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Utopia Talk / Politics / Short Quicken Right After IPO?
earthpig
GTFO HOer
Thu Jul 02 22:28:51
Quicken IPO:
https://www.cnbc.com/2020/06/11/quicken-loans-the-largest-us-mortgage-lender-is-planning-an-ipo-sources-say.html

Top 10 mortgage lenders by volume in 2019: https://www.housingwire.com/articles/here-are-the-top-10-mortgage-lenders-of-2019/

If someone is looking at most recent quarterly numbers, they'd see that Quicken's revenue is already up 100% relative to 2019, and the year is only half way over.

Someone that doesn't follow mortgages quickly would go "omg #1 in country, and staggering revenue growth in the last quarter relative to last year?!" and it wouldn't be hard to see it over-valued. Their model is heavy marketing paired with significantly worse than market norm pricing (Rates/fees consumers pay). And it works, they are #1, you can't fault success.

IRL they were massively refi heavy in 2019 (compare their purch/refi ratio to everyone else in the top 10 -- they are refi fat, purchase skinny), and that's even more true in 2020. Refinances are heavily rate dependent, purchases are not... 2018 was rates at a 7 year high, and I (purchase focused) had a personal record year. Right now everyone is refinancing (I'm even originating a bunch of refis just b/c my phone doesn't stop ringing for it, past clients and referrals thereof) to get their 2.75% to 3.25%. Fast forward a little bit, and the market will be saturated with homeowners with dat 2.999% rate, and now the rate will be 3.5% or 4%. So who you going to refinance?

The obvious thing to do would be to pivot to purchase mortgages, which are not at all rate sensitive (compared to refis). The only problem with that is that Realtors all over the country hate them, and advise their seller clients not to take those offers (whenever all else is equal or close to it), that's why they already do 3 refis for every 1 purchase even though MANY first time buyers go right to Quicken/Rocket as soon as they start thinking about it.... then their Realtor kerbloshes it and pressures them to find someone else.

So, yeah. At IPO folks will be looking at total units moved 2019, total revenue 2019, and 2020 YTD for both, and see a great looking investment opportunity. I do not think folks will realize just how inflated these numbers are due to the covid interest rate environment and the gov't printing presses buying unlimited mortgage backed securities to prop things up.

So, yeah. It seems like it might be a good thing to short.
sam adams
Member
Thu Jul 02 22:33:33
My local credit union gave us about 0.4% better than quicken, so ya, fuck them.

And oh look its refi time again.
earthpig
GTFO HOer
Thu Jul 02 22:35:30
Quicken's latest gimmick that they want me to sell is the 29 year fixed. The rate is a little lower (non-round things like 2.923% instead of 3%). The monthly P&I payment is almost exactly the same as a 30 year fixed, within like $0.25 per month. By design. #2 on that top 10 list is UWM (incidentally #1 in purchase). They don't do a trivial rate cut for dropping to 29 years, but they let me pick whatever number of years I want up to 30. So for the "I purchased 3 years ago, I don't want to reset to 1 of 30!" crowd, it's the better answer b/c you can do a 27 year mortgage. Or shave a year off and do 26.

http://imgur.com/a/Vg8GZ5N
sam adams
Member
Thu Jul 02 22:35:49
Might even be worth dropping to a 15 year with crazy low rates like this. Do they do 20 year loans?
earthpig
GTFO HOer
Thu Jul 02 22:40:50
"My local credit union gave us about 0.4% better than quicken, so ya, fuck them."

Calling 1-800-quicken directly will get you among the highest rates and fees in the country. And yet they are #1. That super bowl sponsorship was money well spent.

Their wholesale rates, when you cut out the super bowls and pyramid schemes, and throw in a volume based discount, are actually not at all bad. That retail v wholesale pricing difference is a non-trivial component of how I earn a living.

Quicken is a frienemy. They do not acknowledge the existence of wholesale and mortgage brokers. When I broker a loan there, I'm a "partner" or a "banker," and it's not "Quicken Wholesale," it's "Quicken Loans Mortgage Services." I do not send them a lot of business. Frienemies.

By contrast --> retail consumer facing https://www.loandepot.com/ and wholesale broker facing https://www.ldwholesale.com/
earthpig
GTFO HOer
Thu Jul 02 22:42:41
"Might even be worth dropping to a 15 year with crazy low rates like this. Do they do 20 year loans?"

Yes, they do 20, some discount the rate others do not.

