdings is ~~applicable to many derivative instruments and hedging relationships.~~a limited partnership or similar legal entity as contemplated in ASC 810, Consolidation.

~~Subject~~Furthermore, management concluded that Rocket Companies, Inc. is Holdings’ primary beneficiary. As the primary beneficiary, Rocket Companies, Inc. consolidates the results and operations of Holdings for financial reporting purposes under the variable interest consolidation model guidance in ASC 810.

Rocket Companies, Inc.'s relationship with Holdings results in no recourse to ~~meeting certain criteria,~~ the ~~new guidance provides optional expedients~~general credit of Rocket Companies, Inc. Holdings and exceptions to applying contract modification accounting under existing U.S. GAAP, to address the expected phase out of the London Inter-bank Offered Rate (“LIBOR”) by the end of 2022. This guidance is effective upon issuance and allows application to contract changes as early as January 1, 2020. The Company isits consolidated subsidiaries represents Rocket Companies, Inc.'s sole investment. Rocket Companies, Inc. shares in the ~~process~~income and losses of ~~transitioning~~Holdings in direct proportion to Rocket Companies, Inc.'s ownership percentage. Further, Rocket Companies, Inc. has no contractual requirement to provide financial support to Holdings.

Rocket Companies, Inc.’s financial position, performance and cash flows effectively represent those of Holdings and its ~~funding facilities~~subsidiaries as of and financing facilities that utilize LIBOR as the reference rate by adding alternative base rate language which may include the Secured Overnight Financing Rate ("SOFR"). For contracts to which ASC Topic 470, Debt applies, we have applied the optional expedients available from ASU 2020-04 and accounted for the ~~contract modifications related to reference rate reform prospectively. Of the contracts that have been adjusted~~period ended March 31, 2022.

Recently Adopted Accounting Standards

There are no recently issued accounting pronouncements adopted for the new reference rate, there has been an immaterial impact on the condensed consolidated financial statements. The Company is continuing to evaluate the impact that the adoption of this ASU will have on the condensed consolidated financial statements and related disclosures.period.

2. 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.

~~Rocket Companies, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements (Continued)~~

~~(In Thousands, Except Shares and Per Share Amounts)~~

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 ~~June 30, 2021~~March 31, 2022 or December 31, ~~2020.~~2021.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

(In Thousands, Except Shares and Per Share Amounts)

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 market prices of 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. 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 dealer price ~~quotes.~~quotes and internal models.

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 ~~(including MSRs collateral for financing liability and MSRs financing liability)~~ is determined using aan 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, contractual servicing fee income, and ancillary income among others. ~~These fair value measurements~~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.

~~Rocket Companies, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements (Continued)~~

~~(In Thousands, Except Shares and Per Share Amounts)~~

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 ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 or the year ended December 31, ~~2020.~~2021.

Level 1 Level 2 Level 3 Total
Balance at June 30, 2021
Assets:
Mortgage loans held for sale $ 0 $ 20,615,530 $ 2,579,313 $ 23,194,843
IRLCs 0 0 907,978 907,978
MSRs 0 0 4,644,172 4,644,172
Forward commitments 0 22,339 0 22,339
Total assets $ 0 $ 20,637,869 $ 8,131,463 $ 28,769,332
Liabilities:
Forward commitments $ 0 $ 91,731 $ 0 $ 91,731
Total liabilities $ 0 $ 91,731 $ 0 $ 91,731
Balance at December 31, 2020
Assets:
Mortgage loans held for sale $ 0 $ 22,285,440 $ 579,666 $ 22,865,106
IRLCs 0 0 1,897,194 1,897,194
MSRs 0 0 2,862,685 2,862,685
MSRs collateral for financing liability (1) 0 0 205,033 205,033
Forward commitments 0 20,584 0 20,584
Total assets $ 0 $ 22,306,024 $ 5,544,578 $ 27,850,602
Liabilities:
Forward commitments $ 0 $ 506,071 $ 0 $ 506,071
MSRs financing liability (1) 0 0 187,794 187,794
Total liabilities $ 0 $ 506,071 $ 187,794 $ 693,865

~~(1) Refer to~~ ~~Note 3, Mortgage Servicing Rights~~ ~~for further information regarding both the MSRs collateral for financing liability and MSRs financing liability.~~


	Level 1		Level 2		Level 3		Total
Balance at March 31, 2022
Assets:
Mortgage loans held for sale	$	—	$	8,506,382	$	2,178,762	$	10,685,144
IRLCs	—		—		213,210		213,210
MSRs	—		—		6,410,288		6,410,288
Forward commitments	—		667,908		—		667,908
Total assets	$	—	$	9,174,290	$	8,802,260	$	17,976,550
Liabilities:
Forward commitments	$	—	$	34,126	$	—	$	34,126
Total liabilities	$	—	$	34,126	$	—	$	34,126

Balance at December 31, 2021
Assets:
Mortgage loans held for sale	$	—	$	17,014,202	$	2,309,366	$	19,323,568
IRLCs	—		—		538,861		538,861
MSRs	—		—		5,385,613		5,385,613
Forward commitments	—		17,337		—		17,337
Total assets	$	—	$	17,031,539	$	8,233,840	$	25,265,379
Liabilities:
Forward commitments	$	—	$	19,911	$	—	$	19,911
Total liabilities	$	—	$	19,911	$	—	$	19,911

~~Rocket Companies, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements (Continued)~~

~~(In Thousands, Except Shares and Per Share Amounts)~~

~~The following tables present the quantitative information about recurring Level 3 fair value financial instruments and the fair value measurements as of:~~

June 30, 2021 December 31, 2020
Unobservable Input Range Weighted Average Range Weighted Average
Mortgage loans held for sale
Dealer pricing 87% - 104% 100 % 89% - 105% 99 %
IRLCs
Loan funding probability 0% - 100% 77 % 0% - 100% 74 %
MSRs, MSRs collateral for financing liability, and MSRs financing liability
Discount rate 9.5% - 12.0% 9.9 % 9.5% - 12.0% 9.9 %
Conditional prepayment rate 6.8% - 57.6% 10.5 % 6.6% - 52.1% 15.8 %

1512

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

(In Thousands, Except Shares and Per Share Amounts)

The following tables present the quantitative information about recurring Level 3 fair value financial instruments and the fair value measurements as of:


	March 31, 2022			December 31, 2021
Unobservable Input	Range	Weighted Average		Range	Weighted Average
Mortgage loans held for sale
Dealer pricing	89% - 101%	98	%	89% - 103%	99	%
IRLCs
Loan funding probability	0% - 100%	77	%	0% - 100%	78	%
MSRs
Discount rate	9.0% - 12.0%	9.5	%	9.0% - 12.0%	9.5	%
Conditional prepayment rate	6.5% - 15.0%	7.1	%	6.8% - 36.9%	8.7	%

The table below presents a reconciliation of Level 3 assets measured at fair value on a recurring basis for the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020.~~2021. Mortgage servicing rights ~~(including MSRs collateral for financing liability and MSRs financing liability)~~ 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.


		Loans Held for Sale		IRLCs			Loans Held for Sale		IRLCs
Balance at March 31, 2021		$	990,834	$	765,215
Balance at December 31, 2021						Balance at December 31, 2021	$	2,309,366	$	538,861
Transfers in (1)	Transfers in (1)	2,065,406		0		Transfers in (1)	522,640		—
Transfers out/principal reductions (1)	Transfers out/principal reductions (1)	(473,948)		0		Transfers out/principal reductions (1)	(618,320)		—
Net transfers and revaluation gains		0		142,763
Net transfers and revaluation losses						Net transfers and revaluation losses	—		(325,651)
Total losses included in net income	Total losses included in net income	(2,979)		0		Total losses included in net income	(34,924)		—
Balance at June 30, 2021		$	2,579,313	$	907,978

Balance at March 31, 2020		$	418,090	$	1,214,865
Transfers in (1)		242,904		0
Transfers out/principal reductions (1)		(235,617)		0
Net transfers and revaluation gains		0		1,178,899
Total losses included in net income		(9,277)		0
Balance at June 30, 2020		$	416,100	$	2,393,764
Balance at March 31, 2022						Balance at March 31, 2022	$	2,178,762	$	213,210

Balance at December 31, 2020	Balance at December 31, 2020	$	579,666	$	1,897,194	Balance at December 31, 2020	$	579,666	$	1,897,194
Transfers in (1)	Transfers in (1)	2,783,564		0		Transfers in (1)	718,158		—
Transfers out/principal reductions (1)	Transfers out/principal reductions (1)	(781,410)		0		Transfers out/principal reductions (1)	(307,462)		—
Net transfers and revaluation losses	Net transfers and revaluation losses	0		(989,216)		Net transfers and revaluation losses	—		(1,131,979)
Total losses included in net income		(2,507)		0
Balance at June 30, 2021		$	2,579,313	$	907,978
Total gains included in net income						Total gains included in net income	472		—
Balance at March 31, 2021						Balance at March 31, 2021	$	990,834	$	765,215

Balance at December 31, 2019		$	308,793	$	508,135
Transfers in (1)		783,763		0
Transfers out/principal reductions (1)		(660,986)		0
Net transfers and revaluation gains		0		1,885,629
Total losses included in net income		(15,470)		0
Balance at June 30, 2020		$	416,100	$	2,393,764

(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 to third parties and loans paid in full.

~~Rocket Companies, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements (Continued)~~

~~(In Thousands, Except Shares and Per Share Amounts)~~

Fair Value Option

The following is the estimated fair value and unpaid principal balance (“UPB”) of 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 loans held for sale as the Company believes fair value best reflects their expected future economic performance:

Fair Value Unpaid Principal Balance Difference (1)
Balance at June 30, 2021 $ 23,194,843 $ 22,691,966 $ 502,877
Balance at December 31, 2020 $ 22,865,106 $ 21,834,817 $ 1,030,289


	Fair Value		Principal Amount Due Upon Maturity		Difference (1)
Balance at March 31, 2022	$	10,685,144	$	10,798,888	$	(113,744)
Balance at December 31, 2021	$	19,323,568	$	19,018,552	$	305,016

(1) Represents the amount of gains (losses) included in Gain on sale of loans, net due to changes in fair value of items accounted for using the fair value option.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

(In Thousands, Except Shares and Per Share Amounts)

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, warehouse borrowings, and line of credit borrowing facilities as these financial instruments are highly liquid or short-term in nature and as a result, their carrying amounts approximate fair value:


		June 30, 2021				December 31, 2020					March 31, 2022				December 31, 2021
		Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value			Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Senior Notes, due 10/15/2026										Senior Notes, due 10/15/2026	$	1,139,718	$	1,058,874	$	1,139,146	$	1,151,932
Senior Notes, due 1/15/2028	Senior Notes, due 1/15/2028	$	996,070	$	1,060,722	$	994,986	$	1,079,629	Senior Notes, due 1/15/2028	61,230		58,854		61,197		64,251
Senior Notes, due 3/1/2029	Senior Notes, due 3/1/2029	$	742,448	$	740,693	$	741,946	$	766,365	Senior Notes, due 3/1/2029	743,063		686,115		742,812		752,805
Senior Notes, due 3/1/2031	Senior Notes, due 3/1/2031	$	1,236,790	$	1,253,838	$	1,236,114	$	1,298,175	Senior Notes, due 3/1/2031	1,237,943		1,126,338		1,237,605		1,273,675
Senior Notes, due 10/15/2033										Senior Notes, due 10/15/2033	841,907		748,034		841,731		857,718
Total Senior Notes, net										Total Senior Notes, net	$	4,023,861	$	3,678,215	$	4,022,491	$	4,100,381

The fair value of Senior Notes was calculated using the observable bond price at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. The Senior Notes are classified as Level 2 in the fair value hierarchy.

~~Rocket Companies, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements (Continued)~~

~~(In Thousands, Except Shares and Per Share Amounts)~~

3. Mortgage Servicing Rights

Mortgage servicing rights are recognized as assets on the Condensed Consolidated Balance Sheets when loans are sold, and the associated servicing rights are retained. The Company maintains one class of MSRs asset and has elected the fair value option. These MSRs are recorded at fair value, which is determined using aan internal valuation model that calculates the present value of estimated future net servicing fee income. The model includes estimates of prepayment speeds, discount rate, cost to service, float earnings, contractual servicing fee income, and ancillary income and late fees, among others.

The following table summarizes changes to the ~~MSRs~~MSR assets for the three ~~and six~~ months ended:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Fair value, beginning of period	Fair value, beginning of period	$	4,304,762	$	2,170,638	$	2,862,685	$	2,874,972	Fair value, beginning of period	$	5,385,613	$	2,862,685
MSRs originated	MSRs originated	857,111		669,923		2,030,275		1,205,342		MSRs originated	796,616		1,173,164
MSRs sales	MSRs sales	(83,195)		0		(99,060)		(186,292)		MSRs sales	(253,997)		(15,865)

Changes in fair value:	Changes in fair value:									Changes in fair value:
Due to changes in valuation model inputs or assumptions (1)	Due to changes in valuation model inputs or assumptions (1)	(141,073)		(272,885)		442,234		(1,078,421)		Due to changes in valuation model inputs or assumptions (1)	767,271		583,307
Due to collection/realization of cash flows	Due to collection/realization of cash flows	(293,433)		(278,467)		(591,962)		(526,392)		Due to collection/realization of cash flows	(285,215)		(298,529)
Total changes in fair value	Total changes in fair value	(434,506)		(551,352)		(149,728)		(1,604,813)		Total changes in fair value	482,056		284,778
Fair value, end of period	Fair value, end of period	$	4,644,172	$	2,289,209	$	4,644,172	$	2,289,209	Fair value, end of period	$	6,410,288	$	4,304,762

(1) Reflects changes in assumptions including discount rates and prepayment speed assumptions, mostly due to changes in market interest rates. Does not include the change in fair value of derivatives that economically hedge MSRs identified for ~~sale.~~sale or the effects of contractual prepayment protection resulting from sales of MSRs.

The total UPB of mortgage loans serviced, excluding subserviced loans, at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 was ~~$466,444,905~~$492,368,318 and ~~$371,494,905,~~$485,087,214, respectively. The portfolio primarily consists of high-quality performing agency and government (FHA and VA) loans. As of ~~June 30, 2021,~~March 31, 2022, delinquent loans (defined as 60-plus days past-due) were ~~2.60%~~1.31% of our total portfolio. Excluding clients in COVID-19 related forbearance plans, our delinquent loans (defined as 60-plus days past-due) were ~~0.71%~~0.84% as of ~~June 30, 2021.~~

During the first quarter of 2021 and fourth quarter of 2020, the Company sold MSRs with a fair value of $4,885 and $193,739, respectively, relating to certain single-family mortgage loans. Based on the contract terms, the sale of those MSRs did not immediately qualify for sale accounting treatment under U.S. GAAP. As a result, the Company was required to retain the MSRs asset (i.e., MSRs collateral for financing liability, at fair value) and the MSRs liability (i.e., MSRs financing liability, at fair value) on the balance sheet until certain contractual provisions lapsed during the second quarter of 2021. These MSRs were reported on the balance sheet at fair value using a valuation methodology consistent with the Company’s method for valuing MSRs until those contractual provisions lapsed. Additionally, the terms of the agreement require quarterly adjustments to the sales price for changes in prepayment rates at the time of sale for a period of six months. Furthermore, in the six months ended June 30, 2021, the Company also sold MSRs with a fair value ~~of $94,175 relating to certain mortgage loans, which qualified for sale accounting treatment under U.S. GAAP.~~March 31, 2022.

1814

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

(In Thousands, Except Shares and Per Share Amounts)

During the third quarter of 2019, the Company sold MSRs with a fair value of $340,303 relating to certain single-family mortgage loans. Based on the contract terms, the sale of those MSRs did not immediately qualify for sale accounting treatment under U.S. GAAP. As a result, the Company was required to retain the MSRs asset and the MSRs liability on the balance sheet until certain contractual provisions lapsed after June 2020. These MSRs were reported on the balance sheet at fair value using a valuation methodology consistent with the Company’s method for valuing MSRs until those contractual provisions lapsed. In addition, change in FMV of the MSRs asset and liability from this sale is captured within Loan servicing (loss) income, net in the Condensed Consolidated Statements of Income and Comprehensive Income. The unrealized gain of $14,911 and $131,061 relating to the MSRs liability and the offsetting unrealized loss of $14,911 and $131,061 relating to the MSRs asset were recorded in current operations for the three and six months ended June 30, 2020. Furthermore, in the six months ended June 30, 2020, the Company sold MSRs with a fair value of $186,292 relating to certain mortgage loans, all of which qualified for sale accounting treatment under U.S. GAAP.

The following is a summary of the weighted average discount rate and prepayment speed assumptions used to determine the fair value of MSRs as well as the expected life of the loans in the servicing portfolio:


		June 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Discount rate	Discount rate	9.9	%	9.9	%	Discount rate	9.5	%	9.5	%
Prepayment speeds	Prepayment speeds	10.5	%	15.8	%	Prepayment speeds	7.1	%	8.7	%
Life (in years)	Life (in years)	6.65		5.05		Life (in years)	7.97		7.25

The key assumptions used to estimate the fair value of MSRs are prepayment speeds and the discount rate. Increases in prepayment speeds generally have an adverse effect on the value of MSRs as the underlying loans prepay faster. In a declining interest rate environment, the fair value of MSRs generally decreases as prepayments increase and therefore, the estimated life of the MSRs and related cash flows decrease. Decreases in prepayment speeds generally have a positive effect on the value of MSRs as the underlying loans prepay less frequently. In a rising interest rate environment, the fair value of MSRs generally increases as prepayments decrease and therefore, the estimated life of the MSRs and related cash flows increase. Increases in the discount rate result in a lower MSRs value and decreases in the discount rate result in a higher MSRs value. MSRs uncertainties are hypothetical and do not always have a direct correlation with each assumption. Changes in one assumption may result in changes to another assumption, which might magnify or counteract the uncertainties.

The following table stresses the discount rate and prepayment speeds at two different data points:

Discount Rate Prepayment Speeds
100 BPS Adverse Change 200 BPS Adverse Change 10% Adverse Change 20% Adverse Change
June 30, 2021
Mortgage servicing rights $ (193,419) $ (361,577) $ (157,732) $ (314,225)
December 31, 2020
Mortgage servicing rights $ (115,130) $ (212,119) $ (147,420) $ (279,691)

~~Rocket Companies, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements (Continued)~~

~~(In Thousands, Except Shares and Per Share Amounts)~~


	Discount Rate				Prepayment Speeds
	100 BPS Adverse Change		200 BPS Adverse Change		10% Adverse Change		20% Adverse Change
March 31, 2022
Mortgage servicing rights	$	(281,487)	$	(529,914)	$	(218,374)	$	(416,199)
December 31, 2021
Mortgage servicing rights	$	(232,658)	$	(435,181)	$	(198,153)	$	(372,018)

4. Mortgage Loans Held for Sale

The Company sells substantially all of its originated mortgage loans into the secondary market. The Company may retain the right to service some of these loans upon sale through ownership of servicing rights. A reconciliation of the changes in mortgage loans held for sale to the amounts presented on the Condensed Consolidated Statements of Cash Flows is below:


		Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020			2022		2021
Balance at the beginning of period	Balance at the beginning of period	$	22,865,106	$	13,275,735	Balance at the beginning of period	$	19,323,568	$	22,865,106
Disbursements of mortgage loans held for sale	Disbursements of mortgage loans held for sale	187,979,171		122,056,424		Disbursements of mortgage loans held for sale	54,173,353		104,103,499
Proceeds from sales of mortgage loans held for sale (1)	Proceeds from sales of mortgage loans held for sale (1)	(192,043,819)		(121,559,129)		Proceeds from sales of mortgage loans held for sale (1)	(63,180,565)		(110,276,266)
Gain on sale of mortgage loans excluding fair value of other financial instruments, net (2)	Gain on sale of mortgage loans excluding fair value of other financial instruments, net (2)	4,394,385		3,855,505		Gain on sale of mortgage loans excluding fair value of other financial instruments, net (2)	368,788		2,133,105

Balance at the end of period	Balance at the end of period	$	23,194,843	$	17,628,535	Balance at the end of period	$	10,685,144	$	18,825,444

(1) The proceeds from sales of loans held for sale on the Condensed Consolidated Statements of Cash Flows includes amounts related to the sale of consumer loans.

(2) The Gain on sale of loans excluding fair value of MSRs, net on the Condensed Consolidated Statements of Cash Flows includes amounts related to the sale of consumer loans, interest rate lock commitments, forward commitments, and provisions for investor reserves.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

(In Thousands, Except Shares and Per Share Amounts)

Credit Risk

The Company is subject to credit risk associated with mortgage loans that it purchases and originates during the period of time prior to the sale of these loans. The Company considers credit risk and losses associated with these loans to be insignificant as it holds the loans for a short period of time, which for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 is, on average, approximately 1721 days from the date of borrowing, and the market for these loans continues to be highly liquid. The Company is also subject to credit risk associated with mortgage loans it has repurchased as a result of breaches of representations and warranties during the period of time between repurchase and resale.

5. Borrowings

The Company maintains various funding facilities and other non-funding debt as shown in the tables below. Interest rates typically have two main components – a base rate most commonly LIBOR or SOFR, which is sometimes subject to a minimum floor plus a spread. Some facilities have a commitment fee, which can range from 0.0% to ~~0.50%.~~0.5% per year. The commitment fee charged by lenders ~~for each of the facilities is an annual fee and~~ is calculated based on the committed line amount multiplied by a negotiated rate. The Company is required to maintain certain covenants, including minimum tangible net worth, minimum liquidity, maximum total debt or liabilities to net worth ratio, pretax net income requirements, and other customary debt covenants, as defined in the agreements. The Company was in compliance with all covenants as of ~~June 30, 2021.~~March 31, 2022.

~~Rocket Companies, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements (Continued)~~

~~(In Thousands, Except Shares and Per Share Amounts)~~

The amount owed and outstanding on the Company’s loan funding facilities fluctuates ~~greatly~~ based on its origination volume, the amount of time it takes the Company to sell the loans it originates, and the Company’s ability to use ~~the~~its cash to self-fund loans. In addition to self-funding, the Company may from time to time use surplus cash to “buy-down” the effective interest rate of certain loan funding facilities or to self-fund a portion of our loan originations. As of ~~June 30, 2021, $2,935,563~~March 31, 2022, $2,292,172 of the Company’s cash was used to buy-down our funding facilities and self-fund, ~~$500,000~~$200,000 of which are buy-down funds that are included in Cash and cash equivalents on the Condensed Consolidated Balance Sheets and ~~an estimated $2,435,563~~$2,092,172 of which is discretionary self-funding that reduces Cash and cash equivalents on the Condensed Consolidated Balance Sheets. The Company has the right to withdraw the ~~$500,000~~$200,000 at any time, unless a margin call has been made or a default has occurred under the relevant facilities. The Company has an estimated ~~$2,435,563~~$2,092,172 of discretionary self-funded loans, of which a portion can be transferred to a warehouse line or the early buy out line, provided that such loans meet the eligibility criteria to be placed on such lines. The remaining portion will be funded in normal course over a short period of time, generally less than one month. A large unanticipated margin call could also have a material adverse effect on the Company’s liquidity. ~~Furthermore, refer to~~ ~~Note 3, Mortgage Servicing Rights~~ ~~for additional information regarding the MSRs financing liability with the MSRs sold during the fourth quarter of 2020.~~

The terms of the Senior Notes restrict our ability and the ability of our subsidiary guarantors among other things to: (1) incur additional debt or issue preferred stock; (2) pay dividends or make distributions in respect of capital stock; (3) purchase or redeem capital stock; (4) make investments or other restricted payments; (5) sell assets; (6) enter into transactions with affiliates; (7) effect a consolidation or merger, taken as a whole; (8) designate our subsidiaries as unrestricted subsidiaries, unless certain conditions are met, as defined in the agreements; (9) merge, consolidate or sell, transfer or lease assets, and; ~~(10)~~(2) create liens on assets. ~~Items (1) through (9) apply to the 2028 Senior Notes. Items (9) and (10) apply to the 2029 and 2031 Senior Notes, which have investment grade covenants.~~

2116

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

(In Thousands, Except Shares and Per Share Amounts)

Funding Facilities


Facility Type	Facility Type	Collateral	Maturity	Line Amount		Committed Line Amount		Outstanding Balance June 30, 2021		Outstanding Balance December 31, 2020		Facility Type	Collateral	Maturity	Line Amount		Committed Line Amount		Outstanding Balance as of March 31, 2022		Outstanding Balance as of December 31, 2021
MRA funding:	MRA funding:											MRA funding:
1) Master Repurchase Agreement (7)		Mortgage loans held for sale (6)	10/22/2021	$	2,000,000	$	100,000	$	499,265	$	999,752
1) Master Repurchase Agreement (1)(9)												1) Master Repurchase Agreement (1)(9)	Mortgage loans held for sale (8)	10/20/2023	$	2,000,000	$	100,000	$	246,476	$	249,119
2) Master Repurchase Agreement ~~(7)~~(9)	2) Master Repurchase Agreement ~~(7)~~(9)	Mortgage loans held for sale (6)	12/2/2021	1,500,000		500,000		1,414,929		1,320,484		2) Master Repurchase Agreement ~~(7)~~(9)	Mortgage loans held for sale (8)	12/1/2022	1,500,000		250,000		576,521		1,328,727
3) Master Repurchase Agreement ~~(7)~~(9)	3) Master Repurchase Agreement ~~(7)~~(9)	Mortgage loans held for sale (6)	4/22/2022	2,750,000		1,000,000		2,088,280		2,407,156		3) Master Repurchase Agreement ~~(7)~~(9)	Mortgage loans held for sale (8)	4/21/2023	2,250,000		500,000		527,655		1,714,806
4) Master Repurchase Agreement ~~(7)~~(9)	4) Master Repurchase Agreement ~~(7)~~(9)	Mortgage loans held for sale (6)	4/26/2022	1,800,000		1,500,000		1,613,432		1,953,949		4) Master Repurchase Agreement ~~(7)~~(9)	Mortgage loans held for sale (8)	1/26/2023	2,000,000		1,200,000		1,252,325		1,479,128
5) Master Repurchase Agreement ~~(7)~~(9)	5) Master Repurchase Agreement ~~(7)~~(9)	Mortgage loans held for sale (6)	4/20/2023	3,000,000		500,000		2,820,837		2,004,707		5) Master Repurchase Agreement ~~(7)~~(9)	Mortgage loans held for sale (8)	4/20/2023	3,000,000		500,000		585,523		2,264,954
6) Master Repurchase Agreement ~~(7)~~(9)	6) Master Repurchase Agreement ~~(7)~~(9)	Mortgage loans held for sale (6)	9/5/2022	2,000,000		500,000		1,391,514		1,780,902		6) Master Repurchase Agreement ~~(7)~~(9)	Mortgage loans held for sale (8)	9/22/2023	2,000,000		500,000		225,067		498,335
7) Master Repurchase Agreement ~~(7)~~(9)	7) Master Repurchase Agreement ~~(7)~~(9)	Mortgage loans held for sale (6)	9/16/2021	1,750,000		1,137,500		1,164,702		1,343,130		7) Master Repurchase Agreement ~~(7)~~(9)	Mortgage loans held for sale (8)	9/15/2023	1,200,000		500,000		167,104		542,846
8) Master Repurchase Agreement ~~(7)~~(9)	8) Master Repurchase Agreement ~~(7)~~(9)	Mortgage loans held for sale (6)	6/10/2022	500,000		0		349,941		219,786		8) Master Repurchase Agreement ~~(7)~~(9)	Mortgage loans held for sale (8)	6/10/2022	500,000		—		—		—
9) Master Repurchase Agreement ~~(7)~~(9)	9) Master Repurchase Agreement ~~(7)~~(9)	Mortgage loans held for sale (6)	9/24/2021	1,500,000		750,000		797,157		983,126		9) Master Repurchase Agreement ~~(7)~~(9)	Mortgage loans held for sale (8)	9/22/2023	1,250,000		250,000		243,482		539,257
10) Master Repurchase Agreement ~~(7)~~(9)	10) Master Repurchase Agreement ~~(7)~~(9)	Mortgage loans held for sale (6)	10/9/2021	500,000		0		488,230		480,544		10) Master Repurchase Agreement ~~(7)~~(9)	Mortgage loans held for sale (8)	8/16/2023	750,000		100,000		89,124		616,165
11) Master Repurchase Agreement ~~(7)~~(9)	11) Master Repurchase Agreement ~~(7)~~(9)	Mortgage loans held for sale (6)	12/17/2021	1,000,000		500,000		540,109		765,432		11) Master Repurchase Agreement ~~(7)~~(9)	Mortgage loans held for sale (8)	12/16/2022	1,000,000		250,000		223,372		253,389
				$	18,300,000	$	6,487,500	$	13,168,396	$	14,258,968				$	17,450,000	$	4,150,000	$	4,136,649	$	9,486,726
Early Funding:	Early Funding:											Early Funding:
12) Early Funding Facility ~~(7)~~(9)	12) Early Funding Facility ~~(7)~~(9)	Mortgage loans held for sale (6)	(4)	$	4,000,000	$	0	$	2,741,132	$	2,514,193	12) Early Funding Facility ~~(7)~~(9)	Mortgage loans held for sale (8)	(6)	$	4,000,000	$	—	$	1,328,175	$	2,071,154
13) Early Funding Facility ~~(7)~~(9)	13) Early Funding Facility ~~(7)~~(9)	Mortgage loans held for sale (6)	(5)	3,000,000		0		1,311,701		969,412		13) Early Funding Facility ~~(7)~~(9)	Mortgage loans held for sale (8)	(7)	3,000,000		—		1,004,783		1,193,712
				7,000,000		0		4,052,833		3,483,605					7,000,000		—		2,332,958		3,264,866

Total	Total			$	25,300,000	$	6,487,500	$	17,221,229	$	17,742,573	Total			$	24,450,000	$	4,150,000	$	6,469,607	$	12,751,592

(1) Subsequent to ~~June 30, 2021,~~March 31, 2022, this facility was ~~renewed which extended~~amended to decrease the ~~maturity date~~total facility size to ~~April 21, 2023.~~$1,000,000.

(2) This facility has a 12-month initial term, which can be extended for 3-months at each subsequent 3-month anniversary from the initial start date. Subsequent to ~~June 30, 2021,~~March 31, 2022, this facility was amended to decrease the committed amount to $1,100,000 and was extended to April 26, 2023.

(3) Subsequent to March 31, 2022, this facility was amended to decrease the total facility size to ~~$1,700,000~~$2,000,000 with ~~$1,400,000~~$250,000 committed and was extended to ~~July 26, 2022.~~May 4, 2024.

~~(3)~~(4) Subsequent to ~~June 30, 2021,~~March 31, 2022, this facility was amended to decrease the committed amount to $250,000.

(5) Subsequent to March 31, 2022, this facility was amended to decrease the total facility size to ~~$1,500,000~~$900,000 with ~~$600,000~~$250,000 committed.

~~(4)~~(6) This facility is an evergreen agreement with no stated termination or expiration date. This agreement can be terminated by either party upon written notice.

~~(5)~~

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

(In Thousands, Except Shares and Per Share Amounts)

(7) This facility ~~will have~~has an overall line size of $3,000,000, which ~~will be~~is reviewed every 90 days. This facility is an evergreen agreement with no stated termination or expiration date. This agreement can be terminated by either party upon written notice.

~~(6)~~(8) The Company has multiple borrowing facilities in the form of asset sales under agreements to repurchase. These borrowing facilities are secured by mortgage loans held for sale at fair value as the first priority security interest.

~~Rocket Companies, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements (Continued)~~

~~(In Thousands, Except Shares and Per Share Amounts)~~

~~(7)~~(9) The interest rates charged by lenders on the funding facilities included the applicable base rate plus a spread ranging from 1.00% to ~~2.25%~~1.85% for the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, and the applicable base rate plus a spread ranging from ~~0.40%~~1.00% to ~~2.30%~~2.25% for the year ended December 31, ~~2020.~~2021.

Other Financing Facilities


Facility Type	Facility Type	Collateral	Maturity	Line Amount		Committed Line Amount		Outstanding Balance June 30, 2021		Outstanding Balance December 31, 2020		Facility Type	Collateral	Maturity	Line Amount		Committed Line Amount		Outstanding Balance March 31, 2022		Outstanding Balance December 31, 2021
Line of Credit Financing Facilities	Line of Credit Financing Facilities											Line of Credit Financing Facilities
1) Unsecured line of credit (1)	1) Unsecured line of credit (1)	—	7/27/2025	$	2,000,000	$	0	$	0	$	0	1) Unsecured line of credit (1)	—	7/27/2025	$	2,000,000	$	—	$	—	$	—
2) Unsecured line of credit (1)	2) Unsecured line of credit (1)	—	7/31/2025	100,000		0		0		0		2) Unsecured line of credit (1)	—	7/31/2025	100,000		—		—		—
3) Revolving credit facility ~~(4)~~(3)	3) Revolving credit facility ~~(4)~~(3)	—	8/10/2023	1,000,000		1,000,000		0		300,000		3) Revolving credit facility ~~(4)~~(3)	—	8/10/2024	1,000,000		1,000,000		—		—
4) MSRs line of credit (4)		MSRs	10/22/2021	200,000		0		0		0
5) MSRs line of credit (3)(4)		MSRs	(3)	200,000		200,000		75,000		75,000
4) MSR line of credit (3)												4) MSR line of credit (3)	MSRs	10/20/2023	200,000		—		—		—
5) MSR line of credit (2)(3)												5) MSR line of credit (2)(3)	MSRs	(2)	—		—		—		75,000
				$	3,500,000	$	1,200,000	$	75,000	$	375,000				$	3,300,000	$	1,000,000	$	—	$	75,000
Early Buy out Financing Facility
Early Buyout Financing Facility												Early Buyout Financing Facility
6) Early buy out facility ~~(4)~~(3)	6) Early buy out facility ~~(4)~~(3)	Loans/ Advances	3/13/2023	$	2,600,000	$	0	$	2,148,959	$	330,266	6) Early buy out facility ~~(4)~~(3)	Loans/ Advances	3/13/2024	$	2,600,000	$	—	$	1,698,167	$	1,896,784

(1) Refer to Note 6, Transactions with Related Parties for additional details regarding this unsecured line of credit.

(2) ~~Subsequent to June 30, 2021, this~~This facility was ~~renewed,~~voluntarily paid off and ~~the maturity date was extended to August 10, 2024.~~terminated in March 2022.

(3) This MSRs facility can be drawn upon for corporate purposes and is collateralized by GSE MSRs within our servicing portfolio. This facility has a 5-year total commitment comprised of a 3-year revolving period that expires on April 30, 2022 followed by a 2-year amortization period that expires on April 30, 2024.

~~(4)~~ The interest rates charged by lenders on the other funding facilities included the applicable base rate, plus a spread ranging from 1.45% to 4.00% for the ~~six~~three months ended ~~June 30, 2021,~~March 31, 2022, and the applicable base rate plus a spread ranging from ~~1.75%~~1.45% to 4.00% for the year ended December 31, ~~2020.~~2021.

Unsecured Senior Notes


Facility Type	Facility Type	Maturity	Interest Rate		Outstanding Balance June 30, 2021			Outstanding Balance December 31, 2020			Facility Type	Maturity	Interest Rate		Outstanding Principal March 31, 2022			Outstanding Principal December 31, 2021
Unsecured Senior Notes (1)	Unsecured Senior Notes (1)	1/15/2028	5.250	%	$	1,010,000		$	1,010,000		Unsecured Senior Notes (1)	10/15/2026	2.875	%	$	1,150,000		$	1,150,000
Unsecured Senior Notes (2)		3/1/2029	3.625	%	750,000			750,000
Unsecured Senior Notes (3)		3/1/2031	3.875	%	1,250,000			1,250,000
Unsecured Senior Notes (2)											Unsecured Senior Notes (2)	1/15/2028	5.250	%	61,985			61,985
Unsecured Senior Notes (3)											Unsecured Senior Notes (3)	3/1/2029	3.625	%	750,000			750,000
Unsecured Senior Notes (4)											Unsecured Senior Notes (4)	3/1/2031	3.875	%	1,250,000			1,250,000
Unsecured Senior Notes (5)											Unsecured Senior Notes (5)	10/15/2033	4.000	%	850,000			850,000
Total Senior Notes	Total Senior Notes				$	3,010,000		$	3,010,000		Total Senior Notes				$	4,061,985		$	4,061,985

Weighted Average Interest Rate	Weighted Average Interest Rate				4.27		%	4.27		%	Weighted Average Interest Rate				3.59		%	3.59		%

(1) The 2026 Senior Notes are unsecured obligation notes with no asset required to pledge for this borrowing. Unamortized debt issuance costs are presented net against the Senior Notes reducing the $1,150,000 carrying amount on the Condensed Consolidated Balance Sheets by $10,282 and $10,854 as of March 31, 2022 and December 31, 2021, respectively.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

(In Thousands, Except Shares and Per Share Amounts)

(2) The 2028 Senior Notes are unsecured obligation notes with no asset required to pledge for this borrowing. Unamortized debt issuance costs and discounts are presented net against the Senior Notes reducing the ~~$1,010,000~~$61,985 carrying amount on the Condensed Consolidated Balance Sheets by ~~$7,604~~$412 and ~~$6,326~~$343 as of ~~June 30, 2021,~~March 31, 2022, respectively, and ~~$8,197~~$430 and ~~$6,817,~~$358, as of December 31, ~~2020,~~2021, respectively.

~~(2)~~(3) The 2029 Senior Notes are unsecured obligation notes with no asset required to pledge for this borrowing. Unamortized debt issuance costs ~~and discounts~~ are presented net against the Senior Notes reducing the $750,000 carrying amount on the Condensed Consolidated Balance Sheets by ~~$7,552~~$6,937 and ~~$8,053~~$7,188 as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

~~Rocket Companies, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements (Continued)~~

~~(In Thousands, Except Shares and Per Share Amounts)~~

~~(3)~~(4) The 2031 Senior Notes are unsecured obligation notes with no asset required to pledge for this borrowing. Unamortized debt issuance costs ~~and discounts~~ are presented net against the Senior Notes reducing the $1,250,000 carrying amount on the Condensed Consolidated Balance Sheets by ~~$13,210~~$12,057 and ~~$13,887~~$12,395 as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

(5) The 2033 Senior Notes are unsecured obligation notes with no asset required to pledge for this borrowing. Unamortized debt issuance costs are presented net against the Senior Notes reducing the $850,000 carrying amount on the Condensed Consolidated Balance Sheets by $8,093 and $8,269 as of March 31, 2022 and December 31, 2021, respectively.

Refer to Note 2, Fair Value Measurements for information pertaining to the fair value of the Company’s debt as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021.

6. Transactions with Related Parties

The Company has entered into various transactions and agreements with RHI, its subsidiaries, certain other affiliates and related parties (collectively, “Related Parties”). These transactions include providing financing and services as well as obtaining financing and services from these Related Parties.

Financing Arrangements

On June 9, 2017, Rocket Mortgage and RHI entered into ~~a $300,000 uncommitted and~~an unsecured line of credit, as further amended and restated on September 16, 2021 (“RHI Line of Credit”)~~. On December 24, 2019 the Company amended the~~, pursuant to which Rocket Mortgage has a borrowing capacity of $2,000,000. The RHI Line of Credit ~~and increased the borrowing capacity to $1,000,000, due on November 1, 2024. On July 24, 2020, the Company amended the RHI Line of Credit and increased the borrowing capacity to $2,000,000, due~~matures on July 27, 2025. Borrowings under the line of credit bear interest at a rate per annum of one month LIBOR plus 1.25%., or the applicable successor benchmark should LIBOR be discontinued. The line of credit is uncommitted and RHI has sole discretion over advances. The RHI Line of Credit also contains negative covenants which restrict the ability of the Company to incur debt and create liens on certain assets. It also requires Rocket Mortgage to maintain a quarterly consolidated net income before taxes if adjusted tangible net worth meets certain requirements. As of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, there were 0no outstanding principal amounts due to RHI pursuant to the RHI Line of Credit. In the three months ended March 31, 2022 and March 31, 2021, Rocket Mortgage repaid an aggregate of $762 and $1,000,487, respectively, under the RHI Line of Credit. As of March 31, 2022 and March 31, 2021, the total amount of interest paid under the line was $762 and $487, respectively, with outstanding interest due to RHI of zero and $357, respectively.

RHI and ATI are parties to a surplus debenture, effective as of December 28, 2015, and as further amended and restated on December 31, 2019 (the “RHI/ATI Debenture”), pursuant to which ATI is indebted to RHI for an aggregate principal amount of $21,500. The RHI/ATI Debenture matures on December 31, 2030. Interest under the RHI/ATI Debenture accrues at an annual rate of 8%. Principal and interest under the RHI/ATI Debenture are due and payable quarterly, in each case subject to ATI achieving a certain amount of surplus and payments of all interest before principal payments begin. Any unpaid amounts of principal and interest shall be due and payable upon the maturity of the RHI/ATI Debenture. During the three months ended March 31, 2022, and March 31, 2021, ATI repaid an aggregate of $250 and $250, respectively, under the RHI/ATI Debenture. In the three months ended March 31, 2022 and March 31, 2021, the total amount of interest accrued under the RHI/ATI Debenture was $424 and $424, respectively.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

(In Thousands, Except Shares and Per Share Amounts)

On July 31, 2020, Holdings and RHI entered into an agreement for an uncommitted, unsecured revolving line of credit ("RHI 2nd Line of Credit’’), which will provide for financing from RHI to the Company of up to $100,000. The ~~line~~RHI 2nd Line of ~~credit will mature~~Credit matures on July 31, 2025. Borrowings under the line of credit will bear interest at a rate per annum of one month LIBOR plus 1.25%., or the applicable successor benchmark should LIBOR be discontinued. The negative covenants of the line of credit restrict the ability of the Company to incur debt and create liens on certain assets. The line of credit also contains customary events of default. As of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 there were ~~0 amounts outstanding pursuant to~~no draws on the RHI 2nd ~~line~~Line of ~~credit.~~Credit and no amounts outstanding.

~~Rocket Companies, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements (Continued)~~

~~(In Thousands, Except Shares and Per Share Amounts)~~

The amounts receivable from and payable to Related Parties consisted of the following as of:


		June 30, 2021				December 31, 2020					March 31, 2022				December 31, 2021
		Principal		Interest Rate		Principal		Interest Rate			Principal		Interest Rate		Principal		Interest Rate
Included in Notes receivable and due from affiliates on the Condensed Consolidated Balance Sheets	Included in Notes receivable and due from affiliates on the Condensed Consolidated Balance Sheets									Included in Notes receivable and due from affiliates on the Condensed Consolidated Balance Sheets
Affiliated receivables and other notes	Affiliated receivables and other notes	$	10,977	—	%	$	22,172	—	%	Affiliated receivables and other notes	$	10,796	—	%	$	9,753	—	%
Notes receivable and due from affiliates	Notes receivable and due from affiliates	$	10,977			$	22,172			Notes receivable and due from affiliates	$	10,796			$	9,753

Included in Notes payable and due to affiliates on the Condensed Consolidated Balance Sheets	Included in Notes payable and due to affiliates on the Condensed Consolidated Balance Sheets									Included in Notes payable and due to affiliates on the Condensed Consolidated Balance Sheets
RHI/ATI Debenture	RHI/ATI Debenture	$	21,500	8.00	%	$	21,500	8.00	%	RHI/ATI Debenture	$	21,500	8.00	%	$	21,500	8.00	%
Affiliated payables	Affiliated payables	55,369		—	%	52,396		—	%	Affiliated payables	8,156		—	%	12,150		—	%
Notes payable and due to affiliates	Notes payable and due to affiliates	$	76,869			$	73,896			Notes payable and due to affiliates	$	29,656			$	33,650

Services, Products and Other Transactions

We have entered into transactions and agreements to provide certain services to ~~RHI, its subsidiaries and certain other affiliates of our majority shareholder.~~Related Parties. We recognized revenue of ~~$3,369~~$3,017 and ~~$2,594~~$3,729 for the three months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020, respectively and $7,098 and $5,694 for the six months ended June 30, 2021 and 2020 respectively,~~ for the performance of these services, which was included in Other income. We have also entered into transactions and agreements to purchase certain services, products and other transactions from ~~certain subsidiaries of RHI and affiliates of our majority shareholder.~~Related Parties. We incurred expenses of ~~$33,791~~$38,994 and ~~$78,928~~$33,191 for the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020, respectively and $61,311 and $89,800 for the six months ended June 30, 2021 and 2020~~ respectively, for these products, services and other transactions, which are included in General and administrative expenses. We also incurred expenses of $5,646 and $5,119 for the three months ended June 30, 2021 and 2020, respectively and $11,317 and $10,130 for the six months ended June 30, 2021 and 2020, respectively, for parking spaces we rent from related parties, or an agent of the related party, which are included in General and administrative expenses.

The Company has also entered into a Tax Receivable Agreement with RHI and ~~Dan Gilbert,~~ our ~~founder and~~ Chairman ~~(our "Chairman")~~ as described further in Note 8, Income Taxes. The Company has also guaranteed the debt of a related party as described further in Note 10, Commitments, Contingencies, and Guarantees.

Promotional Sponsorships

The Company incurred marketing and advertising costs related to the Rocket Mortgage Field House Naming Rights Contract and other promotional sponsorships, which are related parties. The company incurred expenses of ~~$2,335~~$2,477 and ~~$2,322~~$2,335 for the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020, respectively and $4,670 and $4,645 for the six months ended June 30, 2021 and 2020,~~ respectively, related to these arrangements.

Lease Transactions with Related Parties

The Company is a party to lease agreements for certain offices, including our headquarters in Detroit, with various affiliates of Bedrock Management Services LLC (“Bedrock”), a related party, and other related parties of the Company. The ~~company~~Company incurred expenses of ~~$17,182~~$19,253 and ~~$17,755~~$17,629 for the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020, respectively and $34,811 and $34,152 for the six months ended June 30, 2021 and 2020,~~ respectively related to these arrangements.

2520

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

(In Thousands, Except Shares and Per Share Amounts)

7. Other Assets

Other assets consist of the following:


		June 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Goodwill and other intangible assets						Goodwill and other intangible assets	$	1,286,146	$	1,296,926
Mortgage production related receivables	Mortgage production related receivables	$	370,690	$	307,282	Mortgage production related receivables	329,399		393,513
Disbursement funds advanced	Disbursement funds advanced	166,842		80,877		Disbursement funds advanced	189,598		27,493
Prepaid expenses	Prepaid expenses	123,815		98,529		Prepaid expenses	109,683		141,512
Goodwill and other intangible assets		45,855		47,230
Non-production-related receivables	Non-production-related receivables	45,455		76,595		Non-production-related receivables	101,377		114,557
Ginnie Mae buyouts		28,124		40,681
Margin call receivable from counterparty		12,059		247,604

Other real estate owned	Other real estate owned	627		1,131		Other real estate owned	581		492

Other	Other	83,115		41,548		Other	135,492		141,321
Total Other assets		$	876,582	$	941,477
Total other assets						Total other assets	$	2,152,276	$	2,115,814

8. Income Taxes

The Company has income tax expense of ~~$24,047 and $21,448~~$25,849 on ~~income~~Income before income taxes ~~and non-controlling interest~~ of ~~$1,060,697 and $3,485,530~~$1,062,457 for the three months ended ~~June 30, 2021 and 2020, respectively.~~March 31, 2022. The Company has income tax expense of ~~$89,879 and $22,680~~$65,832 on ~~income~~Income before income taxes ~~and non-controlling interest~~ of ~~$3,903,867 and $3,585,809~~$2,843,170 for the ~~six~~three months ended ~~June 30, 2021 and 2020, respectively.~~March 31, 2021.

The Company’s income tax expense varies from the expense that would be expected based on statutory rates due principally to its organizational structure. Prior to the IPO in 2020, the Company was owned by RHI which has elected S corporation status. When owned by RHI, Quicken Loans, Amrock and several other wholly owned corporations had elected to be treated as qualified subchapter S subsidiaries. The shareholders of RHI, as shareholders of an S corporation, are responsible for the federal income tax liabilities. A provision for state income taxes is required for certain jurisdictions that tax S corporations and their qualified Subchapter S subsidiaries and for states where the Company is taxed as a C Corporation.

~~During 2020, in a series of transactions occurring along with the IPO,~~Several subsidiaries of ~~the Company were contributed to~~ Holdings, ~~by RHI. Several of these subsidiaries,~~ such as ~~Quicken Loans,~~Rocket Mortgage, Amrock and other subsidiaries, are ~~no longer qualified Subchapter S corporations and are~~ single member LLC ~~entities owned by Holdings.~~entities. As single member LLCs of Holdings, all taxable income or loss generated by these subsidiaries will pass through and be included in the income or loss of Holdings. A provision for state income taxes is required for certain jurisdictions that tax single member LLCs as regarded entities. Other ~~contributed~~ subsidiaries of Holdings, such as Amrock Title Insurance Co., LMB Mortgage Services and others, are treated as C Corporations and will separately file and pay taxes apart from Holdings in various jurisdictions including U.S. federal, state, local and Canada.

As part of the IPO, Rocket Companies acquired a portion of the units of Holdings, which is treated as a partnership for U.S. federal tax purposes and in most applicable jurisdictions for state and local income tax purposes. The remaining portion of Holdings is owned by RHI and our Chairman ("LLC Members"). As a partnership, Holdings is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by Holdings after Rocket Companies acquisition of its portion of Holdings is passed through and included in the taxable income or loss of its members, including Rocket Companies, in accordance with the terms of the operating agreement of Holdings (the "Holdings Operating Agreement"). Rocket Companies is a C Corporation and is subject to U.S. federal, state, and local income taxes with respect to its allocable share of any taxable income of Holdings.

Tax Receivable Agreement

The Company expects to obtain an increase in its share of the tax basis in the net assets of Holdings when Holdings Units are redeemed from or exchanged by the LLC Members. The Company intends to treat any redemptions and exchanges of Holdings Units as direct purchases of Holdings Units for U.S. federal income tax purposes. These increases in tax basis may reduce the amounts that the Company would otherwise pay in the future to various tax authorities. They may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.

2621

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

(In Thousands, Except Shares and Per Share Amounts)

In connection with the reorganization completed prior to our IPO in 2020, the Company entered into ~~the~~a Tax Receivable Agreement with the LLC ~~Members. The Tax Receivable Agreement provides for~~Members that will obligate the ~~payment by Rocket Companies of~~ Company to make payments to the LLC Members generally equal to 90% of the ~~amount of any~~applicable cash tax ~~benefits~~savings that ~~Rocket Companies~~the Company actually realizes or in some cases is deemed to realize as a result of the tax attributes generated by (i) certain increases in ~~Rocket Companies~~our allocable share of the tax basis in Holdings’ assets resulting from (a) the purchases of Holdings Units (along with the corresponding shares of our Class D common stock or Class C common stock) from the LLC Members (or their transferees of Holdings Units or other assignees) using the net proceeds from our initial public offering or in any future offering, (b) exchanges by the LLC Members (or their transferees of Holdings Units or other assignees) of Holdings Units (along with the corresponding shares of our Class D common stock or Class C common stock) for cash or shares of our Class B common stock or Class A common stock, as applicable, or (c) payments under the Tax Receivable Agreement; (ii) tax benefits related to imputed interest deemed arising as a result of payments made under the Tax Receivable Agreement and (iii) disproportionate allocations (if any) of tax benefits to Holdings as a result of section 704(c) of the Code that relate to the reorganization transactions. The Company ~~expects to~~will retain the benefit ~~from~~of the remaining 10% of ~~any cash savings, if any, that it realizes.~~these tax savings.

~~Effective on~~On March 31, 2021, the Company ~~and RHI~~ exchanged 20,200,000 shares of Class A common stock for the equivalent number of ~~Paired Interests (in this instance, Holdings Units together with a corresponding number of~~ shares of Class D common ~~stock)~~stock and Holdings Units with RHI, which resulted in an increase in the tax basis of assets of Holdings ~~and would be~~that is subject to the provisions of the Tax Receivable Agreement. The Company recorded an increase in its deferred tax asset on investment in partnership of $123,587, an increase in the valuation allowance of $3,146, and an increase in the Tax receivable agreement liability of $119,456 with the net offsetting amount of $985 recorded to Additional Paid-in Capital in the ~~Increase~~Change in controlling interest of investment, net ~~of income taxes and Tax receivable agreement liability~~ in the Condensed Consolidated Statements of Changes in Equity.