The spread between 15 and 30, or 20 and 30, is smaller than I've ever seen it. A few years ago you might get 0.75% or 1% off your rate for dropping to a 15 (holding constant fees etc). Now, it's like 0.25%. The big "pro" of a lower rate is barely still there, and the big "con" of a higher payment is unchanged, so it's less appealing now than it has ever been (in my short 6 years).
earthpig
GTFO HOer
Thu Jul 02 22:46:36
But anyways I talk about refinancing personal homes all day.

Quicken. I think it will be massively overvalued at IPO by folks that don't necessarily know that a mortgage origination model that's 2/3 or 4/5 refinance is a house of cards built on artificially low rates and continued pandemic. They will just look at YoY origination/growth and go "OMG FASTEST GROWING COMPANY EVER AND ALREADY #1 IN IT'S FIELD THIS IS THE NEW APPLE OR GOOGLE!!" and bid the stock value up far higher than it should be, considering how rickety this foundation is.
sam adams
Member
Fri Jul 03 12:43:42
And plus with the interest rate near inflation rate... i could probably make more simply putting those 15 year savings into the market or perhaps a second home/rental.

So ya... 30 sounds right.
Earthpig
GTFO HOer
Fri Jul 03 14:11:38
If you want a referral in your state lmk. Rate will be in 2s, will close in 3 weeks (market average for a simple refi right now is 2.5 months).
earthpig
GTFO HOer
Fri Jul 03 18:22:44
trolling www.youdontwantthismortgage.com
jergul
large member
Fri Jul 03 20:12:37
In the 2s? I have a meeting with out bank next week to get mine down to 1.45.

Your lenders have crazy margins.
Rugian
Member
Sat Jul 04 12:24:14
EP

Covid must be seriously hammering your closings rate if you're trying to drum up business on UP :p
Nimatzo
iChihuaha
Sat Jul 04 13:36:31
Uhm, yea, you are getting screwed, I had to check, but ours is 1.4%.
Rugian
Member
Sat Jul 04 13:55:13
What were Scandinavian spreads pre-Covid? From what I've seen here, lenders have lowered rates somewhat but have resisted the urge to go 1:1 with the Fed's nosedive. Presumably they don't want to drastically lower rates only to see the Fed jack the benchmark back up in a quarter or so.
Rugian
Member
Sat Jul 04 13:56:40
On the construction lending side, LIBOR + 250-275 was pretty standard pre-Covid. Now it's more like LIBOR + 350-400.
Earthpig
GTFO HOer
Sat Jul 04 15:25:39
Rugian- complete decoupling from the normal indicators months ago. The treasury dept is buying mbs sufficient to price set right around 3%. A 3% mbs sells for 105 (simplified: $100k loan sells for $105k) today. In Feb, the rate would need to be 4% to score 105 on the back.

Business is really good. A lot of my colleagues do not have small kids and can work until 2 am. Business is much better for them.
Earthpig
GTFO HOer
Sat Jul 04 15:28:04
Simplified for others, I'm sure you have an idea how that works. But anyways it's a version of price fixing. Corporate socialism. Joe consumer is getting $1200 one time plus $600/mo. Mortgage banks are just getting printed money thrown at them. It's an abomination.
Seb
Member
Sat Jul 04 17:17:40
1.4% for me, just remortgaged.
jergul
large member
Sat Jul 04 17:51:44
EP
Yah, I sort of thought so.
earthpig
GTFO HOer
Sun Jul 05 01:24:42
You really can't compare across borders. Any of those rates in the 1s 30 years with a fixed interest rate?

Also, you may as well say that Japan is a ripoff because it takes 10k of their currency to buy a bottle of coke.
jergul
large member
Sun Jul 05 02:23:42
We can compare across borders easily by looking at the cost lenders pay to borrow money and the cost they charge for lending money.
earthpig
GTFO HOer
Wed Jul 08 22:58:19
Prospectus, IPO formerly announced.

http://www...4746920004008/a2241988zs-1.htm

Brokers sending them business (rather than their own employees) is 36% of their volume, but only 14% of their profit. I knew they gave us a wholesale discount relative to consumers calling 1-800-quicken, I didn't know it was that big.
Dakyron
Member
Thu Jul 09 10:27:49
If you can get in on the initial IPO, might be worth it, but that is often impossible to do for a normal person.

Buying even a few minutes after the IPO is dangerous since the price usually skyrockets, then crashes the first few hours.
earthpig
GTFO HOer
Fri Jul 10 01:49:46
@daky:

Feedback I've gotten from old school stock brokers is to wait for the feeding frenzy to stop, let the stock price calm the fuck down and drop a bit, and short it at that point.
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