~~During the year ended December 31, 2020, the Company acquired an aggregate~~A payment of ~~115,000,000 Holdings Units valued at $2,070,000 in connection with the exchange of those Holdings Units by~~$40,721 was made to the LLC Members ~~which resulted in an increase in the tax basis of the assets of Holdings and would be subject~~pursuant to ~~the provisions of~~ the Tax Receivable ~~Agreement.~~Agreement during the three months ended March 31, 2022.

The amounts payable under the Tax Receivable Agreement will vary depending upon a number of factors, including the amount, character, and timing of the taxable income of Rocket Companies in the future. Any such changes in these factors or changes in the Company’s determination of the need for a valuation allowance related to the tax benefits acquired under the Tax Receivable Agreement could adjust the Tax receivable agreement liability recognized and recorded within earnings in future periods.

Tax Distributions

The holders of Holdings’ Units, including Rocket Companies Inc., incur U.S. federal, state and local income taxes on their share of any taxable income of Holdings. The Holdings Operating Agreement provides for pro rata cash distributions (“tax distributions”) to the holders of the Holdings Units in an amount generally calculated to provide each holder of Holdings Units with sufficient cash to cover its tax liability in respect of the Holdings Units. In general, these tax distributions are computed based on Holdings’ estimated taxable income, multiplied by an assumed tax rate as set forth in the Holdings Operating Agreement.

For the three ~~and six~~ months ended ~~June 30,~~March 31, 2022, Holdings paid tax distributions totaling $160,629 to holders of Holdings Units other than Rocket Companies. For the three months ended March 31, 2021, Holdings paid tax distributions totaling ~~$1,206,549 and $1,406,699, respectively,~~$200,150 to holders of Holdings Units other than Rocket Companies.

9. Derivative Financial Instruments

The Company enters into interest rate lock commitments ("IRLCs"), forward commitments to sell mortgage loans and forward commitments to purchase loans, which are considered derivative financial instruments. These items are accounted for as free-standing derivatives and are included in the Condensed Consolidated Balance Sheets at fair value. The Company treats all of its derivative instruments as economic hedges; therefore, none of its derivative instruments qualify for designation as accounting hedges. Changes in the fair value of the IRLCs and forward commitments to sell mortgage loans are recorded in current period earnings and are included in ~~gain~~Gain on sale of loans, net in the Condensed Consolidated Statements of Income and Comprehensive Income. Forward commitments to purchase mortgage loans are recognized in current period earnings and are included in ~~gain~~Gain on sale of loans, net in the Condensed Consolidated Statements of Income and Comprehensive Income.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

(In Thousands, Except Shares and Per Share Amounts)

The Company enters into IRLCs to fund residential mortgage loans with its potential borrowers. These commitments are binding agreements to lend funds to these potential borrowers at specified interest rates within specified periods of time.

The fair value of IRLCs is derived from the fair value of similar mortgage loans or bonds, which is based on observable market data. Changes to the fair value of IRLCs are recognized based on changes in interest rates, changes in the probability that the commitment will be exercised, and the passage of time. The expected net future cash flows related to the associated servicing of the loan are included in the fair value measurement of rate locks.

IRLCs and uncommitted mortgage loans held for sale expose the Company to the risk that the value of the mortgage loans held and mortgage loans underlying the commitments may decline due to increases in mortgage interest rates during the life of the commitments. To protect against this risk, the Company uses forward loan sale commitments to economically hedge the risk of potential changes in the value of the loans. These derivative instruments are recorded at fair value. The Company expects that the changes in fair value of these derivative financial instruments will either fully or partially offset the changes in fair value of the IRLCs and uncommitted mortgage loans held for sale. The changes in the fair value of these derivatives are recorded in ~~gain~~Gain on sale of loans, net.

MSRs assets (including the MSRs value associated with outstanding IRLCs) that the Company plans to sell expose the Company to the risk that the value of the MSRs asset may decline due to decreases in mortgage interest rates prior to the sale of these assets. To protect against this risk, the Company uses forward loan purchase commitments to economically hedge the risk of potential changes in the value of MSRs assets that have been identified for sale. These derivative instruments are recorded at fair value. The Company expects that the changes in fair value of these derivative financial instruments will either fully or partially offset the changes in fair value of the MSRs assets the Company intends to sell. The changes in fair value of these derivatives are recorded in the ~~change~~Change in fair value of ~~MSRs, net.~~MSRs.

Forward commitments include To-Be-Announced ("TBA") mortgage-backed securities that have been aggregated at the counterparty level for presentation and disclosure purposes. Counterparty agreements contain a legal right to offset amounts due to and from the same counterparty under legally enforceable master netting agreements to settle with the same counterparty, on a net basis, as well as the right to obtain cash collateral. Forward commitments also include commitments to sell loans to counterparties and to purchase loans from counterparties at determined prices.

The Company uses forward commitments in hedging the interest rate risk exposure on its fixed and adjustable rate commitments. Utilization of forward commitments involves some degree of basis risk. Basis risk is defined as the risk that the hedged instrument’s price does not move in parallel with the increase or decrease in the market price of the hedged financial instrument. The Company calculates an expected hedge ratio to mitigate a portion of this risk. The Company’s derivative instruments are not designated as accounting hedging instruments, and therefore, changes in fair value are recorded in current period earnings. Hedging gains and losses are included in Gain on sale of loans, net in the Condensed Consolidated Statements of Income and Comprehensive Income.

Net hedging gains and losses were as follows:

Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Hedging (losses) gains (1) $ (274,289) $ (510,804) $ 1,367,991 $ (1,507,788)


	Three Months Ended March 31,
	2022		2021
Hedging gains (1)	$	1,533,145	$	1,642,280

(1) Includes the change in fair value related to derivatives economically hedging MSRs identified for sale.

Refer to Note 2, Fair Value Measurements, for additional information on the fair value of derivative financial instruments.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

(In Thousands, Except Shares and Per Share Amounts)

Notional and Fair Value

The notional and fair values of derivative financial instruments not designated as hedging instruments were as follows:


		Notional Value		Derivative Asset		Derivative Liability			Notional Value		Derivative Asset		Derivative Liability
Balance at June 30, 2021:
Balance at March 31, 2022:								Balance at March 31, 2022:
IRLCs, net of loan funding probability (1)	IRLCs, net of loan funding probability (1)	$	31,406,858	$	907,978	$	0	IRLCs, net of loan funding probability (1)	$	16,445,558	$	213,210	$	—
Forward commitments (2)	Forward commitments (2)	$	45,016,925	$	22,339	$	91,731	Forward commitments (2)	$	22,671,123	$	667,908	$	34,126

Balance at December 31, 2020:
Balance at December 31, 2021:								Balance at December 31, 2021:
IRLCs, net of loan funding probability (1)	IRLCs, net of loan funding probability (1)	$	40,560,544	$	1,897,194	$	0	IRLCs, net of loan funding probability (1)	$	21,194,326	$	538,861	$	—
Forward commitments (2)	Forward commitments (2)	$	59,041,900	$	20,584	$	506,071	Forward commitments (2)	$	36,476,871	$	17,337	$	19,911

(1) IRLCs are also discussed in Note 10, Commitments, Contingencies, and Guarantees.

(2) Includes the fair value and net notional value related to derivatives economically hedging MSRs identified for sale.

Counterparty agreements for forward commitments contain master netting agreements. The table below presents the gross amounts of recognized assets and liabilities subject to master netting agreements. The Company had ~~$12,059~~zero and ~~$247,604~~$137 of cash pledged to counterparties related to these forward commitments at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively, classified in Other assets in the Condensed Consolidated Balance Sheets. As of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, there was $487,448 and $22,826, respectively, cash on our Condensed Consolidated Balance Sheets from the ~~Company had $14 and 0, respectively, of cash pledged from counterparties related to these forward commitments.~~respective counterparties. Margins received by the Company are classified in Other liabilities in the Condensed Consolidated Balance Sheets.


		Gross Amount of Recognized Assets or Liabilities		Gross Amounts Offset in the Condensed Consolidated Balance Sheets		Net Amounts Presented in the Condensed Consolidated Balance Sheets			Gross Amount of Recognized Assets or Liabilities		Gross Amounts Offset in the Condensed Consolidated Balance Sheets		Net Amounts Presented in the Condensed Consolidated Balance Sheets
Offsetting of Derivative Assets	Offsetting of Derivative Assets							Offsetting of Derivative Assets
Balance at June 30, 2021:
Balance at March 31, 2022:								Balance at March 31, 2022:
Forward commitments	Forward commitments	$	37,364	$	(15,025)	$	22,339	Forward commitments	$	1,012,358	$	(344,450)	$	667,908
Balance at December 31, 2020:
Balance at December 31, 2021:								Balance at December 31, 2021:
Forward commitments	Forward commitments	$	35,746	$	(15,162)	$	20,584	Forward commitments	$	50,225	$	(32,888)	$	17,337

Offsetting of Derivative Liabilities	Offsetting of Derivative Liabilities							Offsetting of Derivative Liabilities
Balance at June 30, 2021:
Balance at March 31, 2022:								Balance at March 31, 2022:
Forward commitments	Forward commitments	$	(165,165)	$	73,434	$	(91,731)	Forward commitments	$	(51,074)	$	16,948	$	(34,126)
Balance at December 31, 2020:
Balance at December 31, 2021:								Balance at December 31, 2021:
Forward commitments	Forward commitments	$	(715,671)	$	209,600	$	(506,071)	Forward commitments	$	(54,922)	$	35,011	$	(19,911)

Counterparty Credit Risk

Credit risk is defined as the possibility that a loss may occur from the failure of another party to perform in accordance with the terms of the contract, which exceeds the value of existing collateral, if any. The Company attempts to limit its credit risk by dealing with creditworthy counterparties and obtaining collateral where appropriate.

The Company is exposed to credit loss in the event of contractual nonperformance by its trading counterparties and counterparties to its various over-the-counter derivative financial instruments noted in the above Notional and Fair Value discussion. The Company manages this credit risk by selecting only counterparties that it believes to be financially strong, spreading the credit risk among many such counterparties, placing contractual limits on the amount of unsecured credit extended to any single counterparty, and entering into netting agreements with the counterparties as appropriate.

2924

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

(In Thousands, Except Shares and Per Share Amounts)

Certain counterparties have master netting agreements. The master netting agreements contain a legal right to offset amounts due to and from the same counterparty. Derivative assets in the Condensed Consolidated Balance Sheets represent derivative contracts in a gain position, net of loss positions with the same counterparty and, therefore, also represent the Company’s maximum counterparty credit risk. The Company incurred 0no credit losses due to nonperformance of any of its counterparties during the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 and ~~2020.~~2021.

10. Commitments, Contingencies, and Guarantees

Interest Rate Lock Commitments

IRLCs are agreements to lend to a client as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The Company evaluates each client’s creditworthiness on a case-by-case basis.

The number of days from the date of the IRLC to expiration of fixed and variable rate lock commitments outstanding at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 was approximately 45 days and 43 days on ~~average.~~average, respectively.

The UPB of IRLCs was as follows:

June 30, 2021 December 31, 2020
Fixed Rate Variable Rate Fixed Rate Variable Rate
IRLCs $ 38,217,725 $ 2,539,252 $ 53,736,717 $ 1,065,936


	March 31, 2022				December 31, 2021
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
IRLCs	$	20,391,277	$	1,076,203	$	25,937,777	$	1,239,762

Commitments to Sell Mortgage Loans

In the ordinary course of business, the Company enters into contracts to sell existing mortgage loans held for sale into the secondary market at specified future dates. The amount of commitments to sell existing loans at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 was ~~$6,022,664~~$2,122,874 and ~~$3,139,816,~~$2,243,381, respectively.

Commitments to Sell Loans with Servicing Released

In the ordinary course of business, the Company enters into contracts to sell the MSRs of certain newly originated loans on a servicing released basis. In the event that a forward commitment is not filled and there has been an unfavorable market shift from the date of commitment to the date of settlement, the Company is contractually obligated to pay a pair-off fee on the undelivered balance. There were ~~$2,218,101~~$241,223 and ~~$280,502 in UPB~~$333,594 of loans committed to be sold servicing released at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

Investor Reserves

The following presents the activity in the investor reserves:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Balance at beginning of period	Balance at beginning of period	$	93,937	$	55,667	$	87,191	$	54,387	Balance at beginning of period	$	78,888	$	87,191
(Benefit from) provision for investor reserves		(19,316)		7,786		(13,969)		9,363
Premium recapture and indemnification losses paid		(419)		(441)		980		(738)
Provision for investor reserves										Provision for investor reserves	2,386		5,347
Premium recapture and (indemnification losses paid)										Premium recapture and (indemnification losses paid)	(515)		1,399
Balance at end of period	Balance at end of period	$	74,202	$	63,012	$	74,202	$	63,012	Balance at end of period	$	80,759	$	93,937

The maximum exposure under the Company’s representations and warranties would be the outstanding principal balance and any premium received on all loans ever sold by the Company, less (i) loans that have already been paid in full by the mortgagee, (ii) loans that have defaulted without a breach of representations and warranties, (iii) loans that have been indemnified via settlement or make-whole, or (iv) loans that have been repurchased. Additionally, the Company may receive relief of certain representation and warranty obligations on loans sold to Fannie Mae or Freddie Mac on or after January 1, 2013 if Fannie Mae or Freddie Mac satisfactorily concludes a quality control loan file review or if the borrower meets certain acceptable payment history requirements within 12 or 36 months after the loan is sold to Fannie Mae or Freddie Mac.

3025

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

(In Thousands, Except Shares and Per Share Amounts)

Property Taxes, Insurance, and Principal and Interest Payable

As a service to its clients, the Company administers escrow deposits representing undisbursed amounts received for payment of property taxes, insurance and principal, and interest on mortgage loans held for sale. Cash held by the Company for property taxes and insurance was ~~$4,768,373~~$4,400,289 and ~~$3,551,400,~~$3,682,366, and for principal and interest was ~~$8,789,110~~$6,511,100 and ~~$13,065,549~~$8,370,326 at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. These amounts are not considered assets of the Company and, therefore, are excluded from the Condensed Consolidated Balance Sheets. The Company remains contingently liable for the disposition of these deposits.

Guarantees

As of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the Company guaranteed the debt of a related party ~~totaling $15,000,~~ consisting of 3 separate guarantees ~~of $5,000 each.~~totaling $4,789 and $5,216, respectively. As of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the Company did not record a liability on the Condensed Consolidated Balance Sheets for these guarantees because it was not probable that the Company would be required to make payments under these guarantees.

Trademark License

The Company has a perpetual trademark license agreement with a third-party entity. This agreement requires annual payments by the Company based upon the income from the sale of loans generated under the Quicken Loans brand. Total licensing fees incurred and paid were 0 and $1,875 for the three months ended June 30, 2021 and 2020 respectively, and $625 and $3,750 for the six months ended June 30, 2021 and 2020, respectively, which is classified in other expenses in the Condensed Consolidated Statements of Income and Comprehensive Income.

The Company has entered into an agreement with Intuit that, among other things, ~~gives~~is expected to give the Company full ownership of the “Quicken Loans” brand ~~in 2022~~by mid-2022 in exchange for certain agreements, subject to the satisfaction of certain conditions. WeAdditionally, we have fulfilled our payment obligations pertaining to the trademark licensing agreement with Intuit in 2021 and no further expenses are expected.

Tax Receivable Agreement

As indicated in Note 8, Income Taxes, the Company is party to a Tax Receivable Agreement.

Legal

Rocket ~~Companies'~~Companies, through its subsidiaries, engages in, among other things, ~~engage in~~ mortgage lending, title and settlement services, and other financial technology services. Rocket Companies and its subsidiaries operate in highly regulated industries and are routinely subject to various legal and administrative proceedings concerning matters that arise in the normal and ordinary course of business, including inquiries, complaints, subpoenas, audits, examinations, investigations and potential enforcement actions from regulatory agencies and state attorney generals; state and federal lawsuits and putative class actions; and other litigation. Periodically, we assess our potential liabilities and contingencies in connection with outstanding legal and administrative proceedings utilizing the latest information available. While it is not possible to predict the outcome of any of these matters, based on our assessment of the facts and circumstances, we do not believe any of these matters, individually or in the aggregate, will have a material adverse effect on our financial position, results of operations or cash flows. However, actual outcomes may differ from those expected and could have a material effect on our financial position, results of operations, or cash flows in a future period. Rocket Companies accrues for losses when they are probable to occur and such losses are reasonably estimable. Legal costs are expensed as they are incurred.

As of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020, we recorded~~2021, the Company had reserves related to potential damages in connection with any legal proceedings of ~~$15,000 and 0, respectively.~~$15,000. The ultimate outcome of these or other actions or proceedings, including any monetary awards against us, is uncertain and there can be no assurance as to the amount of any such potential awards. Rocket Companies will incur defense costs and other expenses in connection with the lawsuits. Plus, if a judgment for money that exceeds specified thresholds is rendered against us and we fail to timely pay, discharge, bond or obtain a stay of execution of such judgment, it is possible that we could be deemed in default of loan funding facilities and other agreements governing indebtedness. If the final resolution of any such litigation is unfavorable in one or more of these actions, it could have a material adverse effect on our business, liquidity, financial condition, cash flows and results of operations.

~~Rocket Companies, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements (Continued)~~

~~(In Thousands, Except Shares and Per Share Amounts)~~

11. Minimum Net Worth Requirements

Certain secondary market investors and state regulators require the Company to maintain minimum net worth and capital requirements. To the extent that these requirements are not met, secondary market investors and/or the state regulators may utilize a range of remedies including sanctions, and/or suspension or termination of selling and servicing agreements, which may prohibit the Company from originating, securitizing or servicing these specific types of mortgage loans.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

(In Thousands, Except Shares and Per Share Amounts)

Rocket Mortgage is subject to the following minimum net worth, minimum capital ratio and minimum liquidity requirements established by the Federal Housing Finance Agency (“FHFA”) for Fannie Mae and Freddie Mac Seller/Servicers, and Ginnie Mae for single family issuers. Furthermore, refer to Note 5, Borrowings for additional information regarding compliance with all covenant requirements.

Minimum Net Worth

The minimum net worth requirement for Fannie Mae and Freddie Mac is defined as follows:

• Base of $2,500 plus 25 basis points of outstanding UPB for total loans serviced.

• Adjusted/Tangible Net Worth is defined as total equity less goodwill, intangible assets, affiliate receivables and certain pledged assets.

The minimum net worth requirement for Ginnie Mae is defined as follows:

• Base of $2,500 plus 35 basis points of the Ginnie Mae total single-family effective outstanding obligations.

• Adjusted/Tangible Net Worth is defined as total equity less goodwill, intangible assets, affiliate receivables and certain pledged assets. Effective for fiscal year 2020, under the Ginnie Mae MBS Guide, the issuers will no longer be permitted to include deferred tax assets when computing the minimum net worth requirements.

Minimum Capital Ratio

• For Fannie Mae, Freddie Mac and Ginnie Mae, the Company is also required to hold a ratio of Adjusted/Tangible Net Worth to Total Assets greater than 6%.

Minimum Liquidity

The minimum liquidity requirement for Fannie Mae and Freddie Mac is defined as follows:

• 3.5 basis points of total Agency servicing.

• Incremental 200 basis points of total nonperforming Agency, measured as 90+ delinquencies, servicing in excess of 6% of the total Agency servicing UPB.

• Allowable assets for liquidity may include cash and cash equivalents (unrestricted) and available for sale or held for trading investment grade securities (e.g., Agency MBS, Obligations of GSEs, US Treasury Obligations).

The minimum liquidity requirement for Ginnie Mae is defined as follows:

• Maintain liquid assets equal to the greater of $1,000 or 10 basis points of our outstanding single-family MBS.

The most restrictive of the minimum net worth and capital requirements require the Company to maintain a minimum adjusted net worth balance of ~~$2,039,636~~$1,349,382 and ~~$2,175,968~~$1,794,783 as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. As of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the Company was in compliance with this requirement.

3227

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

(In Thousands, Except Shares and Per Share Amounts)

12. Segments

The Company’s Chief Executive Officer, who has been identified as its Chief Operating Decision Maker (“CODM”), has evaluated how the Company views and measures its performance. ASC 280, Segment Reporting establishes the standards for reporting information about segments in financial statements. In applying the criteria set forth in that guidance, the Company has determined that it has 2 reportable ~~segments—~~segments — Direct to Consumer and Partner Network. The key factors used to identify these reportable segments are the organization and alignment of the Company’s internal operations and the nature of its marketing channels, which drive client acquisition into the mortgage platform. This determination reflects how its CODM monitors performance, allocates capital and makes strategic and operational decisions. The Company’s segments are described as follows:

Direct to Consumer

In the Direct to Consumer segment, clients have the ability to interact with Rocket Mortgage online and/or with the Company’s mortgage bankers. The Company markets to potential clients in this segment through various brand campaigns and performance marketing channels. The Direct to Consumer segment derives revenue from originating, closing, selling and servicing predominantly agency-conforming loans, which are pooled and sold to the secondary market. The segment also includes title insurance, appraisals and settlement services complementing the Company’s end-to-end mortgage origination experience. Servicing activities are fully allocated to the Direct to Consumer segment and are viewed as an extension of the client experience. Servicing enables Rocket Mortgage to establish and maintain long term relationships with our clients, through multiple touchpoints at regular engagement intervals.

Revenues in the Direct to Consumer segment are generated primarily from the gain on sale of loans, which includes loan origination fees, revenues from sales of loans into the secondary market, as well as the fair value of originated MSRs and hedging gains and losses. Loan servicing ~~(loss)~~ income ~~net~~ consists of the contractual fees earned for servicing loans and other ancillary servicing fees, as well as changes in the fair value of MSRs due to changes in valuation assumptions and realization of cash flows.

Partner Network

The Rocket Professional platform supports our Partner Network segment, where we leverage our superior client service and widely recognized brand to grow marketing and influencer relationships, and our mortgage broker partnerships through Rocket Pro TPO. Our marketing partnerships consist of well-known consumer-focused companies that find value in our award-winning client experience and want to offer their clients mortgage solutions with our trusted, widely recognized brand. These organizations connect their clients directly to us through marketing channels and a referral process. Our influencer partnerships are typically with companies that employ licensed mortgage professionals that find value in our client experience, technology and efficient mortgage process, where mortgages may not be their primary offering. We also enable clients to start the mortgage process through the Rocket platform in the way that works best for them, including through a local mortgage broker.

Revenues in the Partner Network segment are generated primarily from the gain on sale of loans, which includes loan origination fees, revenues from sales of loans into the secondary market, as well as the fair value of originated MSRs and hedging gains and losses.

Other Information About Our Segments

The Company measures the performance of the segments primarily on a contribution margin basis. The accounting policies applied by our segments are the same as those described in Note 1, Business, Basis of Presentation and Accounting Policies and the decrease in MSRs due to valuation assumptions is consistent with the changes described in Note 3, Mortgage Servicing Rights. Directly attributable expenses include Salaries, commissions and team member benefits, General and administrative expenses and Other expenses, such as servicing costs and origination costs.

The Company does not allocate assets to its reportable segments as they are not included in the review performed by the CODM for purposes of assessing segment performance and allocating resources. The balance sheet is managed on a consolidated basis and is not used in the context of segment reporting.

3328

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

(In Thousands, Except Shares and Per Share Amounts)

The Company also reports an ~~“all other”~~“All Other” category that includes operations from Rocket Homes, Rock Connections, Rocket Auto, Core Digital Media, Rocket Loans, Truebill and includes professional service fee revenues from related parties. These operations are neither significant individually nor in aggregate and therefore do not constitute a reportable segment.

Key operating data for our business segments for the ~~three and six months~~periods ended:


Three Months Ended June 30, 2021		Direct to Consumer		Partner Network		Segments Total		All Other		Total
Three Months Ended March 31, 2022												Three Months Ended March 31, 2022	Direct to Consumer		Partner Network		Segments Total		All Other		Total
Revenues	Revenues											Revenues
Gain on sale	Gain on sale	$	2,050,639	$	287,651	$	2,338,290	$	3,199	$	2,341,489	Gain on sale	$	1,217,103	$	258,056	$	1,475,159	$	8,627	$	1,483,786
Interest income	Interest income	52,489		33,222		85,711		934		86,645		Interest income	57,601		32,168		89,769		771		90,540
Interest expense on funding facilities	Interest expense on funding facilities	(39,409)		(24,943)		(64,352)		(26)		(64,378)		Interest expense on funding facilities	(26,727)		(14,969)		(41,696)		—		(41,696)
Servicing fee income	Servicing fee income	342,687		0		342,687		662		343,349		Servicing fee income	365,499		—		365,499		715		366,214
Changes in fair value of MSRs	Changes in fair value of MSRs	(414,745)		0		(414,745)		0		(414,745)		Changes in fair value of MSRs	454,380		—		454,380		—		454,380
Other income	Other income	229,860		23,228		253,088		123,300		376,388		Other income	167,027		16,477		183,504		133,868		317,372
Total U.S. GAAP Revenue, net	Total U.S. GAAP Revenue, net	2,221,521		319,158		2,540,679		128,069		2,668,748		Total U.S. GAAP Revenue, net	2,234,883		291,732		2,526,615		143,981		2,670,596
Plus: Decrease in MSRs due to valuation assumptions		121,312		0		121,312		0		121,312
Less: Increase in MSRs due to valuation assumptions (net of hedges)												Less: Increase in MSRs due to valuation assumptions (net of hedges)	(739,217)		—		(739,217)		—		(739,217)
Adjusted revenue	Adjusted revenue	2,342,833		319,158		2,661,991		128,069		2,790,060		Adjusted revenue	1,495,666		291,732		1,787,398		143,981		1,931,379
Directly attributable expenses	Directly attributable expenses	907,963		176,065		1,084,028		58,155		1,142,183		Directly attributable expenses	869,210		120,034		989,244		118,872		1,108,116
Contribution margin	Contribution margin	$	1,434,870	$	143,093	$	1,577,963	$	69,914	$	1,647,877	Contribution margin	$	626,456	$	171,698	$	798,154	$	25,109	$	823,263


Six Months Ended June 30, 2021		Direct to Consumer		Partner Network		Segments Total		All Other		Total
Three Months Ended March 31, 2021												Three Months Ended March 31, 2021	Direct to Consumer		Partner Network		Segments Total		All Other		Total
Revenues	Revenues											Revenues
Gain on sale	Gain on sale	$	4,914,239	$	972,080	$	5,886,319	$	7,612	$	5,893,931	Gain on sale	$	2,863,600	$	684,428	$	3,548,028	$	4,414	$	3,552,442
Interest income	Interest income	111,157		69,283		180,440		1,450		181,890		Interest income	58,668		36,061		94,729		516		95,245
Interest expense on funding facilities	Interest expense on funding facilities	(81,414)		(50,762)		(132,176)		(46)		(132,222)		Interest expense on funding facilities	(42,006)		(25,818)		(67,824)		(20)		(67,844)
Servicing fee income	Servicing fee income	634,339		0		634,339		1,371		635,710		Servicing fee income	291,652		—		291,652		709		292,361
Changes in fair value of MSRs	Changes in fair value of MSRs	(168,824)		0		(168,824)		0		(168,824)		Changes in fair value of MSRs	200,555		—		200,555		—		200,555
Other income	Other income	534,772		51,005		585,777		256,723		842,500		Other income	304,912		27,778		332,690		133,422		466,112
Total U.S. GAAP Revenue, net	Total U.S. GAAP Revenue, net	5,944,269		1,041,606		6,985,875		267,110		7,252,985		Total U.S. GAAP Revenue, net	3,677,381		722,449		4,399,830		139,041		4,538,871
Less: Increase in MSRs due to valuation assumptions		(423,138)		0		(423,138)		0		(423,138)
Less: Increase in MSRs due to valuation assumptions (net of hedges)												Less: Increase in MSRs due to valuation assumptions (net of hedges)	(499,084)		—		(499,084)		—		(499,084)
Adjusted revenue	Adjusted revenue	5,521,131		1,041,606		6,562,737		267,110		6,829,847		Adjusted revenue	3,178,297		722,449		3,900,746		139,041		4,039,787
Directly attributable expenses	Directly attributable expenses	1,926,460		355,842		2,282,302		128,911		2,411,213		Directly attributable expenses	973,129		179,777		1,152,906		65,067		1,217,973
Contribution margin	Contribution margin	$	3,594,671	$	685,764	$	4,280,435	$	138,199	$	4,418,634	Contribution margin	$	2,205,168	$	542,672	$	2,747,840	$	73,974	$	2,821,814

~~Rocket Companies, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements (Continued)~~

~~(In Thousands, Except Shares and Per Share Amounts)~~

Three Months Ended
June 30, 2020 Direct to Consumer Partner Network Segments Total All Other Total
Revenues
Gain on sale $ 4,020,492 $ 734,662 $ 4,755,154 $ (1,570) $ 4,753,584
Interest income 51,012 26,376 77,388 651 78,039
Interest expense on funding facilities (35,397) (18,302) (53,699) (58) (53,757)
Servicing fee income 248,873 0 248,873 969 249,842
Changes in fair value of MSRs (552,844) 0 (552,844) 0 (552,844)
Other income 206,538 39,859 246,397 314,552 560,949
Total U.S. GAAP Revenue, net 3,938,674 782,595 4,721,269 314,544 5,035,813
Plus: Decrease in MSRs due to valuation assumptions 274,377 0 274,377 0 274,377
Adjusted revenue 4,213,051 782,595 4,995,646 314,544 5,310,190
Directly attributable expenses 948,900 139,140 1,088,040 123,494 1,211,534
Contribution margin $ 3,264,151 $ 643,455 $ 3,907,606 $ 191,050 $ 4,098,656

Six Months Ended
June 30, 2020 Direct to Consumer Partner Network Segments Total All Other Total
Revenues
Gain on sale $ 5,631,324 $ 938,109 $ 6,569,433 $ 6,260 $ 6,575,693
Interest income 98,322 51,947 150,269 1,812 152,081
Interest expense on funding facilities (60,782) (32,023) (92,805) (411) (93,216)
Servicing fee income 504,863 0 504,863 2,072 506,935
Changes in fair value of MSRs (1,544,096) 0 (1,544,096) 0 (1,544,096)
Other income 351,561 59,469 411,030 393,695 804,725
Total U.S. GAAP Revenue, net 4,981,192 1,017,502 5,998,694 403,428 6,402,122
Plus: Decrease in MSRs due to valuation assumptions 1,017,704 0 1,017,704 0 1,017,704
Adjusted revenue 5,998,896 1,017,502 7,016,398 403,428 7,419,826
Directly attributable expenses 1,729,520 231,084 1,960,604 168,994 2,129,598
Contribution margin $ 4,269,376 $ 786,418 $ 5,055,794 $ 234,434 $ 5,290,228

3529

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

(In Thousands, Except Shares and Per Share Amounts)

The following table represents a reconciliation of segment contribution margin to consolidated U.S. GAAP income before taxes for the three ~~and six~~ months ended:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Contribution margin, excluding change in MSRs due to valuation assumptions	Contribution margin, excluding change in MSRs due to valuation assumptions	$	1,647,877	$	4,098,656	$	4,418,634	$	5,290,228	Contribution margin, excluding change in MSRs due to valuation assumptions	$	823,263	$	2,821,814
(Decrease) increase in MSRs due to valuation assumptions		(121,312)		(274,377)		423,138		(1,017,704)
Increase in MSRs due to valuation assumptions (net of hedges)										Increase in MSRs due to valuation assumptions (net of hedges)	739,217		499,084
Contribution margin, including change in MSRs due to valuation assumptions	Contribution margin, including change in MSRs due to valuation assumptions	1,526,565		3,824,279		4,841,772		4,272,524		Contribution margin, including change in MSRs due to valuation assumptions	1,562,480		3,320,898
Less expenses not allocated to segments:	Less expenses not allocated to segments:									Less expenses not allocated to segments:
Salaries, commissions and team member benefits	Salaries, commissions and team member benefits	232,674		205,100		457,011		403,950		Salaries, commissions and team member benefits	244,044		230,094
General and administrative expenses	General and administrative expenses	176,125		90,231		370,685		184,827		General and administrative expenses	192,457		194,494
Depreciation and amortization	Depreciation and amortization	20,589		16,189		35,893		32,304		Depreciation and amortization	21,042		15,304
Interest and amortization expense on non-funding debt	Interest and amortization expense on non-funding debt	35,038		33,168		70,609		66,275		Interest and amortization expense on non-funding debt	38,664		35,571
Other expenses	Other expenses	1,442		(5,939)		3,707		(641)		Other expenses	3,816		2,265
Income before income taxes	Income before income taxes	$	1,060,697	$	3,485,530	$	3,903,867	$	3,585,809	Income before income taxes	$	1,062,457	$	2,843,170

~~13. Variable Interest Entities~~

Rocket Companies, Inc. is the sole managing member of Holdings with 100% of the management and voting power in Holdings. In its capacity as managing member, Rocket Companies, Inc. has the sole authority to make decisions on behalf of Holdings and bind Holdings to signed agreements. Further, Holdings maintains separate capital accounts for its investors as a mechanism for tracking earnings and subsequent distribution rights. Accordingly, management concluded that Holdings is a limited partnership or similar legal entity as contemplated in ASC 810, ~~Consolidation~~.

Furthermore, management concluded that Rocket Companies, Inc. is Holdings’ primary beneficiary. As the primary beneficiary, Rocket Companies, Inc. consolidates the results and operations of Holdings for financial reporting purposes under the variable interest consolidation model guidance in ASC 810.

Rocket Companies, Inc.'s relationship with Holdings results in no recourse to the general credit of Rocket Companies, Inc. Holdings and its consolidated subsidiaries represents Rocket Companies, Inc.'s sole investment. Rocket Companies, Inc. shares in the income and losses of Holdings in direct proportion to Rocket Companies, Inc.'s ownership percentage. Further, Rocket Companies, Inc. has no contractual requirement to provide financial support to Holdings.

Rocket Companies, Inc.’s financial position, performance and cash flows effectively represent those of Holdings and its subsidiaries as of and for the period ended June 30, 2021. Prior to the reorganization and IPO, Rocket Companies, Inc. was not impacted by Holdings.

~~14.~~13. Non-controlling Interests

The non-controlling interest balance represents the economic interest in Holdings held by our Chairman and RHI. The following table summarizes the ownership of Holdings Units in Holdings as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020:~~2021:


		June 30, 2021			December 31, 2020				March 31, 2022			December 31, 2021
		Holdings Units	Ownership Percentage		Holdings Units	Ownership Percentage			Holdings Units	Ownership Percentage		Holdings Units	Ownership Percentage
Rocket Companies, Inc.'s ownership of Holdings Units	Rocket Companies, Inc.'s ownership of Holdings Units	135,978,914	6.85	%	115,372,565	5.81	%	Rocket Companies, Inc.'s ownership of Holdings Units	119,627,004	6.08	%	126,437,703	6.40	%
Holdings Units held by our Chairman	Holdings Units held by our Chairman	1,101,822	0.06	%	1,101,822	0.06	%	Holdings Units held by our Chairman	1,101,822	0.05	%	1,101,822	0.06	%
Holdings Units held by RHI	Holdings Units held by RHI	1,847,777,661	93.09	%	1,867,977,661	94.13	%	Holdings Units held by RHI	1,847,777,661	93.87	%	1,847,777,661	93.54	%
Balance at end of period	Balance at end of period	1,984,858,397	100.00	%	1,984,452,048	100.00	%	Balance at end of period	1,968,506,487	100.00	%	1,975,317,186	100.00	%

~~Rocket Companies, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements (Continued)~~

~~(In Thousands, Except Shares and Per Share Amounts)~~

The non-controlling interest holders have the right to exchange Holdings Units, together with a corresponding number of shares of our Class D common stock or Class C common stock (together referred to as “Paired Interests”), for, at our option, (i) shares of our Class B common stock or Class A common stock or (ii) cash from a substantially concurrent public offering or private sale (based on the price of our Class A common stock). As such, future exchanges of Paired Interests by non-controlling interest holders will result in a change in ownership and reduce or increase the amount recorded as non-controlling interest and increase or decrease additional paid-in-capital when Holdings has positive or negative net assets, respectively. As of ~~June 30, 2021,~~March 31, 2022, our Chairman has not exchanged any Paired Interests. ~~As of December 31, 2020, neither our Chairman or RHI had exchanged any Paired Interests.~~

~~Effective on~~On March 31, 2021, the Company ~~and RHI~~ exchanged 20,200,000 shares of Class A common stock for the equivalent number of ~~Paired Interests (in this instance,~~Class D Common stock and Holdings Units ~~together~~ with ~~a corresponding number of shares of Class D common stock).~~RHI. This transaction resulted in an increase of Rocket Companies' controlling interest and a corresponding decrease of non-controlling interest of approximately 1%.

As of March 31, 2022, Rocket Companies has repurchased 22,458,660 shares of Class A common stock under the Share Repurchase Program authorized in November 2020.

~~15.~~

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

(In Thousands, Except Shares and Per Share Amounts)

14. Share-based Compensation

The Company ~~grants various types of share-based awards, both equity~~has the 2020 Omnibus Incentive Plan under which restricted stock units and ~~cash awards,~~stock options are granted to ~~various~~ team members and directors of the Company and its affiliates. ~~Included in~~The fair value of the share-based ~~compensation expense for the Company are RKT and RHI denominated awards. Share-based compensation expense~~awards is ~~included in Salaries, commissions and team member benefits~~estimated on the ~~Condensed Consolidated Statements~~date of ~~Income and Comprehensive Income. In connection with~~grant based on the ~~IPO, equity-based awards were issued under~~market price of the ~~Rocket Companies, Inc. 2020 Omnibus Incentive Plan including restricted stock units and stock options to purchase shares of our Class A~~underlying common stock ~~at an exercise price equal to the price to the public in the initial public offering. Share-based compensation expense~~and is ~~recognized~~amortized on a straight-line basis over the related requisite service periods.

During the three months ended March 31, 2022, the Company granted approximately 21,300,000 restricted stock units with an estimated future expense of $281,600. These awards generally vest annually over a three-year period ~~based on~~or quarterly over an accelerated four-year period, subject to the ~~fair value of~~grantee’s employment or service with the ~~award on the date of grant.~~Company through each applicable vesting date.

~~Team Member Stock Purchase Plan~~

The Company has an employee stock purchase plan, also referred to as the Team Member Stock Purchase Plan ("TMSPP") was initiated in December 2020, with the first offering period beginning in January 2021. Under the TMSPP, the Company is authorized to issue up to 10,526,316 shares of its common stock to qualifying team members. Eligible, under which eligible team members may direct the Company ~~during each three-month option period,~~ to withhold up to 15% of their gross pay ~~the proceeds from which are used~~ to purchase shares of common stock at a price equal to 85% of the closing market price on the exercise date. ~~Under ASC 718, the~~The TMSPP is a liability classified compensatory plan and the Company recognizes compensation expense over the offering period based on the fair value of the purchase discount. ~~There were 896,701 shares purchased for both~~During the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, ~~under~~there were 1,018,875 and zero shares, respectively, purchased by team members through the TMSPP.

~~Share-based Compensation Expense~~Additionally, we are allocated costs associated with awards granted by Rock Holdings, Inc. (“RHI”) in the years prior to the reorganization and IPO and certain of our subsidiaries have individual compensation plans that include equity awards and stock appreciation rights.

~~A summary~~The components of share-based compensation expense ~~recognized during~~included in Salaries, commissions and team member benefits on the ~~three~~Condensed Consolidated Statements of Income and ~~six months ended June 30, 2021 and June 30, 2020 related to RKT-denominated awards~~Comprehensive Income is as follows:

Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
RKT restricted stock units $ 26,963 $ 0 $ 54,564 $ 0
RKT stock options 9,863 0 19,898 0
RKT Team Member Stock Purchase Plan 2,361 0 5,285 0
RKT denominated share-based compensation expense $ 39,187 $ 0 $ 79,747 $ 0

~~Rocket Companies, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements (Continued)~~

~~(In Thousands, Except Shares and Per Share Amounts)~~

~~A summary of share-based compensation expense recognized during the three and six months ended June 30, 2021 and June 30, 2020 related to RHI-denominated awards is as follows:~~

Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
RHI restricted stock units $ 1,372 $ 31,206 $ 2,744 $ 60,183
RHI stock options 0 0 0 32
RHI cash settled awards 0 13,743 0 26,421
RHI denominated share-based compensation expense $ 1,372 $ 44,949 $ 2,744 $ 86,636

Including subsidiary share-based compensation plans, total share-based compensation expense for the three months ended June 30, 2021 and 2020, was $41,036 and $44,997, respectively and $83,020 and $86,733 for the six months ended June 30, 2021 and 2020, respectively.


	Three Months Ended March 31,
	2022		2021
Rocket Companies, Inc. sponsored plans
Restricted stock units	$	42,492	$	27,601
Stock options	9,576		10,035
Team Member Stock Purchase Plan	2,098		2,923
Subtotal Rocket Companies, Inc. sponsored plans	$	54,166	$	40,559
RHI restricted stock units	12,775		1,372
Subsidiary plans	169		52
Total share-based compensation expense	$	67,110	$	41,983

~~16.~~15. Earnings Per Share

The Company applies the two-class method for calculating and presenting earnings per share by separately presenting earnings per share for Class A common stock and Class B common stock. In applying the two-class method, the Company allocates undistributed earnings equally on a per share basis between Class A and Class B common stock. According to the Company’s certificate of incorporation, the holders of the Class A and Class B common stock are entitled to participate in earnings equally on a per-share basis, as if all shares of common stock were of a single class, and in dividends as may be declared by the board of directors. Holders of the Class A and Class B common stock also have equal priority in liquidation. Shares of Class C and Class D common stock do not participate in earnings of Rocket Companies, Inc. As a result, the shares of Class C and Class D common stock are not considered participating securities and are not included in the weighted-average shares outstanding for purposes of earnings per share. Restricted stock units awarded as part of the Company’s compensation program are included in the weighted-average Class A shares outstanding in the calculation of basic earnings per share ("EPS") once the units are fully vested.

Rocket Companies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Continued)

(In Thousands, Except Shares and Per Share Amounts)

Basic earnings per share of Class A common stock is computed by dividing Net income attributable to Rocket Companies by the weighted-average number of shares of Class A common stock outstanding during the period. Diluted earnings per share of Class A common stock is computed by dividing Net income attributable to Rocket Companies by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive securities. There was 0no Class B common stock outstanding as of ~~June 30, 2021.~~March 31, 2022 or 2021, respectively. See Note ~~14,~~13, Non-controlling Interests for a description of Paired ~~Interests.~~Interests and their potential impact on Class A and Class B share ownership.

Prior to the IPO, Holdings membership structure included equity interests held by RHI. The Company analyzed the calculation of earnings per unit for periods prior to the IPO and determined that it resulted in values that would not be meaningful to the users of these condensed consolidated financial statements. Therefore, earnings per share information has not been presented for the three and six months ended June 30, 2020.

~~Rocket Companies, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements (Continued)~~

~~(In Thousands, Except Shares and Per Share Amounts)~~

The following table sets ~~for~~forth the calculation of the basic and diluted earnings per share for the period:


		Three Months Ended June 30,		Six Months Ended June 30,			Three Months Ended March 31,
		2021		2021			2022		2021
Net income	Net income	$	1,036,650	$	3,813,988	Net income	$	1,036,608	$	2,777,338
Net income attributable to non-controlling interest	Net income attributable to non-controlling interest	(975,530)		(3,629,166)		Net income attributable to non-controlling interest	(982,896)		(2,653,636)
Net income attributable to Rocket Companies	Net income attributable to Rocket Companies	61,120		184,822		Net income attributable to Rocket Companies	53,712		123,702
Add: Reallocation of Net income attributable to vested, undelivered stock awards	Add: Reallocation of Net income attributable to vested, undelivered stock awards	30		98		Add: Reallocation of Net income attributable to vested, undelivered stock awards	32		80
Net income attributable to common shareholders	Net income attributable to common shareholders	$	61,150	$	184,920	Net income attributable to common shareholders	$	53,744	$	123,782

Numerator:	Numerator:					Numerator:
Net income attributable to Class A common shareholders - basic	Net income attributable to Class A common shareholders - basic	$	61,150	$	184,920	Net income attributable to Class A common shareholders - basic	$	53,744	$	123,782
Add: Reallocation of net income attributable to dilutive impact of pro-forma conversion of Class D shares to Class A shares (1)	Add: Reallocation of net income attributable to dilutive impact of pro-forma conversion of Class D shares to Class A shares (1)	733,519		0		Add: Reallocation of net income attributable to dilutive impact of pro-forma conversion of Class D shares to Class A shares (1)	744,379		—
Add: Reallocation of net income attributable to dilutive impact of share-based compensation awards (2)	Add: Reallocation of net income attributable to dilutive impact of share-based compensation awards (2)	2,494		8,411		Add: Reallocation of net income attributable to dilutive impact of share-based compensation awards (2)	1,418		6,349
Net income attributable to Class A common shareholders - diluted	Net income attributable to Class A common shareholders - diluted	$	797,163	$	193,331	Net income attributable to Class A common shareholders - diluted	$	799,541	$	130,131
Denominator:	Denominator:					Denominator:
Weighted average shares of Class A common stock outstanding - basic	Weighted average shares of Class A common stock outstanding - basic	136,139,400		125,961,094		Weighted average shares of Class A common stock outstanding - basic	122,691,728		115,673,524
Add: Dilutive impact of conversion of Class D shares to Class A shares	Add: Dilutive impact of conversion of Class D shares to Class A shares	1,848,879,483		0		Add: Dilutive impact of conversion of Class D shares to Class A shares	1,848,879,483		—
Add: Dilutive impact of share-based compensation awards (3)	Add: Dilutive impact of share-based compensation awards (3)	6,249,089		6,139,009		Add: Dilutive impact of share-based compensation awards (3)	3,807,921		6,338,392
Weighted average shares of Class A common stock outstanding - diluted	Weighted average shares of Class A common stock outstanding - diluted	1,991,267,972		132,100,103		Weighted average shares of Class A common stock outstanding - diluted	1,975,379,132		122,011,916

Earnings per share of Class A common stock outstanding - basic	Earnings per share of Class A common stock outstanding - basic	$	0.45	$	1.47	Earnings per share of Class A common stock outstanding - basic	$	0.44	$	1.07
Earnings per share of Class A common stock outstanding - diluted	Earnings per share of Class A common stock outstanding - diluted	$	0.40	$	1.46	Earnings per share of Class A common stock outstanding - diluted	$	0.40	$	1.07

(1) Net income calculated using the estimated annual effective tax rate of Rocket Companies, Inc.

(2) Reallocation of net income attributable to dilutive impact of share-based compensation awards for the three months ended ~~June 30,~~March 31, 2022 and 2021 comprised of ~~$2,448~~$1,356 and $5,889 related to restricted stock units, ~~$11~~zero and $422 related to stock options and $35 related to TMSPP. Reallocation of net income attributable to dilutive impact of share-based compensation awards for the six months ended June 30, 2021 comprised of $8,286 related to restricted stock units, $20 related to stock options$62 and ~~$105~~$38 related to TMSPP.

(3) Dilutive impact of share-based compensation awards for the three months ended ~~June 30,~~March 31, 2022 and 2021 comprised of ~~6,134,281~~3,640,391 and 5,879,491 related to restricted stock units, ~~27,457~~zero and 421,267 related to stock options and 87,351 related to TMSPP. Dilutive impact of share-based compensation awards for the six months ended June 30, 2021 comprised of 6,048,507 related to restricted stock units, 14,285 related to stock options167,530 and ~~76,217~~37,634 related to TMSPP.

For the period from January 1, 2022 to March 31, 2022, 23,941,259 stock options, each weighted for the portion of the period for which they were outstanding, were excluded from the computation of diluted earnings per share as the effect was determined to be anti-dilutive.

For the period from January 1, 2021 to ~~June 30,~~March 31, 2021, ~~1,858,812,080~~1,868,855,039 Holdings Units, each weighted for the portion of the period for which they were outstanding, together with a corresponding number of shares of our Class D common stock, were exchangeable, at our option, for shares of our Class A common stock. After evaluating the potential dilutive effect under the if-converted method, the outstanding Holdings Units for the assumed exchange of non-controlling interests were determined to be anti-dilutive and thus were excluded from the computation of diluted earnings per share.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following management’s discussion and analysis of our financial condition and results of operations should be read in conjunction with, and is qualified in its entirety by reference to, our unaudited condensed consolidated financial statements and the related notes and other information included elsewhere in this Quarterly Report on Form 10-Q (the “Form 10-Q”) and our audited consolidated financial statements included in our Annual Report on Form 10-K (the "Form 10-K") filed with the Securities and Exchange Commission (the “SEC”). This discussion and analysis contains forward-looking statements that involve risks and uncertainties which could cause our actual results to differ materially from those anticipated in these forward-looking statements, including, but not limited to, risks and uncertainties discussed under the heading “Special Note Regarding Forward-Looking Statements,” and in Part II. Item 1A. “Risk Factors” and elsewhere in this Form 10-Q and in our Form 10-K.

Special Note Regarding Forward-Looking Statements

This Form 10-Q contains forward-looking statements, which involve risks and uncertainties. These forward-looking statements are generally identified by the use of forward-looking terminology, including the terms “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” and, in each case, their negative or other various or comparable terminology. All statements other than statements of historical facts contained in this Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth are forward-looking statements. As you read this Form 10-Q, you should understand that these statements are not guarantees of performance or results. They involve known and unknown risks, uncertainties and assumptions, including those described under the heading “Risk Factors” in this Form 10-Q. Although we believe that these forward-looking statements are based upon reasonable assumptions, you should be aware that many factors, including those described under the heading “Risk Factors” in this Form 10-Q, could affect our actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements.

Our forward-looking statements made herein are made only as of the date of this Form 10-Q. We expressly disclaim any intent, obligation or undertaking to update or revise any forward-looking statements made herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in this Form 10-Q.

Objective

The following discussion provides an analysis of the Company's financial condition, cash flows and results of operations from management's perspective and should be read in conjunction with the consolidated financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q. Our objective is to provide a discussion of events and uncertainties known to management that are reasonably likely to cause the reported financial information not to be indicative of future operating results or of future financial condition and to also offer information that provides an understanding of our financial condition, cash flows and results of operations.

Executive Summary

Recent Developments

~~Business Update in Response to COVID-19 Impact~~Share Repurchase Program

As of ~~June 30, 2021, 54,364 clients, or 2.3%~~May 6, 2022, Rocket Companies has repurchased 25.3 million shares at a weighted average price of $14.16. Cumulatively, we have returned $358.7 million to shareholders under the ~~total serviced portfolio, were~~$1 billion Share Repurchase Program authorized in forbearance plans related to COVID-19. Since quarter end, we’ve seen positive developments in the number of clients entering into forbearance and as of July 31, 2021, the total number of clients in forbearance plans related to COVID-19 was 49,859 or 2.1% of the portfolio.

November 2020.

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Three months ended ~~June 30, 2021~~March 31, 2022 summary

For the three months ended ~~June 30, 2021,~~March 31, 2022, we originated ~~$83.8~~$54.0 billion in residential mortgage loans, which was ~~an $11.4~~a $49.5 billion, or ~~15.8%~~47.9%, ~~increase~~decrease from the three months ended ~~June 30, 2020.~~March 31, 2021. Our Net income was $1.0 billion for the three months ended ~~June 30, 2021,~~March 31, 2022, compared to Net income of ~~$3.5~~$2.8 billion for the three months ended ~~June 30, 2020.~~March 31, 2021. We generated ~~$1.3~~$0.5 billion of Adjusted EBITDA for the three months ended ~~June 30, 2021,~~March 31, 2022, which was a decrease of ~~$2.6~~$2.0 billion, or ~~66.7%~~81.6%, compared to ~~$3.8~~$2.5 billion for the three months ended ~~June 30, 2020.~~March 31, 2021. For more information on Adjusted EBITDA, please see “Non-GAAP Financial Measures” below.

The decrease in Net income was primarily driven by a decrease of ~~$2.4~~$2.1 billion, or ~~50.7%~~58.2% in Gain on sale of loans, net which was driven ~~primarily~~mainly by the decrease in gain on sale margin, ~~partially offset by an increase~~as well as a decrease in origination volume in the three months ended ~~June 30, 2021~~March 31, 2022 noted above. Gain on sale margin in 2021 reflects a tighter spread between primary and secondary mortgage rates and an increase in mix of our Partner Network as a percentage of our total originations. The primary mortgage rate is the rate at which lenders originate loans with borrowers and the secondary mortgage rate is the rate at which lenders securitize those loans into mortgage backed securities. Loan servicing ~~(loss)~~ income ~~net~~ increased ~~$231.6~~$327.7 million, or ~~76.4%~~66.5%, ~~which was~~ primarily due to the increase in the ~~change in~~ fair value of MSRs. Other income also decreased $184.6 million, or 33%, due to a decrease in revenues generated from Rocket Loans loan recommendations through the economic injury disaster loans program offered by the Small Business Administration. During the period, expenses ~~increased $60.4~~decreased $87.6 million, or ~~3.8%~~5.2%, which was associated with ~~higher~~a decrease in expenses related to a decrease in title production ~~levels~~and a decrease in payoff interest expense for the three months ended ~~June 30, 2021~~March 31, 2022 as compared to the three months ended June 30, 2020. The increase in production led to an increase in Marketing and advertising expenses of $104.5 million, or 51.7%, due to the Company's increased investment in brand marketing from new national campaigns with the reintroduction of many sporting and other live events that were cancelled in 2020 due to the COVID-19 pandemic. Also, in 2021 the Company’s performance marketing spend increased as compared to the prior period supporting our increase in loan origination volume.

As of June 30, 2021, our servicing portfolio, including loans subserviced for others, included approximately $507.2 billion of UPB and 2.4 million client loans. The portfolio primarily consists of high quality performing GSE and government (FHA and VA) loans. Our delinquent loans (defined as 60-plus days past-due) were 2.60% of our total portfolio. Excluding clients in COVID-19 related forbearance plans, our delinquent loans (defined as 60-plus days past-due) were 0.71% as of June 30, 2021. We monitor the MSR portfolio on a regular basis seeking to optimize our portfolio by evaluating the risk and return profile of the portfolio. As part of these efforts we sold the servicing on approximately 20,000 loans with $7.9 billion in UPB during the three months ended June 30, 2021. These sales were more than offset by new loans that were added to the MSR portfolio organically during the period.

~~Six months ended June 30, 2021 summary~~

For the six months ended June 30, 2021, we originated $187.3 billion in residential mortgage loans, which was a $63.3 billion, or 51.0%, increase from the six months ended June 30, 2020. Our Net income was $3.8 billion for the six months ended June 30, 2021, compared to Net income of $3.6 billion for the six months ended June 30, 2020. We generated $3.7 billion of Adjusted EBITDA for the six months ended June 30, 2021, which was a decrease of $1.1 billion, or 22.6%, compared to $4.8 billion for the six months ended June 30, 2020. For more information on Adjusted EBITDA, please see “Non-GAAP Financial Measures” below.

The increase in Net income was primarily driven by an increase in Loan servicing (loss) income, net, which increased $1.5 billion. The change was primarily due to the increase in the change in fair value of MSRs. Other income also increased $37.8 million, or 4.7%, due primarily to revenue generated from Amrock's title insurance services, property valuation and settlement services. Gain on sale of loans, net decreased $681.8 million, or 10.4% which was driven primarily by the decrease in gain on sale margin, partially offset by the increase in origination volume in the six months ended June 30, 2021 noted above. There was an increase in expenses associated with higher production levels in the six months ended June 30, 2021 as compared to the six months ended June 30, 2020. The increase in production led to an increase in Salaries, commissions and team member benefits of $145.1 million, or 9.4%, primarily due to variable compensation and an increase in team members in production roles to support our continued growth. General and administrative expenses also increased by $71.0 million, or 14.7%, during the six months ended June 30, 2021 as compared to the six months ended June 30, 2020 driven primarily by increased technology spend to support the increase in production. Other expenses increased by $172.3 million, or 52.0%, in the six months ended June 30, 2021 as compared to the six months ended June 30, 2020 driven by expenses incurred to support the higher level of title insurance services, property valuation and settlement services due to the increased origination volumes noted above. Other expenses also increased due to an increase in payoff interest expense that resulted from an increase in the volume of loans paid in full prior to their scheduled maturity from our servicing portfolio in the six months ended June 30,March 31, 2021. When individual loans are paid off, we are required to remit interest for an entire month regardless of the date of payoff; however, clients are only responsible for interest accrued up to the date of payoff. The difference between the interest we are required to remit to investors and the interest we collect from the client as a result of an early payoff is referred to as “payoff ~~interest”~~interest expense”.

As of March 31, 2022, our servicing portfolio, including loans subserviced for others, included approximately $545.8 billion of UPB and 2.6 million client loans. The portfolio primarily consists of high quality performing GSE and government (FHA and VA) loans. Our delinquent loans (defined as 60-plus days past-due) were 1.31% of our total portfolio. Excluding clients in COVID-19 related forbearance plans, our delinquent loans (defined as 60-plus days past-due) were 0.84% as of March 31, 2022. We monitor the MSR portfolio on a regular basis seeking to optimize our portfolio by evaluating the risk and return profile of the portfolio. As part of these efforts we sold the servicing on approximately 62,749 loans with $24.0 billion in UPB during the three months ended March 31, 2022. These sales were more than offset by new loans that were added to the MSR portfolio organically during the period.

Non-GAAP Financial Measures

To provide investors with information in addition to our results as determined by GAAP, we disclose Adjusted Revenue, Adjusted Net Income, Adjusted Diluted EPS and Adjusted EBITDA as non-GAAP measures which management believes provide useful information to investors. These measures are not financial measures calculated in accordance with GAAP and should not be considered as a substitute for revenue, net income, or any other operating performance measure calculated in accordance with GAAP, and may not be comparable to a similarly titled measure reported by other companies.

In first quarter of 2021, we revised our definition of Adjusted Net income and Adjusted EBITDA to exclude a litigation accrual that does not directly affect what we consider to be our core operating performance. Excluding this cost did not impact Adjusted Net income or Adjusted EBITDA for the comparative periods presented. From time to time in the future, we may exclude other items if we believe that doing so is consistent with the goal of providing useful information to investors.

We define “Adjusted Revenue” as total revenues net of the change in fair value of mortgage servicing rights (“MSRs”) due to valuation ~~assumptions.~~assumptions (net of hedges). We define “Adjusted Net Income” as tax-effected earnings before share-based compensation expense, the change in fair value of MSRs due to valuation assumptions ~~and~~(net of hedges), loss on extinguishment of Senior Notes, a litigation accrual, Change in Tax receivable agreement liability, and the tax effects of those adjustments. We define “Adjusted Diluted EPS” as Adjusted Net Income divided by the diluted weighted average number of Class A common stock outstanding for the applicable period, which assumes the pro forma exchange and conversion of all outstanding Class D common stock for Class A common ~~stoc~~k.stock. We define “Adjusted EBITDA” as earnings before interest and amortization expense on non-funding debt, income tax, and depreciation and amortization, net of the change in fair value of MSRs due to valuation assumptions (net of hedges), ~~share-based~~share-based compensation expense, and a litigation accrual. We exclude from each of these non-GAAP ~~revenues~~measures the change in fair value of MSRs due to valuation assumptions (net of hedges) as this represents a non-cash non-realized adjustment to our total revenues, reflecting changes in assumptions including discount rates and prepayment speed assumptions, mostly due to changes in market interest rates, which is not indicative of our performance or results of operation. We also exclude effects of contractual prepayment protection associated with sales of MSRs. Adjusted EBITDA includes ~~interest~~Interest expense on funding facilities, which are recorded as a component of ~~“Interest~~Interest income, ~~net”,~~net, as these expenses are a direct cost driven by loan origination volume. By contrast, interest and amortization expense on non-funding debt is a function of our capital structure and is therefore excluded from Adjusted EBITDA.

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In the first quarter of 2022, we revised our definition of Adjusted Net income and Adjusted EBITDA to also exclude the cash portion of share-based compensation expenses, as these expenses do not directly affect what we consider to be our core operating performance. Comparative periods presented to the extent impacted were updated. From time to time in the future, we may exclude other items if we believe that doing so is consistent with the goal of providing useful information to investors.

We believe that the presentation of Adjusted Revenue, Adjusted Net Income, Adjusted Diluted EPS and Adjusted EBITDA provides useful information to investors regarding our results of operations because each measure assists both investors and management in analyzing and benchmarking the performance and value of our business. Adjusted Revenue, Adjusted Net Income, Adjusted Diluted EPS and Adjusted EBITDA provide indicators of performance that are not affected by fluctuations in certain costs or other items. Accordingly, management believes that these measurements are useful for comparing general operating performance from period to period, and management relies on these measures for planning and forecasting of future periods. Additionally, these measures allow management to compare our results with those of other companies that have different financing and capital structures. However, other companies may define Adjusted Revenue, Adjusted Net Income, Adjusted Diluted EPS and Adjusted EBITDA differently, and as a result, our measures of Adjusted Revenue, Adjusted Net Income, Adjusted Diluted EPS and Adjusted EBITDA may not be directly comparable to those of other companies.

Although we use Adjusted Revenue, Adjusted Net Income, Adjusted Diluted EPS and Adjusted EBITDA as financial measures to assess the performance of our business, such use is limited because they do not include certain material costs necessary to operate our business. Additionally, our definitions of each of Adjusted Revenue, Adjusted Net Income, Adjusted Diluted EPS and Adjusted EBITDA allows us to add back certain non-cash charges and deduct certain gains that are included in calculating ~~total~~Total revenues, net, ~~net~~Net income attributable to Rocket Companies or ~~net income (loss).~~Net income. However, these expenses and gains vary greatly, and are difficult to predict. They can represent the effect of long-term strategies as opposed to short-term results. Adjusted Revenue, Adjusted Net Income, Adjusted Diluted EPS and Adjusted EBITDA should be considered in addition to, and not as a substitute for, ~~total~~Total revenues, net, Net income attributable to Rocket Companies and ~~net~~Net income ~~(loss)~~ in accordance with U.S. GAAP as measures of performance. Our presentation of Adjusted Revenue, Adjusted Net Income, Adjusted Diluted EPS and Adjusted EBITDA should not be construed as an indication that our future results will be unaffected by unusual or nonrecurring items.

Adjusted Revenue, Adjusted Net Income, Adjusted Diluted EPS and Adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Some of these limitations are:

(a) they do not reflect every cash expenditure, future requirements for capital expenditures or contractual commitments;

(b) Adjusted EBITDA does not reflect the significant interest expense or the cash requirements necessary to service interest or principal payment on our debt;

(c) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced or require improvements in the future, and Adjusted Revenue, Adjusted Net Income and Adjusted EBITDA do not reflect any cash requirement for such replacements or improvements; and

(d) they are not adjusted for all non-cash income or expense items that are reflected in our Condensed Consolidated Statements of Cash Flows.

Because of these limitations, Adjusted Revenue, Adjusted Net Income, Adjusted Diluted EPS and Adjusted EBITDA are not intended as alternatives to ~~total~~Total revenue, net, Net income attributable to Rocket Companies or ~~net~~Net income ~~(loss)~~ as an indicator of our operating performance and should not be considered as measures of discretionary cash available to us to invest in the growth of our business or as measures of cash that will be available to us to meet our obligations. We compensate for these limitations by using Adjusted Revenue, Adjusted Net Income, Adjusted Diluted EPS and Adjusted EBITDA along with other comparative tools, together with U.S. GAAP measurements, to assist in the evaluation of operating performance. See below for reconciliation of these non-GAAP measures to their most comparable U.S. GAAP measures. Additionally, our U.S. GAAP-based measures can be found in the condensed consolidated financial statements and related notes included elsewhere in this Form 10-Q.

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Reconciliation of Adjusted Revenue to Total Revenue, net


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
($ in thousands)	($ in thousands)	2021		2020		2021		2020		($ in thousands)	2022		2021
Total Revenue, net		$	2,668,748	$	5,035,813	$	7,252,985	$	6,402,122
Total revenue, net										Total revenue, net	$	2,670,596	$	4,538,871
Change in fair value of MSRs due to valuation assumptions (net of hedges) (1)	Change in fair value of MSRs due to valuation assumptions (net of hedges) (1)	121,312		274,377		(423,138)		1,017,704		Change in fair value of MSRs due to valuation assumptions (net of hedges) (1)	(739,217)		(499,084)
Adjusted Revenue	Adjusted Revenue	$	2,790,060	$	5,310,190	$	6,829,847	$	7,419,826	Adjusted Revenue	$	1,931,379	$	4,039,787

(1) Reflects changes in assumptions including discount rates and prepayment speed assumptions, mostly due to changes in market interest ~~rates.~~rates, and the effects of contractual prepayment protection associated with sales of MSRs.

Reconciliation of Adjusted Net Income to Net Income Attributable to Rocket Companies


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
($ in thousands)	($ in thousands)	2021		2020		2021		2020		($ in thousands)	2022		2021
Net income attributable to Rocket Companies	Net income attributable to Rocket Companies	$	61,120	$	—	$	184,822	$	—	Net income attributable to Rocket Companies	$	53,712	$	123,702
Net income impact from pro forma conversion of Class D common shares to Class A common shares (1)	Net income impact from pro forma conversion of Class D common shares to Class A common shares (1)	976,280		3,464,518		3,630,366		3,564,005		Net income impact from pro forma conversion of Class D common shares to Class A common shares (1)	983,505		2,654,086
Adjustment to the provision for income tax (2)	Adjustment to the provision for income tax (2)	(239,935)		(843,768)		(881,311)		(867,535)		Adjustment to the provision for income tax (2)	(242,150)		(641,376)
Tax-effected net income (2)	Tax-effected net income (2)	$	797,465	$	2,620,750	$	2,933,877	$	2,696,470	Tax-effected net income (2)	$	795,067	$	2,136,412
Non-cash share-based compensation expense		40,930		31,254		83,002		60,312
Share-based compensation expense										Share-based compensation expense	67,110		42,072
Change in fair value of MSRs due to valuation assumptions (net of hedges) (3)	Change in fair value of MSRs due to valuation assumptions (net of hedges) (3)	121,312		274,377		(423,138)		1,017,704		Change in fair value of MSRs due to valuation assumptions (net of hedges) (3)	(739,217)		(499,084)
Litigation accrual (4)	Litigation accrual (4)	—		—		15,000		—		Litigation accrual (4)	—		15,000
Tax impact of adjustments (5)	Tax impact of adjustments (5)	(40,350)		(75,857)		80,861		(267,564)		Tax impact of adjustments (5)	169,438		109,928
Other tax adjustments (6)	Other tax adjustments (6)	1,009		—		1,758		—		Other tax adjustments (6)	1,000		749
Adjusted Net Income	Adjusted Net Income	$	920,366	$	2,850,524	$	2,691,360	$	3,506,922	Adjusted Net Income	$	293,398	$	1,805,077

(1) Reflects net income to Class A common stock from pro forma exchange and conversion of corresponding shares of our Class D common shares held by non-controlling interest holders as of ~~June 30, 2021~~March 31, 2022 and ~~2020.~~2021.

(2) Rocket Companies will be subject to U.S. Federal income taxes, in addition to state, local and Canadian taxes with respect to its allocable share of any net taxable income of Holdings. The adjustment to the provision for income tax reflects the effective tax rates below, assuming the Issuer owns 100% of the non-voting common interest units of Holdings.


		June 30,					March 31,
		2021		2020			2022		2021
Statutory U.S. Federal Income Tax Rate	Statutory U.S. Federal Income Tax Rate	21.00	%	21.00	%	Statutory U.S. Federal Income Tax Rate	21.00	%	21.00	%
Canadian taxes	Canadian taxes	0.01	%	0.01	%	Canadian taxes	0.01		0.01
State and Local Income Taxes (net of federal benefit)	State and Local Income Taxes (net of federal benefit)	3.86	%	3.81	%	State and Local Income Taxes (net of federal benefit)	4.20		3.86
Effective Income Tax Rate for Adjusted Net Income	Effective Income Tax Rate for Adjusted Net Income	24.87	%	24.82	%	Effective Income Tax Rate for Adjusted Net Income	25.21	%	24.87	%

(3) Reflects changes in assumptions including discount rates and prepayment speed assumptions, mostly due to changes in market interest ~~rates.~~rates, and the effects of contractual prepayment protection associated with sales of MSRs.

(4) Reflects legal accrual related to a specific legal matter.

(5) Tax impact of adjustments gives effect to the income tax related to ~~non-cash~~ share-based compensation expense, change in fair value of MSRs due to valuation assumptions and litigation accrual at the above described effective tax rates for each period.

(6) Represents tax benefits due to the amortization of intangible assets and other tax attributes resulting from the purchase of Holdings units, net of payment obligations under Tax Receivable Agreement.

Reconciliation of Adjusted Diluted Weighted Average Shares Outstanding to Diluted Weighted Average Shares Outstanding


		Three Months Ended June 30,			Six Months Ended June 30,				Three Months Ended March 31,
($ in thousands, except shares and per share)	($ in thousands, except shares and per share)	2021		2020	2021		2020	($ in thousands, except shares and per share)	2022		2021
Diluted weighted average Class A Common shares outstanding	Diluted weighted average Class A Common shares outstanding	1,991,267,972		N/A	132,100,103		N/A	Diluted weighted average Class A Common shares outstanding	1,975,379,132		122,011,916
Assumed pro forma conversion of Class D shares (1)	Assumed pro forma conversion of Class D shares (1)	—		N/A	1,858,812,080		N/A	Assumed pro forma conversion of Class D shares (1)	—		1,868,855,039
Adjusted diluted weighted average shares outstanding	Adjusted diluted weighted average shares outstanding	1,991,267,972		N/A	1,990,912,183		N/A	Adjusted diluted weighted average shares outstanding	1,975,379,132		1,990,866,955

Adjusted Net Income	Adjusted Net Income	$	920,366	N/A(2)	$	2,691,360	N/A(2)	Adjusted Net Income	$	293,398	$	1,805,077
Adjusted Diluted EPS	Adjusted Diluted EPS	$	0.46	N/A(2)	$	1.35	N/A(2)	Adjusted Diluted EPS	$	0.15	$	0.91

(1) Reflects the pro forma exchange and conversion of non-dilutive Class D common stock to Class A common stock.

~~(2) This non-GAAP measure is not applicable for these periods, as~~ For the ~~reorganization transactions had not yet occurred.~~three months ended March 31, 2022, Class D common shares were dilutive and are included in the diluted weighted average Class A common shares outstanding in the table above. For the three-months ended March 31, 2021, Class D common shares were anti-dilutive and therefore included in the assumed pro forma conversion of Class D shares in the table above.

Reconciliation of Adjusted EBITDA to Net Income


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
($ in thousands)	($ in thousands)	2021		2020		2021		2020		($ in thousands)	2022		2021
Net income	Net income	$	1,036,650	$	3,464,082	$	3,813,988	$	3,563,129	Net income	$	1,036,608	$	2,777,338
Interest and amortization expense on non-funding debt	Interest and amortization expense on non-funding debt	35,038		33,168		70,609		66,275		Interest and amortization expense on non-funding debt	38,664		35,571
Income tax provision	Income tax provision	24,047		21,448		89,879		22,680		Income tax provision	25,849		65,832
Depreciation and amortization	Depreciation and amortization	20,589		16,189		35,893		32,304		Depreciation and amortization	21,042		15,304
Non-cash share-based compensation expense		40,930		31,254		83,002		60,312
Share-based compensation expense										Share-based compensation expense	67,110		42,072
Change in fair value of MSRs due to valuation assumptions (net of hedges) (1)	Change in fair value of MSRs due to valuation assumptions (net of hedges) (1)	121,312		274,377		(423,138)		1,017,704		Change in fair value of MSRs due to valuation assumptions (net of hedges) (1)	(739,217)		(499,084)
Litigation accrual (2)	Litigation accrual (2)	—		—		15,000		—		Litigation accrual (2)	—		15,000
Adjusted EBITDA	Adjusted EBITDA	$	1,278,566	$	3,840,518	$	3,685,233	$	4,762,404	Adjusted EBITDA	$	450,056	$	2,452,033

(2) Reflects legal accrual related to a specific legal matter.

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Key Performance Indicators

We monitor a number of key performance indicators to evaluate the performance of our business operations. Our loan production key performance indicators enable us to monitor our ability to generate gain on sale revenue as well as understand how our performance compares to the total mortgage origination market. Our servicing portfolio key performance indicators enable us to monitor the overall size of our servicing portfolio of business, the related value of our mortgage servicing rights, and the health of the business as measured by the average ~~MSRs~~MSR delinquency rate. Other key performance indicators for other Rocket Companies, besides Rocket Mortgage ("Other Rocket Companies"), allow us to monitor both revenues and unit sales generated by these businesses. We also include Rockethomes.com average unique monthly ~~visitors,~~visits, as we believe traffic on the site is an indicator of consumer interest.

The following summarizes key performance indicators of the business:

Three Months Ended June 30, Six Months Ended June 30,
(Units and $ in thousands) 2021 2020 2021 2020
Rocket Mortgage (1)
Loan Production Data
Closed loan origination volume $ 83,764,238 $ 72,323,981 $ 187,289,376 $ 124,027,813
Direct to Consumer origination volume $ 45,231,277 $ 45,792,368 $ 106,655,648 $ 77,552,097
Partner Network origination volume $ 38,532,961 $ 26,531,613 $ 80,633,728 $ 46,475,716
Gain on sale margin (2) 2.78 % 5.19 % 3.29 % 4.45 %
June 30,
2021 2020
Servicing Portfolio Data
Total serviced UPB (includes subserviced) $ 507,167,578 $ 378,156,838
MSRs UPB of loans serviced $ 466,444,905 $ 346,870,713
UPB of loans subserviced and temporarily serviced $ 40,722,673 $ 31,286,125
Total loans serviced (includes subserviced) 2,372.6 1,930.1
Number of MSRs loans serviced 2,247.5 1,818.5
Number of loans subserviced and temporarily serviced 125.2 111.7
MSRs fair value multiple (3) 3.46 2.13
Total serviced delinquency rate, excluding loans in forbearance (60+) 0.71 % 0.65 %
Total serviced MSRs delinquency rate (60+) 2.60 % 3.71 %
Net client retention rate (trailing twelve months) 90 % 93 %
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Other Rocket Companies
Amrock closings (units) 260.3 240.4 609.1 406.3
Rocket Homes real estate transactions 8.3 7.0 14.9 13.0
Rockethomes.com average unique monthly visitors (4) 1,818.6 359.7 1,455.6 315.5
Rocket Loans closed (units) (5) 4.6 1.5 7.2 5.5
Rocket Auto car sales (units) (6) 15.6 6.4 29.2 14.7
Core Digital Media client inquiries generated 1,726.0 1,261.0 3,604.8 2,677.3
Total Other Rocket Companies gross revenue $ 513,999 $ 626,560 $ 1,068,424 $ 929,203
Total Other Rocket Companies net revenue (7) $ 392,857 $ 553,868 $ 833,291 $ 779,651


	Three Months Ended March 31,
(Units and $ in thousands)	2022			2021
Loan Production Data
Closed loan origination volume	$	53,976,815		$	103,525,138
Direct to Consumer origination volume	$	33,126,537		$	61,424,371
Partner Network origination volume	$	20,850,278		$	42,100,767

Gain on sale margin (1)	3.01		%	3.74		%


	March 31,
	2022			2021
Servicing Portfolio Data
Total serviced UPB (includes subserviced)	$	545,763,625		$	467,030,036
MSRs UPB of loans serviced	$	492,368,318		$	431,497,603
UPB of loans subserviced and temporarily serviced	$	53,395,307		$	35,532,433
Total loans serviced (includes subserviced)	2,554.6			2,315.4
Number of MSRs loans serviced	2,411.4			2,123.7
Number of loans subserviced and temporarily serviced	143.2			191.7
MSR fair value multiple (2)	4.59			3.41
Total serviced delinquency rate, excluding loans in forbearance (60+)	0.84		%	0.72		%
Total serviced MSR delinquency rate (60+)	1.31		%	3.21		%
Net client retention rate (trailing twelve months)	92		%	91		%


	Three Months Ended March 31,
	2022		2021
Other Rocket Companies

Amrock closings (units)	168.3		348.8

Rocket Homes real estate transactions	8.2		6.6
Rockethomes.com average unique monthly visitors (3)	2,591.4		1,092.5

Rocket Loans closed (units)	5.3		2.6


Rocket Auto car sales (units) (4)	13.1		13.6


Total Other Rocket Companies gross revenue	$	294,908	$	450,394
Total Other Rocket Companies net revenue (5)	$	270,884	$	433,017

(1) ~~Rocket Mortgage origination volume and gain on sale margins exclude all reverse mortgage activity.~~

~~(2)~~ Gain on sale margin is the gain on sale of loans, net divided by net rate lock volume for the ~~period, excluding all reverse mortgage activity.~~period. Gain on sale of loans, net includes the net gain on sale of loans, fair value of originated MSRs, and fair value adjustment on loans held for sale, divided by the UPB of loans subject to IRLC’s during the applicable period.

4638

~~(3)~~(2) MSRs fair market value multiple is a metric used to determine the relative value of the MSRs asset in relation to the annualized retained servicing fee, which is the cash that the holder of the MSRs asset would receive from the portfolio ~~as of~~over such ~~date.~~period. It is calculated as the quotient of (a) the MSRs fair market value as of a specified date divided by (b) the weighted average annualized retained servicing fee for our MSRs portfolio as of such date. The weighted average annualized retained servicing fee for our ~~MSRs~~MSRs portfolio was ~~0.29%~~0.28% and ~~0.31%~~0.29% for the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020, respectively, and 0.29% and 0.31% for the six months ended June 30, 2021 and 2020,~~ respectively. The vast majority of our portfolio consists of originated MSRs and consequently, the impact of purchased MSRs does not have a material impact on ~~our~~our weighted average service fee.

~~(4)~~(3) Rockethomes.com average unique monthly visitors is calculated by a third party service that monitors website activity. This metric doesn't necessarily have a direct correlation to revenues and is used primarily to monitor consumer interest in the Rockethomes.com site.

(5) During the three and six months ended June 30, 2021, we processed approximately 0.6 million and 3.0 million unique loan recommendations through the economic injury disaster loans program offered by the Small Business Administration.

~~(6)~~(4) Rocket Auto's Gross Merchandise Value, which represents the vehicle and other vehicle-related sales during the period, was ~~$484~~$445 and ~~$844~~$360 for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, respectively.

~~(7)~~(5) Net revenue presented above is calculated as gross revenues less intercompany revenue eliminations. A portion of the Other Rocket Companies revenues is generated through intercompany transactions. These intercompany transactions take place with entities that are part of our platform. Consequently, we view gross revenue of individual Other Rocket Companies as a key performance indicator, and we consider net revenue of Other Rocket Companies on a combined basis.

Description of Certain Components of Financial Data

Components of ~~revenue~~Revenue

Our sources of revenue include Gain on sale of loans, net, Loan servicing ~~(loss)~~ income ~~net,~~ , Interest income, net, and Other ~~income.~~income.

Gain on sale of loans, net

Gain on sale of loans, net includes all components related to the origination and sale of mortgage loans, including (1) net gain on sale of loans, which represents the premium we receive in excess of the loan principal amount and certain fees charged by investors upon sale of loans into the secondary market, (2) loan origination fees, credits, points and certain costs, (3) provision for or benefit from investor reserves, (4) the change in fair value of interest rate locks (“IRLCs” or “rate lock”) and loans held for sale, (5) the gain or loss on forward commitments hedging loans held for sale and IRLCs, and (6) the fair value of originated MSRs.

An estimate of the gain on sale of loans, net is recognized at the time an IRLC is issued, net of an estimated pull-through factor. The pull-through factor is a key assumption and estimates the loan funding probability, as not all loans that reach IRLC status will result in a closed loan. Subsequent changes in the fair value of IRLCs and mortgage loans held for sale are recognized in current period earnings. When the mortgage loan is sold into the secondary market (i.e., funded), any difference between the proceeds received and the current fair value of the loan is recognized in current period earnings in gain on sale of loans.

Loan origination fees generally include underwriting and processing fees. Loan origination costs include lender paid mortgage insurance, recording taxes, investor fees and other related expenses. Net loan origination fees and costs related to the origination of mortgage loans are recognized as a component of the fair value of IRLCs.

We establish reserves for our estimated liabilities associated with the potential repurchase or indemnity of purchasers of loans previously sold due to representation and warranty claims by investors. Additionally, the reserves are established for the estimated liabilities from the need to repay, where applicable, a portion of the premium received from investors on the sale of certain loans if such loans are repaid in their entirety within a specified time period after the sale of the loans. The provision for or benefit from investor reserves is recognized in current period earnings in gain on sale of loans.

We enter into derivative transactions to protect against the risk of adverse interest rate movements that could impact the fair value of certain assets, including IRLCs and loans held for sale. We primarily use forward loan sales commitments to hedge our interest rate risk exposure. Changes in the value of these derivatives, or hedging gains and losses, are included in gain on sale of loans.

Included in gain on sale of loans, net is also the fair value of originated MSRs, which represents the estimated fair value of MSRs related to loans which we have sold and retained the right to service.

Loan servicing ~~(loss)~~ income ~~net~~

The value of newly originated MSRs is recognized as a component of the gain on sale of loans, net when loans are sold and the associated servicing rights are retained. Loan servicing fee income consists of the contractual fees earned for servicing the loans and includes ancillary revenue such as late fees and modification incentives. Loan servicing fee income is recorded to income as earned, which is upon collection of payments from borrowers. We have elected to subsequently measure the MSRs at fair value on a recurring basis. Changes in fair value of MSRs, net primarily due to the realization of expected cash flows and/or changes in valuation inputs and estimates, are recognized in current period earnings. Furthermore, we also include in Loan servicing ~~(loss)~~ income ~~net~~ the gains and losses related to MSRs collateral ~~for~~ financing liability and MSRs financing liability.

We regularly perform a comprehensive analysis of the ~~MSRs~~MSR portfolio in order to identify and sell certain MSRs that do not align with our strategy for retaining MSRs. To hedge against interest rate exposure on these assets, we enter into forward loan purchase commitments. Changes in the value of derivatives designed to protect against ~~MSRs~~MSR value fluctuations, or ~~MSRs~~MSR hedging gains and losses, are included as a component of servicing fee loss, net.

Interest income, net

Interest income, net is interest earned on mortgage loans held for sale net of the interest expense paid on our loan funding facilities.

Other income

Other income includes revenues generated from Amrock (title insurance services, property valuation, and settlement services), Rocket Homes (real estate network referral fees), Rocket Auto (auto sales ~~business~~ revenues), Core Digital Media (third party lead generation revenues), Rock Connections (third party sales and support revenues), Truebill (personal finance), Rocket Loans (personal loans) and professional service fees. The professional service fees represent amounts received in exchange for professional services provided to affiliated companies. Services are provided primarily in connection with technology, facilities, human resources, accounting, training, and security functions. ~~For additional information on such fees, see Note 6, Transactions with Related Parties in the notes to the unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q.~~ Other income also includes revenues from investment interest income.

Components of operating expenses

Our operating expenses as presented in the statement of operations data include ~~salaries,~~Salaries, commissions and team member benefits ~~general~~, General and administrative expenses ~~marketing~~, Marketing and advertising expenses, and ~~other~~Other expenses.

Salaries, commissions and team member benefits

Salaries, commissions and team member benefits include all payroll, benefits, and share-based compensation expenses for our team members.

General and administrative expenses

General and administrative expenses primarily include occupancy costs, professional services, loan processing expenses on loans that do not close or that are not charged to clients on closed loans, commitment fees, fees on loan funding facilities, license fees, office expenses and other operating expenses.

Marketing and advertising expenses

Marketing and advertising expenses are primarily related to performance and brand marketing.

~~Interest and amortization expense on non-funding debt~~

~~Interest and amortization expense on non-funding debt primarily related to expenses in connections with the issuance of our Senior Notes.~~

Other expenses

Other expenses primarily consist of depreciation and amortization on property and equipment, and mortgage servicing related ~~expenses, and provision for income taxes.~~expenses.

Income taxes

In calculating the provision for interim income taxes, in accordance with ASC Topic 740 Income Taxes, we apply an estimated annual effective tax rate to year-to-date ordinary income. At the end of each interim period, we estimate the effective tax rate expected to be applicable for the full year. Tax-effects of significant, unusual or infrequently occurring items are excluded from the estimated annual effective tax rate calculation and recognized in the interim period in which they occur.

Tax Receivable Agreement

In connection with the reorganization completed prior to our IPO in 2020, wethe Company entered into a Tax Receivable Agreement with ~~RHI and our Chairman~~the LLC Members that will obligate usthe Company to make payments to ~~RHI and our Chairman~~the LLC Members generally equal to 90% of the applicable cash tax savings that wethe Company actually ~~realize~~realizes or in some cases ~~are~~is deemed to realize as a result of the tax attributes generated by (i) certain increases in our allocable share of the tax basis in Holdings’ assets resulting from (a) the purchases of Holdings Units (along with the corresponding shares of our Class D common stock or Class C common stock) from ~~RHI and our Chairman~~the LLC Members (or their transferees of Holdings Units or other assignees) using the net proceeds from our initial public offering or in any future offering, (b) exchanges by ~~RHI and our Chairman~~the LLC Members (or their transferees of Holdings Units or other assignees) of Holdings Units (along with the corresponding shares of our Class D common stock or Class C common stock) for cash or shares of our Class B common stock or Class A common stock, as applicable, or (c) payments under the Tax Receivable Agreement; (ii) tax benefits related to imputed interest deemed arising as a result of payments made under the Tax Receivable Agreement and (iii) disproportionate allocations (if any) of tax benefits to Holdings as a result of section 704(c) of the Code that relate to the reorganization transactions. WeThe Company will retain the benefit of the remaining 10% of these tax savings.

Share-based compensation

Share-based compensation is comprised of both equity and liability awards and is measured and expensed accordingly under Accounting Standards Codification (“ASC”) 718 Compensation—Stock Compensation. As indicated above, share-based compensation expense is included as part of salaries, benefits and team member benefits.

Non-controlling interest

We are the sole managing member of Holdings and consolidate the financial results of Holdings. Therefore, we report a non-controlling interest based on the Holdings Units of Holdings held by Dan Gilbert, our founder and Chairman (our "Chairman") and RHI on our Condensed Consolidated Balance Sheets. Income or loss is attributed to the non-controlling interests based on the weighted average Holdings Units outstanding during the period and is presented on the Condensed Consolidated Statements of Income and Comprehensive Income. Refer to Note ~~14,~~13, Non-controlling Interests for more information on non-controlling interests.

4941

Results of Operations for the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~

Summary of Operations


Condensed Statement of Operations Data	Condensed Statement of Operations Data	Three Months Ended June 30,				Six Months Ended June 30,				Condensed Statement of Operations Data	Three Months Ended March 31,
($ in thousands)	($ in thousands)	2021		2020		2021		2020		($ in thousands)	2022		2021
Revenue	Revenue									Revenue
Gain on sale of loans, net	Gain on sale of loans, net	$	2,341,489	$	4,753,584	$	5,893,931	$	6,575,693	Gain on sale of loans, net	$	1,483,786	$	3,552,442
Servicing fee income	Servicing fee income	343,349		249,842		635,710		506,935		Servicing fee income	366,214		292,361
Change in fair value of MSRs	Change in fair value of MSRs	(414,745)		(552,844)		(168,824)		(1,544,096)		Change in fair value of MSRs	454,380		200,555
Interest income, net	Interest income, net	22,267		24,282		49,668		58,865		Interest income, net	48,844		27,401
Other income	Other income	376,388		560,949		842,500		804,725		Other income	317,372		466,112
Total revenue, net	Total revenue, net	2,668,748		5,035,813		7,252,985		6,402,122		Total revenue, net	$	2,670,596	$	4,538,871
Expenses	Expenses									Expenses
Salaries, commissions and team member benefits	Salaries, commissions and team member benefits	840,470		854,007		1,682,669		1,537,613		Salaries, commissions and team member benefits	853,915		842,199
General and administrative expenses	General and administrative expenses	262,815		289,183		554,234		483,257		General and administrative expenses	275,857		291,419
Marketing and advertising expenses	Marketing and advertising expenses	306,685		202,198		627,528		420,191		Marketing and advertising expenses	328,058		320,843
Interest and amortization expense on non-funding-debt	Interest and amortization expense on non-funding-debt	35,038		33,168		70,609		66,275		Interest and amortization expense on non-funding-debt	38,664		35,571
Other expenses	Other expenses	187,090		193,175		503,957		331,657		Other expenses	111,645		205,669
Total expenses	Total expenses	1,632,098		1,571,731		3,438,997		2,838,993		Total expenses	$	1,608,139	$	1,695,701
Income before income taxes										Income before income taxes	1,062,457		2,843,170
Provision for income taxes										Provision for income taxes	(25,849)		(65,832)
Net income	Net income	$	1,036,650	$	3,464,082	$	3,813,988	$	3,563,129	Net income	1,036,608		2,777,338
Net (income) loss attributable to non-controlling interest		(975,530)		(3,464,082)		(3,629,166)		(3,563,129)
Net income attributable to non-controlling interest										Net income attributable to non-controlling interest	(982,896)		(2,653,636)
Net income attributable to Rocket Companies	Net income attributable to Rocket Companies	$	61,120	$	—	$	184,822	$	—	Net income attributable to Rocket Companies	$	53,712	$	123,702

Gain on sale of loans, net

The components of gain on sale of loans for the periods presented were as follows:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
($ in thousands)	($ in thousands)	2021		2020		2021		2020		($ in thousands)	2022		2021
Net gain on sale of loans (1)		$	1,704,139	$	3,087,003	$	4,291,569	$	4,499,134
Net (loss) gain on sale of loans (1)										Net (loss) gain on sale of loans (1)	$	(125,594)	$	2,587,431
Fair value of originated MSRs	Fair value of originated MSRs	857,111		669,923		2,030,275		1,205,342		Fair value of originated MSRs	796,616		1,173,164
Benefit from (provision for) investor reserves		19,316		(7,786)		13,969		(9,363)
Fair value adjustment gain on loans held for sale and IRLCs		357,026		1,458,539		(1,526,917)		2,393,868
Provision for investor reserves										Provision for investor reserves	(2,386)		(5,347)
Fair value adjustment on loans held for sale and IRLCs										Fair value adjustment on loans held for sale and IRLCs	(743,501)		(1,883,943)
Revaluation loss from forward commitments economically hedging loans held for sale and IRLCs	Revaluation loss from forward commitments economically hedging loans held for sale and IRLCs	(596,103)		(454,095)		1,085,035		(1,513,288)		Revaluation loss from forward commitments economically hedging loans held for sale and IRLCs	1,558,651		1,681,137
Gain on sale of loans, net	Gain on sale of loans, net	$	2,341,489	$	4,753,584	$	5,893,931	$	6,575,693	Gain on sale of loans, net	$	1,483,786	$	3,552,442

(1) Net (loss) gain on sale of loans represents the premium received in excess of the UPB, plus net origination fees.

5042

The table below provides details of the characteristics of our mortgage loan production for each of the periods presented:


($ in thousands)	($ in thousands)	Three Months Ended June 30,						Six Months Ended June 30,						($ in thousands)	Three Months Ended March 31,
Loan origination volume by type	Loan origination volume by type	2021			2020			2021			2020			Loan origination volume by type	2022			2021
Conventional Conforming	Conventional Conforming	$	63,849,712		$	58,938,294		$	144,960,644		$	96,853,179		Conventional Conforming	$	41,379,684		$	81,110,931
FHA/VA	FHA/VA	12,986,323			11,014,894			31,392,944			21,803,679			FHA/VA	9,086,995			18,406,621
Non-Agency	Non-Agency	6,928,203			2,370,793			10,935,788			5,370,955			Non-Agency	3,510,136			4,007,586
Total mortgage loan origination volume	Total mortgage loan origination volume	$	83,764,238		$	72,323,981		$	187,289,376		$	124,027,813		Total mortgage loan origination volume	$	53,976,815		$	103,525,138
Portfolio metrics	Portfolio metrics													Portfolio metrics
Average loan amount	Average loan amount	$	281		$	274		$	278		$	275		Average loan amount	$	281		$	276
Weighted average loan-to-value ratio	Weighted average loan-to-value ratio	68.37		%	70.64		%	67.83		%	71.60		%	Weighted average loan-to-value ratio	69.15		%	67.39		%
Weighted average credit score	Weighted average credit score	749			754			752			751			Weighted average credit score	737			755
Weighted average loan rate	Weighted average loan rate	2.88		%	3.22		%	2.78		%	3.36		%	Weighted average loan rate	3.34		%	2.70		%
Percentage of loans sold	Percentage of loans sold													Percentage of loans sold
To GSEs and government	To GSEs and government	92.96		%	93.87		%	94.84		%	93.09		%	To GSEs and government	91.51		%	96.26		%
To other counterparties	To other counterparties	7.04		%	6.13		%	5.16		%	6.91		%	To other counterparties	8.49		%	3.74		%
Servicing-retained	Servicing-retained	94.10		%	94.23		%	95.99		%	94.76		%	Servicing-retained	98.96		%	97.07		%
Servicing-released	Servicing-released	5.90		%	5.77		%	4.01		%	5.24		%	Servicing-released	1.04		%	2.93		%
Net rate lock volume (1)	Net rate lock volume (1)	$	83,586,479		$	91,977,659		$	178,702,224		$	148,027,603		Net rate lock volume (1)	$	49,613,500		$	95,115,745
Gain on sale margin (2)	Gain on sale margin (2)	2.78		%	5.19		%	3.29		%	4.45		%	Gain on sale margin (2)	3.01		%	3.74		%

(1) Net rate lock volume includes the UPB of loans subject to IRLCs, net of the pull-through factor as described in the “Description of Certain Components of Financial Data” section above.

(2) Gain on sale margin is a ratio of gain on sale of loans, net to the net rate lock volume for the period as described above. Gain on sale of loans, net includes the net gain on sale of loans, fair value of originated MSRs, fair value adjustment gain on loans held for sale and IRLC’s, and revaluation loss from forward commitments economically hedging loans held for sale and IRLCs. This metric is a measure of profitability for our on-going mortgage business and therefore excludes revenues from Other Rocket Companies and reverse mortgage activity. See the table above for each of the components of gain on sale of loans, net.

Gain on sale of loans, net was ~~$2.3~~$1.5 billion for the three months ended ~~June 30, 2021,~~March 31, 2022, a decrease of ~~$2.4~~$2.1 billion, or ~~50.7%~~58.2%, as compared with ~~$4.8~~$3.6 billion for the three months ended ~~June 30, 2020.~~March 31, 2021. The decrease ~~in gain on sale of loans, net~~ was primarily driven by a ~~decrease~~decline in gain on sale margin to ~~2.78%~~3.01% from ~~5.19%~~3.74%, ~~partially offset by an increase~~as well as in mortgage loan origination volume of ~~$11.4~~$49.5 billion, or ~~15.8%~~47.9%, ~~for~~as compared to the three months ended ~~June 30,~~March 31, 2021 ~~and 2020, respectively.~~. The decrease in gain on sale margin ~~in 2021~~during the three months ended March 31, 2022 reflects a tighter spread between primary and secondary mortgage ~~rates and an increase in mix of our Partner Network as a percentage of our total originations.~~rates. The primary mortgage rate is the rate at which lenders originate loans with borrowers and the secondary mortgage rate is the rate at which lenders securitize those loans into mortgage backed securities.

Gain on sale of loans, net was $5.9 billion for the six months ended June 30, 2021, a decrease of $0.7 billion, or 10.4%, as compared with $6.6 billion for the six months ended June 30, 2020. The decrease in gain on sale of loans, net was primarily driven by a decrease in gain on sale margin to 3.29% from 4.45%, partially offset by an increase in mortgage loan origination volume of $63.3 billion, or 51.0%, for the six months ended June 30, 2021 and 2020, respectively. The decrease in gain on sale margin in 2021 reflects a tighter spread between primary and secondary mortgage rates and an increase in mix of our Partner Network as a percentage of our total originations. The primary mortgage rate is the rate at which lenders originate loans with borrowers and the secondary mortgage rate is the rate at which lenders securitize those loans into mortgage backed securities.

Net (loss) gain on sales of loans decreased ~~$1.4~~$2.7 billion, or ~~44.8%~~104.9%, to ~~$1.7~~$(0.1) billion in the three months ended ~~June 30, 2021~~March 31, 2022 compared to ~~$3.1~~$2.6 billion in the three months ended ~~June 30, 2020.~~March 31, 2021. This was driven by a decrease in gain on sale margin, ~~partially offset by an increase~~as well as a decrease in mortgage loan origination volume, noted above.

Net gain on sales of loans decreased $207.6 million, or 4.6%, to $4.3 billion in the six months ended June 30, 2021 compared to $4.5 billion in the six months ended June 30, 2020. This was driven by a decrease in gain on sale margin, partially offset by an increase in mortgage loan origination volume, noted above.

The fair value of MSRs originated was ~~$857.1~~$796.6 million for the three months ended ~~June 30, 2021, an increase~~March 31, 2022, a decrease of ~~$187.2~~$376.5 million, or ~~27.9%~~32.1%, as compared with ~~$669.9 million~~$1.2 billion during the three months ~~ended June 30, 2020.~~ended March 31, 2021. The ~~increase~~decrease was primarily due to ~~an increase to funded~~a reduction in sold loan volume of ~~$12.5~~$43.6 billion, or ~~18.8%~~41.2%, from ~~$66.5~~$105.8 billion for the three months ended ~~June 30, 2020~~March 31, 2021 to ~~$79.0~~$62.2 billion for the three months ended ~~June 30, 2021.~~March 31, 2022. MSR assets are created at the time Mortgage Loans Held for Sale are securitized and sold to investors for cash, while the Company retains the MSR. The increase in funded loan volume was partially offset by a decrease in the weighted average servicing fee during the three months ended June 30, 2021 as compared to the three months ended June 30, 2020.

The fair value of MSRs originated was $2.0 billion for the six months ended June 30, 2021, an increase of $824.9 million, or 68.4%, as compared with $1.2 billion during the six months ended June 30, 2020. The increase was primarily due to an increase in funded loan volume of $67.2 billion, or 57.2%, from $117.5 billion for the six months ended June 30, 2020 to $184.8 billion for the six months ended June 30, 2021. MSR assets are created at the time Mortgage Loans Held for Sale are securitized and sold to investors for cash, while the Company retains the MSR. The increase in funded loan volume was partially offset by a decrease in the weighted average servicing fee during the six months ended June 30, 2021 as compared to the six months ended June 30, 2020.

Loan servicing ~~(loss)~~ income ~~net~~

For the periods presented, Loan servicing ~~(loss)~~ income ~~net~~ consisted of the following:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
($ in thousands)	($ in thousands)	2021		2020		2021		2020		($ in thousands)	2022		2021
Retained servicing fee	Retained servicing fee	$	335,494	$	244,125	$	619,103	$	491,727	Retained servicing fee	$	356,551	$	283,609
Subservicing income	Subservicing income	2,465		1,963		4,994		3,555		Subservicing income	2,320		2,529
Ancillary income	Ancillary income	5,390		3,754		11,613		11,653		Ancillary income	7,343		6,223
Servicing fee income	Servicing fee income	343,349		249,842		635,710		506,935		Servicing fee income	366,214		292,361
Change in valuation model inputs or assumptions(1)	Change in valuation model inputs or assumptions(1)	(141,073)		(272,885)		442,234		(1,078,421)		Change in valuation model inputs or assumptions(1)	764,723		537,941
Change in fair value of MSRs hedge	Change in fair value of MSRs hedge	19,761		(1,492)		(19,096)		60,717		Change in fair value of MSRs hedge	(25,506)		(38,857)
Collection / realization of cash flows	Collection / realization of cash flows	(293,433)		(278,467)		(591,962)		(526,392)		Collection / realization of cash flows	(284,837)		(298,529)
Change in fair value of MSRs	Change in fair value of MSRs	(414,745)		(552,844)		(168,824)		(1,544,096)		Change in fair value of MSRs	454,380		200,555
Loan servicing (loss) income, net		$	(71,396)	$	(303,002)	$	466,886	$	(1,037,161)
Loan servicing income										Loan servicing income	$	820,594	$	492,916

(1) Includes the effect of contractual prepayment protection resulting from sales of MSRs prepayment protection


		June 30,					March 31,
($ in thousands)	($ in thousands)	2021		2020		($ in thousands)	2022		2021
MSRs UPB of loans serviced	MSRs UPB of loans serviced	$	466,444,905	$	346,870,713	MSRs UPB of loans serviced	$	492,368,318	$	431,497,603
Number of MSRs loans serviced	Number of MSRs loans serviced	2,247,454		1,818,462		Number of MSRs loans serviced	2,411,386		2,123,655
UPB of loans subserviced and temporarily serviced	UPB of loans subserviced and temporarily serviced	$	40,722,673	$	31,286,125	UPB of loans subserviced and temporarily serviced	$	53,395,307	$	35,532,433
Number of loans subserviced and temporarily serviced	Number of loans subserviced and temporarily serviced	125,161		111,670		Number of loans subserviced and temporarily serviced	143,231		191,737
Total serviced UPB	Total serviced UPB	$	507,167,578	$	378,156,838	Total serviced UPB	$	545,763,625	$	467,030,036
Total loans serviced	Total loans serviced	2,372,615		1,930,132		Total loans serviced	2,554,617		2,315,392
MSRs fair value	MSRs fair value	$	4,644,172	$	2,289,209	MSRs fair value	$	6,410,288	$	4,304,762
Total serviced delinquency rate, excluding loans in forbearance (60+)	Total serviced delinquency rate, excluding loans in forbearance (60+)	0.71%		0.65%		Total serviced delinquency rate, excluding loans in forbearance (60+)	0.84%		0.72%
Total serviced delinquency count (60+) as % of total	Total serviced delinquency count (60+) as % of total	2.60%		3.71%		Total serviced delinquency count (60+) as % of total	1.31%		3.21%
Weighted average credit score	Weighted average credit score	741		736		Weighted average credit score	737		740
Weighted average LTV	Weighted average LTV	70.87%		74.47%		Weighted average LTV	70.51%		71.67%
Weighted average loan rate	Weighted average loan rate	3.21%		3.88%		Weighted average loan rate	3.18%		3.31%
Weighted average service fee	Weighted average service fee	0.29%		0.31%		Weighted average service fee	0.28%		0.29%

Loan servicing ~~(loss)~~ income, net was ~~$71.4~~$820.6 million for the three months ended ~~June 30, 2021,~~March 31, 2022, which compares to ~~Loan servicing (loss) income, net of $303.0~~$492.9 million for the three months ended ~~June 30, 2020.~~March 31, 2021. The ~~reduction of~~changes in valuation model inputs or assumptions was $764.7 million for the ~~loss was driven primarily by an increase in servicing fee income to $343.3 million in 2021~~three months ended March 31, 2022 as compared to ~~$249.8~~$537.9 million for the three months ended March 31, 2021, predominately due to a decrease in ~~2020,~~prepayment speed assumptions during the period. Servicing fee income also increased to $366.2 million for the three months ended March 31, 2022 as compared to $292.4 million for the three months ended March 31, 2021, primarily a result of the ~~increase~~growth in ~~the UPB of loans serviced for the period.~~our servicing portfolio.

Loan servicing (loss) income, net was $466.9 million for the six months ended June 30, 2021, which compares to Loan servicing (loss) income, net of $1,037.2 million for the six months ended June 30, 2020. The increase was driven primarily by a smaller decrease in fair market value of MSRs of $168.8 million in 2021 as compared to a reduction in fair market value of MSRs of $1,544.1 million in 2020.

~~The~~e change in MSRs fair value was a net ~~loss~~increase of ~~$414.7~~$454.4 million for the three months ended ~~June 30, 2021,~~March 31, 2022, as compared with a net ~~loss~~increase of ~~$552.8~~$200.6 million for the ~~three~~three months ended ~~June 30, 2020.~~March 31, 2021. The change ~~in fair value during~~was largely attributable to the three months ended June 30, 2021 included $293.4 million of loss due to collection/realization of cash flows and a decrease in fair value due to change in valuation assumptions (net of hedges) of $121.3 million primarily driven by a decrease in prepayment speeds from 10.9% at March 31, 2021 to 10.5% at June 30, 2021. The prepayment speed valuation assumption represents the annual rate at which serviced clients are estimated to repay their UPB. The decrease in fair value during the three months ended June 30, 2020 included $278.5 million of due to collection/realization of cash flows and a decreaseincrease in fair value due to changes in valuation model inputs orand assumptions (net of hedges) of ~~$274.4 million.~~$240.1 million, which was driven by a decrease in the overall prepayment assumptions, largely as a result of an increase in mortgage interest rates. The overall prepayment assumptions decreased from ~~19.7%~~8.7% at December 31, 2021 to 7.1% at March 31, ~~2020 to 19.2% at June 30, 2020, driven primarily by MSR new adds~~ 2022. The net increase of $200.6 million during the ~~quarter. Excluding the addition of new MSRs, the prepayment speeds increased at June 30, 2020 relative to~~three months ended March 31, ~~2020 resulting in the decrease in fair value due to changes in valuation assumptions noted above.~~

~~The change in MSRs fair value~~2021, was a ~~net loss~~result of $168.8 million for the six months ended June 30, 2021, as compared with a net loss of $1,544.1 million for the six months ended June 30, 2020. The change in fair value during the six months ended June 30, 2021 included $592.0 million of loss due to collection/realization of cash flows and an increase in fair value due to change in valuation assumptions (net of hedges) of $423.1 million primarily driven by a decrease in prepayment speeds from 15.8% at December 31, 2020 to ~~10.5%~~10.9% at ~~June 30,~~March 31, 2021. The decrease in fair value during the six months ended June 30, 2020 included $526.4 million of due to collection/realization of cash flows and a decrease in fair value due to changes in valuation model inputs or assumptions (net of hedges) of $1.0 billion primarily driven by an increase in prepayment speeds from 14.5% at December 31, 2019 to 19.2% at June 30, 2020.

5344

Interest income, net

The components of Interest income, net for the periods presented were as follows:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
($ in thousands)	($ in thousands)	2021		2020		2021		2020		($ in thousands)	2022		2021
Interest income	Interest income	$	86,645	$	78,039	$	181,890	$	152,081	Interest income	$	90,540	$	95,245
Interest expense on funding facilities	Interest expense on funding facilities	(64,378)		(53,757)		(132,222)		(93,216)		Interest expense on funding facilities	(41,696)		(67,844)
Interest income, net	Interest income, net	$	22,267	$	24,282	$	49,668	$	58,865	Interest income, net	$	48,844	$	27,401

Interest income, net was ~~$22.3~~$48.8 million for the three months ended ~~June 30, 2021, a decrease~~March 31, 2022, an increase of ~~$2.0~~$21.4 million, or ~~8.3%~~78.3%, as compared to ~~$24.3~~$27.4 million for the three months ~~ended June 30, 2020.~~ended March 31, 2021. The ~~decrease was driven by an~~ increase in interest ~~expense that~~income, net in 2022 was ~~a result of increased production volume, as well as~~primarily attributable to higher note rates, which was partially offset by a decrease in ~~mortgage rates.~~

~~Interest income, net was $49.7 million for~~production during the ~~six~~three months ended June 30, 2021, a decrease of $9.2 million, or 15.6%, as compared to $58.9 million for the six months ended June 30, 2020. The decrease was driven by an increase in interest expense that was a result of increased production volume, as well as a decrease in note rates.March 31, 2022.

Other income

Other income decreased ~~$184.6~~$148.7 million, or ~~33%~~31.9%, to ~~$376.4~~$317.4 million for the three months ended ~~June 30, 2021~~March 31, 2022 as compared to ~~$560.9~~$466.1 million for the three months ended ~~June 30, 2020.~~March 31, 2021. The decrease was ~~driven by~~primarily a result of a decrease in ~~revenues generated from Rocket Loans loan recommendations through the economic injury disaster loans program offered by the Small Business Administration.~~

Other income increased $37.8 million, or 5%, to $842.5 million for the six months ended June 30, 2021 as compared to $804.7 million for the six months ended June 30, 2020. The increase was driven by revenues generated from Amrock's title insurance services, property valuation and settlement services that were also driven by the increase in origination volume noted above, partially offset by the decrease in revenues generated from Rocket Loans loan recommendations through the economic injury disaster loans program offered by the Small Business Administration.related revenues.

Expenses

Expenses for the periods presented were as follows:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
($ in thousands)	($ in thousands)	2021		2020		2021		2020		($ in thousands)	2022		2021
Salaries, commissions and team member benefits	Salaries, commissions and team member benefits	$	840,470	$	854,007	$	1,682,669	$	1,537,613	Salaries, commissions and team member benefits	$	853,915	$	842,199
General and administrative expenses	General and administrative expenses	262,815		289,183		554,234		483,257		General and administrative expenses	275,857		291,419
Marketing and advertising expenses	Marketing and advertising expenses	306,685		202,198		627,528		420,191		Marketing and advertising expenses	328,058		320,843
Interest and amortization expense on non-funding debt	Interest and amortization expense on non-funding debt	35,038		33,168		70,609		66,275		Interest and amortization expense on non-funding debt	38,664		35,571
Other expenses	Other expenses	187,090		193,175		503,957		331,657		Other expenses	111,645		205,669
Total expenses	Total expenses	$	1,632,098	$	1,571,731	$	3,438,997	$	2,838,993	Total expenses	$	1,608,139	$	1,695,701

Total expenses were $1.6 billion for the three months ended March 31, 2022, a decrease of $87.6 million or 5.2%, as compared with $1.7 billion for the three months ended ~~June 30, 2021, an increase of $60.4 million or 3.8%, as compared with $1.6 billion for the three months ended June 30, 2020.~~March 31, 2021. This was driven primarily by ~~an increase~~a decrease in ~~marketing and advertising expenses, partially offset by decreases in salaries, commissions and team member benefits, general and administrative expenses, and~~ other expenses ~~as described below.~~

which

~~Total expenses~~ were $3.4 billion for the six months ended June 30, 2021, an increase of $0.6 billion or 21.1%, as compared with $2.8 billion for the six months ended June 30, 2020. This was driven primarily by increases in salaries, commissions and team member benefits, general and administrative expenses, marketing and advertising, and other expenses as described below.

~~Salaries, commissions and team member benefits were $840.5~~$111.6 million for the three months ended ~~June 30, 2021,~~March 31, 2022, a decrease of ~~$13.5~~$94.0 million, or ~~1.6%~~45.7%, as compared with ~~$854.0~~$205.7 million for the three months ended ~~June 30, 2020.~~March 31, 2021. The decrease was primarily ~~due~~attributable to a decrease in ~~variable compensation~~title related toexpenses and a decrease in ~~rate lock volume.~~payoff interest expense.

Salaries, commissions and team member benefits were $1.7 billion for the six months ended June 30, 2021, an increase of $145.1 million, or 9.4%, as compared with $1.5 billion for the six months ended June 30, 2020. The increase was primarily due to an increase in team members to support increased production.

General and administrative expenses were $262.8 million for the three months ended June 30, 2021, a decrease of $26.4 million, or 9.1%, as compared with $289.2 million for the three months ended June 30, 2020. The decreased expense was driven primarily by decreases in loan processing costs.

General and administrative expenses were $554.2 million for the six months ended June 30, 2021, an increase of $71.0 million, or 14.7%, as compared with $483.3 million for the six months ended June 30, 2020. The increased expense was driven primarily by increased technology spend to support the increase in production.

Marketing and advertising expenses were $306.7 million for the three months ended June 30, 2021, an increase of $104.5 million, or 51.7% as compared with $202.2 million for the three months ended June 30, 2020. In 2021, the Company’s brand marketing spend increased from new national campaigns with the reintroduction of many sporting and other live events that were cancelled in 2020 due to the COVID-19 pandemic. Also, in 2021 the Company’s performance marketing spend increased as compared to the prior period supporting our increase in loan origination volume.

Marketing and advertising expenses were $627.5 million for the six months ended June 30, 2021, an increase of $207.3 million, or 49.3% as compared with $420.2 million for the six months ended June 30, 2020. In 2021, the Company’s brand marketing spend increased from new national campaigns with the reintroduction of many sporting and other live events that were cancelled in 2020 due to the COVID-19 pandemic. Also, in 2021 the Company’s performance marketing spend increased as compared to the prior period supporting our increase in loan origination volume.

Other expenses were $187.1 million for the three months ended June 30, 2021, a decrease of $6.1 million, or 3.1%, as compared with $193.2 million for the three months ended June 30, 2020. The decrease was due to a decrease in expenses incurred from the sale of MSRs associated with prepayment provisions within the sales agreement.

Other expenses were $504.0 million for the six months ended June 30, 2021, an increase of $172.3 million, or 52.0%, as compared with $331.7 million for the six months ended June 30, 2020. The increased expense was driven primarily by an increase in expenses incurred to support the higher level of title insurance services, property valuation and settlement services due to the increased origination volumes noted above, an increase in payoff interest expense, expenses incurred from the sale of MSRs associated with prepayment provisions within the sales agreement, and an increase in our provision for income taxes as a result of higher income before income taxes and a higher effective tax rate for six months ended June 30, 2021.

Summary Results by Segment for the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~

Our operations are organized by distinct marketing channels which promote client acquisition into our platform and include two reportable segments: Direct to Consumer and Partner Network. In the Direct to Consumer segment, clients have the ability to interact with the Rocket Mortgage app and/or with our Rocket Cloud Force, consisting of sales team members across our platform. We market to potential clients in this segment through various performance marketing channels. The Direct to Consumer segment derives revenue from originating, closing, selling and servicing predominantly agency-conforming loans, which are pooled and sold to the secondary market. This also includes providing title insurance services, appraisals and settlement services to these clients as part of our end-to-end mortgage origination experience. Servicing activities are fully allocated to the Direct to Consumer segment as they are viewed as an extension of the client experience with the primary objective to establish and maintain positive, regular touchpoints with our clients, which positions us to have high retention and recapture the clients’ next refinance, purchase, personal loan, and auto sales transactions. These activities position us to be the natural choice for clients’ next refinance or purchase transaction.

We measure the performance of the segments primarily on a contribution margin basis. Contribution margin is intended to measure the direct profitability of each segment and is calculated as Adjusted Revenue less directly attributable expenses. Adjusted Revenue is a non-GAAP financial measure described above. Directly attributable expenses include Salaries, commissions and team member benefits, Marketing and advertising expenses, General and administrative expenses and Other expenses, such as direct servicing costs and origination costs. For segments, we measure gain on sale margin of ~~funded~~sold loans and refer to this metric as ~~‘funded loan gain~~‘Sold Loan Gain on ~~sale margin.’~~Sale Margin’. A loan is considered ~~funded~~sold when it is sold to investors onin the secondary market. ~~Funded~~In previous disclosures, ‘sold loans’ were referred to as ‘funded loans’. Sold loan gain on sale margin represents revenues on loans that have been ~~funded~~sold divided by the ~~funded~~sold UPB amount. ~~Funded~~Sold loan gain on sale margin is used specifically in the context of measuring the gain on sale margins of our Direct to Consumer and Partner Network segments. ~~Funded~~Sold loan gain on sale margin is an important metric in evaluating the revenue generating performance of our segments as it allows us to measure this metric at a segment level with a high degree of precision. By contrast, ‘gain on sale margin’, which we use outside of the segment discussion, measures the gain on sale revenue generation of our combined mortgage business. See below for our overview and discussion of segment results for the three and ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 and ~~2020.~~2021. For additional discussion, see Note 12, Segments of the notes to the unaudited condensed consolidated financial statements of this Form 10-Q.

Direct to Consumer Results


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
($ in thousands)	($ in thousands)	2021			2020			2021			2020			($ in thousands)	2022			2021
Funded Loan Volume		$	48,902,086		$	46,776,841		$	113,930,523		$	78,467,954
Funded Loan Gain on Sale Margin		4.66		%	5.09		%	5.06		%	4.93		%
Sold Loan Volume														Sold Loan Volume	$	36,164,727		$	65,028,437
Sold Loan Gain on Sale Margin														Sold Loan Gain on Sale Margin	4.00		%	5.36		%
Revenue	Revenue													Revenue
Gain on sale	Gain on sale	$	2,050,639		$	4,020,492		$	4,914,239		$	5,631,324		Gain on sale	$	1,217,103		$	2,863,600
Interest income	Interest income	52,489			51,012			111,157			98,322			Interest income	57,601			58,668
Interest expense on funding facilities	Interest expense on funding facilities	(39,409)			(35,397)			(81,414)			(60,782)			Interest expense on funding facilities	(26,727)			(42,006)
Service fee income	Service fee income	342,687			248,873			634,339			504,863			Service fee income	365,499			291,652
Changes in fair value of MSRs	Changes in fair value of MSRs	(414,745)			(552,844)			(168,824)			(1,544,096)			Changes in fair value of MSRs	454,380			200,555
Other income	Other income	229,860			206,538			534,772			351,561			Other income	167,027			304,912
Total Revenue, net	Total Revenue, net	$	2,221,521		$	3,938,674		$	5,944,269		$	4,981,192		Total Revenue, net	$	2,234,883		$	3,677,381
Decrease (increase) in MSRs due to valuation assumptions (net of hedges)		121,312			274,377			(423,138)			1,017,704
Increase in MSRs due to valuation assumptions (net of hedges)														Increase in MSRs due to valuation assumptions (net of hedges)	(739,217)			(499,084)
Adjusted Revenue	Adjusted Revenue	$	2,342,833		$	4,213,051		$	5,521,131		$	5,998,896		Adjusted Revenue	$	1,495,666		$	3,178,297
Less: Directly Attributable Expenses (1)	Less: Directly Attributable Expenses (1)	907,963			948,900			1,926,460			1,729,520			Less: Directly Attributable Expenses (1)	869,210			973,129
Contribution Margin	Contribution Margin	$	1,434,870		$	3,264,151		$	3,594,671		$	4,269,376		Contribution Margin	$	626,456		$	2,205,168

(1) Direct expenses attributable to operating segments exclude corporate overhead, depreciation and amortization, and interest and amortization expense on non-funding debt.

For the three months ended ~~June 30, 2021,~~March 31, 2022, Direct to Consumer Adjusted Revenue decreased ~~$1.9~~$1.7 billion, or ~~44.4%~~52.9% to ~~$2.3~~$1.5 billion from ~~$4.2~~$3.2 billion for the three months ended ~~June 30, 2020. The decrease was driven by~~March 31, 2021. Gain on sale revenue decreased $1.6 billion, or 57.5%, due to a decline in Direct to Consumer ~~mortgage net rate lock~~sold loan volume and ~~margins resulting in a decrease in Gain~~gain on sale ~~revenue of $2.0 billion, or 49%, in 2021.~~margins during the three months March 31, 2022. On a ~~funded~~sold loan basis, the Direct to Consumer segment generated ~~$48.9~~$36.2 billion in sold loan volume during the three months ended ~~June 30, 2021, an increase~~March 31, 2022, a decrease of ~~$2.1~~$28.9 billion, or ~~4.5%~~44.4% as compared to the three months ended ~~June 30, 2020.~~March 31, 2021. In addition, ~~funded~~sold loan gain on sale margin was ~~4.7%~~4.00% during the three months ended ~~June 30, 2021~~March 31, 2022 as compared to ~~5.1%~~5.36% during the three months ended ~~June 30, 2020,~~March 31, 2021, driven primarily by a compression in primary-secondary spreads which led to margin suppression during the three months ended ~~June 30, 2021~~March 31, 2022 as compared to the three months ended ~~June 30, 2020.~~March 31, 2021.

For the three months ended ~~June 30, 2021,~~March 31, 2022, Direct to Consumer Directly Attributable Expenses decreased ~~$40.9~~$103.9 million, or ~~4.3%~~10.7%, to ~~$908.0~~$869.2 million during the three months ended ~~June 30, 2021~~March 31, 2022 compared to ~~$948.9~~$973.1 million during the three months ended ~~June 30, 2020.~~March 31, 2021. The decrease was primarily due to a decrease in variable compensation and loan processing costs ~~as well as a decrease in expenses incurred due to~~driven by lower ~~levels of title insurance services, valuation, and settlement services and a decrease in payoff interest expense associated with the decrease in rate lock volume.~~volumes.

For the three months ended ~~June 30, 2021,~~March 31, 2022, Direct to Consumer Contribution Margin decreased ~~$1.8~~$1.6 billion, or ~~56.0%~~71.6%, to ~~$1.4~~$0.6 billion, compared to ~~$3.3~~$2.2 billion during the three months ended ~~June 30, 2020.~~March 31, 2021. The decrease in Contribution Margin was driven primarily by the decrease in Direct to Consumer ~~net rate lock~~sold loan volume and ~~net rate lock~~ gain on sale ~~margin~~margins noted above.

For the six months ended June 30, 2021, Direct to Consumer Adjusted Revenue decreased $0.5 billion, or 8.0% to $5.5 billion from $6.0 billion for the six months ended June 30, 2020. The decrease was driven by a decline in Direct to Consumer net rate lock margins. On a funded loan basis, the Direct to Consumer segment generated $113.9 billion in volume for the six months ended June 30, 2021, an increase of $35.5 billion, or 45.2% as compared to the six months ended June 30, 2020. In addition, funded loan gain on sale margin was 5.06% for the six months ended June 30, 2021 as compared to 4.93% for the six months ended June 30, 2020.

For the six months ended June 30, 2021, Direct to Consumer Attributable Expenses increased $0.2 billion, or 11.4%, to $1.9 billion for the six months ended June 30, 2021 compared to $1.7 billion for the six months ended June 30, 2020. The increase was primarily due to an increase in variable compensation and an increase in team members in production roles needed to support growth. The increase also reflects greater loan processing costs due to higher origination volumes and an increase in expenses incurred to support the higher level of title insurance services, valuation, and settlement services due to the increased origination volumes noted above, as well as a decrease in payoff interest expense.

For the six months ended June 30, 2021, Direct to Consumer Contribution Margin decreased $0.7 billion, or 15.8%, to $3.6 billion, compared to $4.3 billion for the six months ended June 30, 2020. The decrease in Contribution Margin was driven primarily by a decrease in net rate lock gain on sale margins.

5747

Partner Network Results


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
($ in thousands)	($ in thousands)	2021			2020			2021			2020			($ in thousands)	2022			2021
Funded Loan Volume		$	30,119,969		$	19,732,169		$	70,848,564		$	39,064,260
Funded Loan Gain on Sale Margin		1.16		%	2.10		%	1.60		%	1.45		%
Sold Loan Volume														Sold Loan Volume	$	26,033,374		$	40,728,595
Sold Loan Gain on Sale Margin														Sold Loan Gain on Sale Margin	0.91		%	1.93		%
Revenue	Revenue													Revenue
Gain on sale	Gain on sale	$	287,651		$	734,662		$	972,080		$	938,109		Gain on sale	$	258,056		$	684,428
Interest income	Interest income	33,222			26,376			69,283			51,947			Interest income	32,168			36,061
Interest expense on funding facilities	Interest expense on funding facilities	(24,943)			(18,302)			(50,762)			(32,023)			Interest expense on funding facilities	(14,969)			(25,818)
Other income	Other income	23,228			39,859			51,005			59,469			Other income	16,477			27,778
Total Revenue, net	Total Revenue, net	$	319,158		$	782,595		$	1,041,606		$	1,017,502		Total Revenue, net	$	291,732		$	722,449
Decrease (increase) in MSRs due to valuation assumptions (net of hedges)	Decrease (increase) in MSRs due to valuation assumptions (net of hedges)	—			—			—			—			Decrease (increase) in MSRs due to valuation assumptions (net of hedges)	—			—
Adjusted Revenue	Adjusted Revenue	$	319,158		$	782,595		$	1,041,606		$	1,017,502		Adjusted Revenue	$	291,732		$	722,449
Less: Directly Attributable Expenses	Less: Directly Attributable Expenses	176,065			139,140			355,842			231,084			Less: Directly Attributable Expenses	120,034			179,777
Total Contribution Margin	Total Contribution Margin	$	143,093		$	643,455		$	685,764		$	786,418		Total Contribution Margin	$	171,698		$	542,672

For the three months ended ~~June 30, 2021,~~March 31, 2022, Partner Network Adjusted Revenue decreased ~~$463.4~~$430.7 million, or ~~59.2%~~59.6% to ~~$319.2~~$291.7 million, from ~~$782.6~~$722.4 million for the three months ended ~~June 30, 2020. The decrease was driven by~~March 31, 2021. Gain on sale revenue decreased $426.4 million, or 62.3%, due to lower Partner Network ~~net rate lock~~sold loan gain on sale margins, ~~resulting in a decrease in gain on sale revenue of $447.0 million, or 60.8%, in~~and lower sold loan volumes for the three months ended ~~June 30, 2021.~~March 31, 2022. On a ~~funded~~sold loan basis, the Partner Network segment generated ~~$30.1~~$26.0 billion in sold loan volume for the three months ended ~~June 30, 2021, an increase~~March 31, 2022, a decrease of ~~$10.4~~$14.7 billion, or ~~52.6%~~36.1% as compared to the three months ended ~~June 30, 2020.~~March 31, 2021. In addition, ~~funded~~sold loan gain on sale margin was ~~1.2% in 2021~~0.91% for the three months ended March 31, 2022 as compared to ~~2.1% in 2020.~~1.93% for the three months ended March 31, 2021.

For the three months ended ~~June 30, 2021,~~March 31, 2022, Partner Network Directly Attributable Expenses ~~increased $36.9~~decreased $59.7 million, or ~~26.5%~~33.2%, to ~~$176.1~~$120.0 million in the three months ended ~~June 30, 2021~~March 31, 2022 compared to ~~$139.1~~$179.8 million for the three months ended ~~June 30, 2020.~~March 31, 2021. The ~~increase~~decrease was driven primarily ~~due to an increase~~by a decrease in variable compensation and ~~an increase in team members in production roles needed to support growth.~~loan processing costs associated with lower volumes.

For the three months ended ~~June 30, 2021,~~March 31, 2022, Partner Network Contribution Margin decreased ~~$500.4~~$371.0 million, or ~~77.8%~~68.4%, to ~~$143.1~~$171.7 million in the three months ended ~~June 30, 2021~~March 31, 2022 compared to ~~$643.5~~$542.7 million for the three months ended ~~June 30, 2020.~~March 31, 2021. The decrease in Contribution Margin was driven primarily by the decrease in Partner Network ~~net rate lock~~sold loan gain on sale margin noted ~~above; this was offset partially by an increase~~above and a decrease in Partner Network ~~originations.~~sold loan volume.

For the six months ended June 30, 2021, Partner Network Adjusted Revenue increased $24.1 million, or 2.4% to $1,041.6 million, from $1,017.5 million for the six months ended June 30, 2020. The increase was driven by growth in Partner Network mortgage originations resulting in an increase in gain on sale revenue of $34.0 million, or 3.6%, for the six months ended June 30, 2021. On a funded loan basis, the Partner Network segment generated $70.8 billion in volume for the six months ended June 30, 2021, an increase of $31.8 billion, or 81.4% as compared to the six months ended June 30, 2020. In addition, funded loan gain on sale margin was 1.60% for the six months ended June 30, 2021 as compared to 1.45% for the six months ended June 30, 2020.

For the six months ended June 30, 2021, Partner Network Directly Attributable Expenses increased $124.8 million, or 54.0%, to $355.8 million in 2021 compared to $231.1 million for the six months ended June 30, 2020. The increase was primarily due to an increase in variable compensation and an increase in team members in production roles needed to support growth.

For the six months ended June 30, 2021, Partner Network Contribution Margin decreased $100.7 million, or 12.8%, to $685.8 million in 2021 compared to $786.4 million for the six months ended June 30, 2020. The decrease in Contribution Margin was driven primarily by a decrease in net rate lock gain on sale margins and an increase in directly attributable expenses, offset partially by an increase in Partner Network originations.

5848

Liquidity and Capital Resources

Historically, our primary sources of liquidity have included:

• borrowings, including under our loan funding facilities and other secured and unsecured financing facilities;

• cash flow from our operations, including:

• sale of whole loans into the secondary market;

• sale of mortgage servicing rights into the secondary market;

• loan origination fees;

• servicing fee income; and

• interest income on loans held for sale; and

• cash and marketable securities on hand.

Historically, our primary uses of funds have included:

• origination of loans;

• payment of interest expense;

• prepayment of debt;

• payment of operating expenses; and

• distributions to RHI including those to fund distributions for payment of taxes by its ultimate shareholders.

We are also subject to contingencies which may have a significant impact on the use of our cash.

In order to originate and aggregate loans for sale into the secondary market, we use our own working capital and borrow or obtain money on a short-term basis primarily through committed and uncommitted loan funding facilities established with large global banks.

Our loan funding facilities are primarily in the form of master repurchase agreements. We also have loan funding facilities directly with the GSEs. Loans financed under these facilities are generally financed at approximately 97% to 99% of the principal balance of the loan (although certain types of loans are financed at lower percentages of the principal balance of the loan), which requires us to fund the balance from cash generated from operations. Once closed, the underlying residential mortgage loan that is held for sale is pledged as collateral for the borrowing or advance that was made under these loan funding facilities. In most cases, the loans will remain in one of the loan funding facilities for only a short time, generally less than one month, until the loans are pooled and sold. During the time the loans are held for sale, we earn interest income from the borrower on the underlying mortgage loan. This income is partially offset by the interest and fees we have to pay under the loan funding facilities.

When we sell a pool of loans in the secondary market, the proceeds received from the sale of the loans are used to pay back the amounts we owe on the loan funding facilities. We rely on the cash generated from the sale of loans to fund future loans and repay borrowings under our loan funding facilities. Delays or failures to sell loans in the secondary market could have an adverse effect on our liquidity position.

5949

As discussed in Note 5, Borrowings, of the notes to the unaudited condensed consolidated financial statements included in this Form 10-Q, as of ~~June 30, 2021,~~March 31, 2022, we had 1918 different funding facilities in different amounts and with various maturities together with the ~~5.250%~~ Senior ~~Notes due 2028, 3.625% Senior Notes due 2029, and 3.875% Senior Notes due 2031.~~Notes. At ~~June 30, 2021,~~March 31, 2022, the aggregate available amount under our facilities was ~~$31.4~~$30.4 billion, with combined outstanding balances of ~~$19.4~~$8.2 billion and unutilized capacity of ~~$12.0~~$22.2 billion.

The amount of financing actually advanced on each individual loan under our loan funding facilities, as determined by agreed upon advance rates, may be less than the stated advance rate depending, in part, on the market value of the mortgage loans securing the financings. Each of our loan funding facilities allows the bank providing the funds to evaluate the market value of the loans that are serving as collateral for the borrowings or advances being made. If the bank determines that the value of the collateral has decreased, the bank can require us to provide additional collateral or reduce the amount outstanding with respect to those loans (e.g., initiate a margin call). Our inability or unwillingness to satisfy the request could result in the termination of the facilities and possible default under our other loan funding facilities. In addition, a large unanticipated margin call could have a material adverse effect on our liquidity.

The amount owed and outstanding on our loan funding facilities fluctuates significantly based on our origination volume, the amount of time it takes us to sell the loans it originates, and the amount of loans being self-funded with cash. We may from time to time use surplus cash to “buy-down” the effective interest rate of certain loan funding facilities or to self-fund a portion of our loan originations. As of ~~June 30, 2021, $2.9~~March 31, 2022, $2.3 billion of our cash was used to buy-down our funding facilities and self-fund, ~~$500.0~~$200.0 million of which are buy-down funds that are included in Cash and cash equivalents on the Condensed Consolidated Balance Sheets and ~~an estimated $2.4~~$2.1 billion of which is discretionary self-funding that reduces Cash and cash equivalents on the Condensed Consolidated Balance Sheets. We have the ability to withdraw the ~~$500.0~~$200.0 million at any time, unless a margin call has been made or a default has occurred under the relevant facilities. The Company has an estimated ~~$2.4~~$2.1 billion of discretionary self-funded loans, of which a portion can be transferred to a warehouse line or the early buy out line, provided that such loans meet the eligibility criteria to be placed on such lines. The remaining portion will be funded in normal course over a short period of time, generally less than one month. In addition to the ~~$2.4~~$2.1 billion of corporate cash used for discretionary self-funding of loans as of ~~June 30, 2021,~~March 31, 2022, we had an additional ~~$2.0~~$2.3 billion of cash on-hand, for a total of $4.4 billion of available cash.

Our loan funding facilities, early buy out facilities, MSRs facility and unsecured lines of credit also generally require us to comply with certain operating and financial covenants and the availability of funds under these facilities is subject to, among other conditions, our continued compliance with these covenants. These financial covenants include, but are not limited to, maintaining (1) a certain minimum tangible net worth, (2) minimum liquidity, (3) a maximum ratio of total liabilities or total debt to tangible net worth and (4) pre-tax net income requirements. A breach of these covenants can result in an event of default under these facilities and as such allows the lenders to pursue certain remedies. In addition, each of these facilities, as well as our unsecured lines of credit, includes cross default or cross acceleration provisions that could result in all facilities terminating if an event of default or acceleration of maturity occurs under any facility. We were in compliance with all covenants as of ~~June 30, 2021~~March 31, 2022 and ~~2020.~~2021.

~~As disclosed in further detail Item 5. Other Information of this Quarterly Report on Form 10-Q, on August 10, 2021, we refinanced, and extended the maturity of, our revolving credit agreement.~~

~~June 30, 2021~~March 31, 2022 compared to ~~June 30, 2020~~March 31, 2021

Cash Flows

Our Cash and cash equivalents and Restricted cash were ~~$2.1~~$2.4 billion at ~~June 30, 2021, an increase~~March 31, 2022, a decrease of ~~$200.6 million,~~$0.6 billion, or ~~10.8%~~18.8%, compared to ~~$1.9~~$2.9 billion at ~~June 30, 2020.~~March 31, 2021. The ~~increase in~~decrease was primarily driven by distributions made to Class A shareholders of the ~~Cash~~Company and ~~cash equivalents and Restricted cash balance was mainly impacted~~to unit holders (members) of Holdings partially offset by athe net increase from earnings ~~for the period~~ adjusted for non-cash items. ~~The increase was partially offset by distributions made to other unit holders (member) of Holdings.~~

Equity

Equity was ~~$8.2~~$8.7 billion as of ~~June 30, 2021,~~March 31, 2022, an increase of ~~$2.6~~$0.4 billion, or ~~47.4%~~4.8%, as compared to ~~$5.6~~$8.3 billion as of ~~June 30, 2020.~~March 31, 2021. The ~~change~~increase was primarily ~~the~~a result of net income of ~~$9.7~~$4.3 billion and share-based compensation of ~~$153.3 million. The increase~~$167.9 million, which was ~~partially~~ offset by ~~transfers and~~ distributions made to Class A shareholders of the ~~parent company~~Company and to ~~other~~ unit holders ~~(member)~~(members) of Holdings.

6050

Distributions

On February 24, 2022, our board of directors declared a cash dividend (the "2022 Special Dividend") of $1.01 per share to the holders of our Class A common stock. The 2022 Special Dividend was paid on March 22, 2022 to holders of the Class A common stock of record as of the close of business on March 8, 2022. The Company funded the 2022 Special Dividend from cash distributions of approximately $2.0 billion by RKT Holdings, LLC to all of its members, including the Company. To the extent the 2022 Special Dividend exceeded our current and accumulated earnings and profits, a portion of the 2022 Special Dividend may be deemed a return of capital or a capital gain to the investors in our Class A common stock. Refer to our risks and uncertainties discussed under the heading “Special Note Regarding Forward-Looking Statements,” and in Part II. Item 1A. “Risk Factors” and elsewhere in this Form 10-Q and in our Form 10-K.

~~Distributions~~

On February 25, 2021, our board of directors authorized and declared a cash dividend (the ~~"Special~~"2021 Special Dividend") of $1.11 per share to the holders of our Class A common stock. The Special Dividend was paid on March 23, 2021 to holders of the Class A common stock of record as of the close of business on March 9, 2021. The Company funded the Special Dividend from cash distributions of approximately $2.2 billion by RKT Holdings, LLC to all of its members, including the Company.

~~In addition to~~During the three months ended March 31, 2022 the Company had a $2.0 billion 2022 Special Dividend and $160.6 million of tax distributions, for a total of approximately $2.2 billion of distributions. During the three months ended March 31, 2021 the Company had a $2.2 billion 2021 Special Dividend ~~we had $1.4 billion~~and $200 million in tax distributions, for a total of ~~$3.6~~approximately $2.4 billion of ~~distributions during the six months ended June 30, 2021. During the six months ended June 30, 2020, we had net transfers to the parent company of $1.6 billion.~~distributions. Except for tax distributions, these distributions are at the discretion of our board of directors.

Contractual Obligations, Commercial Commitments, and Other Contingencies

There were no material changes outside the ordinary course of business to our outstanding contractual obligations as of ~~June 30, 2021~~March 31, 2022 from information and amounts previously disclosed as of December 31, ~~2020~~2021 in our Annual Report on Form 10-K under the caption “Contractual Obligations, Commercial Commitments, and Other Contingencies”. Refer to Notes 5, Borrowings, and 10, Commitments, Contingencies and Guarantees, of the notes to the condensed consolidated financial statements for further discussion of contractual obligations, commercial commitments, and other contingencies, including legal contingencies.

New Accounting Pronouncements Not Yet Effective

See Note 1, Business, Basis of Presentation and Accounting Policies of the notes to the unaudited condensed consolidated financial statements for details of recently issued accounting pronouncements and their expected impact on our condensed consolidated financial statements.

6151

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes to the Company's exposure to market risks since what was disclosed in the Company's December 31, ~~2020~~2021 Annual Report on Form 10-K.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our CEO and CFO, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Form 10-Q. Based on such evaluation, our CEO and CFO have concluded that as of ~~June 30, 2021,~~March 31, 2022, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in our management’s evaluation pursuant to Rules 13a-15(d) and 15d-15(d) of the Exchange Act during the period covered by this Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Because of inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

6252

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

In the ordinary course of business, we may from time to time be involved in various pending or threatened legal actions. The litigation process is inherently uncertain and it is possible that the resolution of such matters might have a material adverse effect upon our financial condition and/or results of operations. However, in the opinion of our management, matters currently pending or threatened against us are not expected to have a material adverse effect on our business, financial condition and results of operations. Refer to Note 10 Commitments, Contingencies, and Guarantees, to the condensed consolidated financial statements under the heading Legal included in this Quarterly Report on Form 10-Q for legal proceedings and related matters.

Item 1A. Risk Factors

There are certain risks and uncertainties in our business that could cause our actual results to differ materially from those anticipated. In “Part I – Item 1A. – Risk Factors” of our ~~2020~~2021 Form 10-K, as filed with the U.S. Securities and Exchange Commission on March ~~24, 2021,~~1, 2022, and available at www.sec.gov or at www.rocketcompanies.com, we included a detailed discussion of our risk factors. ~~Our~~Other than the additional risk factor noted below, our risk factors have not changed significantly from those disclosed in our ~~2020~~2021 Form 10-K. These risk factors should be read carefully in connection with evaluating our business and in connection with the forward-looking statements and other information contained in this Quarterly Report on Form 10-Q. Any of the risks described in our ~~2020~~2021 Form 10-K could materially affect our business, condensed consolidated financial condition or future results and the actual outcome of matters as to which forward-looking statements are made. The risk factors described in our ~~2020~~2021 Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, also may materially adversely affect our business, condensed consolidated financial condition and/or future results.

The U.S. federal income tax treatment of distributions on our Class A common stock to a holder will depend upon our tax attributes and the holder’s tax basis in our stock, which are not necessarily predictable and can change over time.

Distributions of cash or other property on our Class A common stock, if any, will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits (“E&P”), as determined under U.S. federal income tax principles, and generally be taxable to holders of our Class A common stock as ordinary dividend income for U.S. federal income tax purposes (to the extent of our current and accumulated E&P). E&P should not be confused with earnings or net income under GAAP. To the extent those distributions exceed our current and accumulated E&P, the distributions will be treated as a non-taxable return of capital to the extent of the holder’s tax basis in our Class A common stock, which will reduce a holder’s tax basis in the Class A common stock, and thereafter as capital gain from the sale or exchange of such common stock. Also, if any holder sells our Class A common stock, the holder will recognize a gain or loss equal to the difference between the amount realized and the holder’s tax basis in such Class A common stock. Consequently, such excess distributions will result in a corresponding increase in the amount of gain, or a corresponding decrease in the amount of loss, recognized by the holder upon the sale of the Class A common stock or subsequent distributions with respect to such stock. Additionally, with regard to U.S. corporate holders of our Class A common stock, to the extent that a distribution on our Class A common stock exceeds both our current and accumulated E&P and such holder’s tax basis in such shares, such holders would be unable to utilize the corporate dividends-received deduction (to the extent it would otherwise be applicable to such holder) with respect to the gain resulting from such excess distribution. Further, after we initially report the expected tax characterization of distributions we have paid, the actual characterization, which is not determined with finality until after the end of the tax year in which the distribution occurs, could vary from our expectation with the result that holders of our common stock could incur different income tax liabilities than initially expected. Investors in our Class A common stock are encouraged to consult their tax advisors as to the tax consequences of receiving distributions on our Class A common stock that are not treated as dividends for U.S. federal income tax purposes.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Share Repurchase Authorization

On November 10, 2020, our board of directors approved a share repurchase program of up to $1.0 billion of our Common Stock, including both Class A and Class D, which repurchases may be made, from time to time, in privately negotiated transactions or in the open market, in accordance with applicable securities laws (the “Share Repurchase Program”). The Share Repurchase Program will remain in effect for a two-year period. The Share Repurchase Program authorizes but does not obligate the Company to make any repurchases at any specific time. The timing and extent to which the Company repurchases its shares will depend upon, among other things, market conditions, share price, liquidity targets, regulatory requirements and other factors.

The following table shows the Share Repurchase Program activity during the three months ended ~~June 30, 2021:~~March 31, 2022:

Period Number of Shares
Repurchased Average Repurchase Price Per Share Total Repurchase Amount
4/1/2021 to 4/30/2021 — $ — $ —
5/1/2021 to 5/31/2021 496,829 16.73 8,312,921
6/1/2021 to 6/30/2021 — — —
Total for the three months ended June 30, 2021 496,829 $ 16.73 $ 8,312,921


Period	Number of Shares Repurchased	Average Repurchase Price Per Share		Total Repurchase Amount
1/1/2022 to 1/31/2022	3,266,465	$	13.34	$	43,577,397
2/1/2022 to 2/28/2022	3,900,000	12.15		47,394,660
3/1/2022 to 3/31/2022	850,000	10.81		9,189,540
Total for the three months ended March 31, 2022	8,016,465	$	12.49	$	100,161,597

~~There were no shares repurchased~~As of March 31, 2022 approximately $668.3 million remains available under the Share Repurchase ~~Program prior~~Program.

As of May 6, 2022, Rocket Companies has repurchased 25.3 million shares at a weighted average price of $14.16. Cumulatively, we have returned $358.7 million to ~~May of 2021. Approximately $991.7 million of~~shareholders under the $1 billion Share Repurchase Program ~~remained available as of June 30, 2021.~~

authorized in November 2020.

Item 5. Other Information

~~On August 10, 2021 (the “Closing Date”), Rocket Mortgage, LLC (the “Rocket Mortgage”), a Michigan limited liability company, as borrower, entered into a new Revolving Credit~~Master Repurchase Agreement (the “2021 Credit Agreement”), by and among Rocket Mortgage, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (the “Administrative Agent”), with an initial aggregate commitment of $1.0 billion, maturing on August 10, 2024.

Proceeds of the borrowings under the 2021 Credit Agreement will be used for general corporate purposes. Borrowings under the 2021 Credit Agreement are unsecured and will bear interest at a rate equal to, at Rocket Mortgage’s option, either (a) a Eurodollar rate determined by reference to adjusted LIBOR for the interest period, plus an applicable margin (determined based on Rocket Mortgage’s credit rating) or (b) a base rate determined by reference to the highest of (i) the federal funds rate plus 0.50% per annum, (ii) the rate last quoted by the Wall Street Journal as the US prime rate and (iii) the one-month adjusted LIBOR plus 1.00% per annum, in each case, plus an applicable margin (determined based on Rocket Mortgage’s credit rating). In addition, the 2021 Credit Agreement requires Rocket Mortgage to pay a commitment fee (determined based on Rocket Mortgage’s corporate credit rating) in respect of the unused commitments under the 2021 Credit Agreement.

The 2021 Credit Agreement contains certain customary events of default, including relating to a change of control, and certain covenants and restrictions that limit Rocket Mortgage’s and its subsidiaries’ ability to, among other things, incur additional debt; create liens on certain assets; pay dividends on or make distributions in respect of their capital stock or make other restricted payments; consolidate, merge, sell, or otherwise dispose of all or substantially all of their assets; and enter into certain transactions with their affiliates.

Rocket Mortgage is also subject to certain financial maintenance covenants under the 2021 Credit Agreement, which require Rocket Mortgage and its subsidiaries to not exceed specified leverage and corporate debt ratios at the end of each fiscal quarter, and to maintain minimum liquidity and tangible net worth.

If Rocket Mortgage fails to perform its obligations under these and other covenants, or should any event of default occur, the revolving loan commitments under the 2021 Credit Agreement could be terminated and any outstanding borrowings, together with accrued interest, under the 2021 Credit Agreement could be declared immediately due and payable.

The foregoing description of the 2021 Credit Agreement does not purport to be complete and is subject to, and qualified in its entirety by reference to the full text of the 2021 Credit Agreement, a copy of which is filed as Exhibit 10.8 hereto and incorporated by reference herein.

On ~~the Closing Date,~~May 4, 2022, Rocket Mortgage, ~~terminated~~as Seller, and Bank of America, N.A., as Buyer, entered into a Transaction Terms Letter for Master Repurchase Agreement, which decreases the ~~Revolving Credit~~total facility size to $2,000,000 with $250,000 committed and extended the expiration date of the existing Master Repurchase Agreement dated as of ~~August 10, 2020~~October 16, 2015, as amended, by and between Bank of America, N.A. and the Company (the ~~“2020 Credit Agreement”~~"Master Repurchase Agreement")~~, among Rocket Mortgage,~~ from April 20, 2023 to May 4, 2024 (the "Renewal").

Voluntary Transition Programs

Due to the ~~lenders party thereto~~rapidly changing mortgage market, on April 25, 2022, the Company began offering a voluntary transition program to certain eligible team members. The voluntary transition program includes a compensation package, healthcare coverage, career transition services, and ~~JPMorgan Chase Bank, N.A.. No early termination penalties or prepayment premium were incurred by Rocket Mortgage~~accelerated vesting of certain equity awards, if applicable. On May 6, 2022, the Board of Directors approved an expanded voluntary transition program for additional team members. The Company expects to incur non-recurring charges of approximately $50-$60 million and expects to make cash payments in ~~connection with~~ the ~~termination~~same amount as a result of both the April 25th and May 6th voluntary transition programs. The costs of the ~~2020 Credit Agreement.~~benefits to be provided under the voluntary transition programs will be recognized in the period that the eligible team members accept their offers, which is expected to be predominantly in the second quarter of 2022.

6454

Item 6. Exhibits


Exhibit Number						Description
3.1						Amended and Restated Certificate of Incorporation of Rocket Companies, Inc. (incorporated herein by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q, filed on September 2, 2020)
3.2						Amended and Restated Bylaws of Rocket Companies, Inc. (incorporated herein by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q, filed on September 2, 2020)
#10.1*						Amendment Number 3 to Master Repurchase Agreement, dated as of February 28, 2022, by and between Rocket Mortgage, LLC (formerly known as Quicken Loans, LLC), a Michigan limited liability company, as seller, and Bank of Montreal, a Canadian Chartered bank acting through its Chicago Branch, as buyer
#10.2*						Amendment No. 3 to the Master Repurchase Agreement, dated as of March 25, 2022, is among JPMorgan Chase Bank, National Association, as buyer, QL Ginnie EBO, LLC, as seller, QL Ginnie REO, LLC, as REO Subsidiary, and Rocket Mortgage, LLC, as guarantor
#10.3*						Amendment No. 2 to Master Repurchase Agreement, dated as of March 31, 2022, between Barclays Bank PLC, as buyer and Rocket Mortgage, LLC (formerly known as Quicken Loans, LLC), as seller
#10.4*						Amendment No. 4 to Third Amended and Restated Master Repurchase Agreement, dated as of April 26, 2022, by and among Credit Suisse First Boston Mortgage Capital LLC, as administrative Agent, Credit Suisse AG, acting through its Cayman Islands Branch, as buyer, Alpine Securitization Ltd. as buyer, and other buyers from time to time party thereto, and Rocket Mortgage, LLC and One Reverse Mortgage, LLC as sellers
#10.5*						Amendment No. 1 to Amended and Restated Master Repurchase Agreement, dated as of May 4 , 2022, by and between Bank of America, N.A., as buyer, RCKT Mortgage SPE-A, LLC, as seller and Rocket Mortgage, LLC (f/k/a Quicken Loans, LLC) as guarantor
31.1*						Certification of CEO, pursuant to SEC Rule 13a-14(a) and 15d-14(a)
31.2*						Certification of CFO, pursuant to SEC Rule 13a-14(a) and 15d-14(a)
32.1*						Certification by the CEO, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*						Certification by the CFO, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
10.1*						~~Amendment No. 11 to Master Repurchase Agreement, dated April 22, 2021, by and between Bank of America, N.A., as buyer, and Quicken Loans, LLC, as seller~~
10.2*						Amendment No. 12 to Amended and Restated Master Repurchase Agreement, dated April 14, 2021, by and between UBS AG, by and through its branch office at 1285 Avenue of the Americas, New York, New York, as buyer, and Quicken Loans, LLC, as seller
10.3*						Amendment No. 13 to Amended and Restated Master Repurchase Agreement, dated May 28, 2021, by and between UBS AG, by and through its branch office at 1285 Avenue of the Americas, New York, New York, as buyer, and Quicken Loans, LLC, as seller
10.4*						~~Amendment~~No. 1 to Master Repurchase Agreement, dated as of May 25, 2021, by and among Nomura Corporate Funding Americas, LLC, as a buyer and as agent, Oakdale Secured Funding Trust Quartz, as a buyer, other buyers from time to time party thereto and Quicken Loans, LLC, as Seller
10.5*						~~Amended and Restated Master Repurchase Agreement, dated June 29, 2021, among Bank of America, N.A., as buyer, RCKT Mortgage SPE-A, LLC, as seller, and Quicken Loans, LLC, as guarantor~~
10.6*						Eighteenth Amendment to Master Repurchase Agreement, dated July 16, 2021, by and among JPMorgan Chase Bank, N.A., as buyer and administrative agent for the buyers, the other Buyers from time to time party thereto, and Quicken Loans, LLC, as seller
10.7*						Amendment Number Four to Master Repurchase Agreement, dated August 2, 2021, by and among Morgan Stanley Bank, N.A., as buyer, Morgan Stanley Mortgage Capital Holdings LLC, as agent, and Rocket Mortgage, LLC, as seller
10.8*						~~Revolving Credit Agreement, dated as of August~~ 10 ~~, 2021, by and among Rocket Mortgage, LLC as Borrower, the Lenders Party Thereto and JPMorgan Chase Bank, N.A., as Administrative Agent~~
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101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document
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101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document
104						Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

*						Filed herewith.
#						Certain portions of this exhibit have been redacted pursuant to Item 601(b)(10)(iv) of Regulation S-K. The Company agrees to furnish supplementally an unredacted copy of the exhibit to the Securities and Exchange Commission upon its request.

6555

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Rocket Companies, Inc.

~~August 13, 2021~~May 10, 2022

By:

/s/ Julie Booth

Date

Name: Julie Booth

Chief Financial Officer and Treasurer

(Principal Financial Officer)

6656


	Class A Common Stock Shares	Class A Common Stock Amount		Class D Common Stock Shares	Class D Common Stock Amount		Additional Paid-in Capital		Retained Earnings		Net Parent Investment		Accumulated Other Comprehensive Income (Loss)		Total Non-controlling Interest		Total Equity
Balance, December 31, 2019	0	$	0	0	$	0	$	0	$	0	$	3,510,698	$	(151)	$	5,008	$	3,515,555
Net income (loss)	—	—		—	—		—		—		99,487		—		(440)		99,047
Other comprehensive loss	—	—		—	—		—		—		—		(1,439)		(321)		(1,760)
Net transfers to Parent	—	—		—	—		—		—		21,919		—		—		21,919
Share-based compensation, net	—	—		—	—		—		—		29,049		—		9		29,058
Balance, March 31, 2020	0	$	0	0	$	0	$	0	$	0	$	3,661,153	$	(1,590)	$	4,256	$	3,663,819
Net income (loss)	—	—		—	—		—		—		3,464,518		—		(436)		3,464,082
Other comprehensive income	—	—		—	—		—		—		—		588		131		719
Net transfers to Parent	—	—		—	—		—		—		(1,612,629)		—		—		(1,612,629)
Share-based compensation, net	—	—		—	—		—		—		31,244		—		9		31,253
Other equity adjustment	—	—		—	—		—		—		156		(156)		—		0
Unrealized gain on investment securities	—	—		—	—		—		—		—		7,087		—		7,087
Non-controlling interest attributed to dissolution	—	—		—	—		—		—		—		—		(884)		(884)
Balance, June 30, 2020	0	$	0	0	$	0	$	0	$	0	$	5,544,442	$	5,929	$	3,076	$	5,553,447


	Fair Value		Unpaid Principal Balance		Difference (1)
Balance at June 30, 2021	$	23,194,843	$	22,691,966	$	502,877
Balance at December 31, 2020	$	22,865,106	$	21,834,817	$	1,030,289


Three Months Ended June 30, 2020	Direct to Consumer		Partner Network		Segments Total		All Other		Total
Revenues
Gain on sale	$	4,020,492	$	734,662	$	4,755,154	$	(1,570)	$	4,753,584
Interest income	51,012		26,376		77,388		651		78,039
Interest expense on funding facilities	(35,397)		(18,302)		(53,699)		(58)		(53,757)
Servicing fee income	248,873		0		248,873		969		249,842
Changes in fair value of MSRs	(552,844)		0		(552,844)		0		(552,844)
Other income	206,538		39,859		246,397		314,552		560,949
Total U.S. GAAP Revenue, net	3,938,674		782,595		4,721,269		314,544		5,035,813
Plus: Decrease in MSRs due to valuation assumptions	274,377		0		274,377		0		274,377
Adjusted revenue	4,213,051		782,595		4,995,646		314,544		5,310,190
Directly attributable expenses	948,900		139,140		1,088,040		123,494		1,211,534
Contribution margin	$	3,264,151	$	643,455	$	3,907,606	$	191,050	$	4,098,656


Six Months Ended June 30, 2020	Direct to Consumer		Partner Network		Segments Total		All Other		Total
Revenues
Gain on sale	$	5,631,324	$	938,109	$	6,569,433	$	6,260	$	6,575,693
Interest income	98,322		51,947		150,269		1,812		152,081
Interest expense on funding facilities	(60,782)		(32,023)		(92,805)		(411)		(93,216)
Servicing fee income	504,863		0		504,863		2,072		506,935
Changes in fair value of MSRs	(1,544,096)		0		(1,544,096)		0		(1,544,096)
Other income	351,561		59,469		411,030		393,695		804,725
Total U.S. GAAP Revenue, net	4,981,192		1,017,502		5,998,694		403,428		6,402,122
Plus: Decrease in MSRs due to valuation assumptions	1,017,704		0		1,017,704		0		1,017,704
Adjusted revenue	5,998,896		1,017,502		7,016,398		403,428		7,419,826
Directly attributable expenses	1,729,520		231,084		1,960,604		168,994		2,129,598
Contribution margin	$	4,269,376	$	786,418	$	5,055,794	$	234,434	$	5,290,228