Jay Farner had just graduated from college in 1996 when he got a job at a small mortgage bank near Detroit called Rock Financial.
The 10-year-old company was then going through great changes. Co-founder Dan Gilbert was working to streamline the way he does business, minimizing the need for face-to-face meetings with clients and relying more on technology. Back then, that largely meant telephones and fax machines.
Then the dot-com boom happened, setting off waves of technological innovation that affected just about every industry, including mortgages.
Farner and Rocket have been riding those waves ever since. Now CEO of Rocket Companies, he’s watched the mortgage industry adapt to new tools that make real estate purchases process faster and with less hassle.
Rocket has grown into a $27 billion holding company that includes Rocket Mortgage, the nation’s largest mortgage lender. (This included a Silicon Valley interlude when it was acquired by Intuit in 1999 and spun off in 2003.)
Today, the company is grappling with even bigger technological shifts, driven by AI, data analytics, and blockchain. Mortgages remain the core of its business and it has remained dominant in the space. It closed $320 billion in mortgage volume in 2020 and has processed more than $1 trillion in mortgages since its launch in 1985. It now has 26,000 employees.
Rocket is preparing for further technological disruption. Amid increased competition with the rise of startups such as Better.com, Blend and Divvy Homes, Rocket has expanded into other markets including auto loans, solar panels and personal finances. It’s just acquired Truebill, a personal financial management application.
Read on for Farner’s insight. The interview has been edited for clarity and conciseness.
It was my first job right out of college. i graduated in december  and my father said, “You have a week to find a job. I found this one and was lucky enough to find it. I remember getting in the elevator and meeting a guy who asked me if I worked at Rock Financial. He was pretending to be a customer. He was actually our COO, I believe. He started asking me what I knew about the company. Later that day I went to a practice session and there he was. The concert was in place.
It was a big little company with maybe 150 people. I was a mortgage banker, so I worked with clients to figure out which programs and prices worked best for them. I stayed and here I am 26 years later.
Dan Gilbert, our founder, said we weren’t going to meet people in person. We will do all of this over the phone. We will send the applications to our clients, they will sign them and they will mail them back to us. It was new at the time. Dan was really focused on the marketing side. How do we get customers to contact us directly?
One of the funny things I remember is that I structured an agreement to buy fax machines and we told each client that we would send them a free fax machine to make it easier to get the information back to us. I probably bought maybe 500 or 600. It didn’t work because setting up the fax machine turned out to be more of a hassle than putting the documents in the UPS envelope.
I’m sharing the story because it’s the culture we worked on, ie: Try something. To learn rapidly. Adjust.
The impact of technology on real estate can be divided into three categories. If you look at traffic to Realtor.com or Zillow, the vast majority of people do nothing. They look and they leave. Only a very small fraction of one percent will create a lead and even a smaller percentage will end up engaging with a realtor or mortgage company. This is the top bucket.
The second piece is the application piece. That’s when someone says, “Okay, now I’m ready to move on.” This third piece is the actual tool beneath the actual mechanisms that takes all the data and gives you a decision and closes your loan with certainty to a high degree of success. That’s where we’ve put the vast majority of our work for the past three or four years because it’s tough.
Our mission is to continue to eliminate the amount of data a customer must provide to us and to have that data always ready. So when a customer is ready to buy a home or refinance at the push of a button, they have guaranteed approval. and within days they are able to close their mortgage.
We are always on the lookout for strategic initiatives that can propel our business forward. Every month there are probably hundreds of thousands of people we pre-approve or give verified approval to want to buy a home. There are also hundreds of thousands of people for whom we do initial assessments who are not ready to buy a home. To keep in touch with these customers, Truebill will give us the opportunity to really deliver something of value so they can start saving money. They can start putting that money aside to fulfill their dream of home ownership. This becomes the bridge from the initial request we receive today to getting to where we can actually help them with the purchase.
A low interest market like the one we’ve seen in recent years helps all competitors succeed. It’s more difficult because everyone has the opportunity to increase their market share. We had to be more sophisticated to compete in a market where anyone can succeed. I look forward to the tougher market in 2022. That’s when it gets harder to make money. This is where it becomes more difficult to invest in technology. This is where it becomes more difficult to invest in marketing. We will see our competitors pull back a bit. This gives us the opportunity to go further in our technological investments.
To deliver real value to the customer, you need to have multiple products and services. The mortgage, which is incredibly demanding and difficult, is where we started. I like that we are able to understand this because the added challenges we face usually require less of everything compared to what a mortgage requires. So additional products and services will be easier than the work we did for mortgages. But mortgages fuel everything.
We’ve done a great job, I think, of building our brand. But the cost of marketing without a way to engage customers for life is too high. It’s not durable unless you have all the components.
We focus on customer lifetime value when making an investment in marketing. We need to know that our platform will monetize this at some point, whether it is through a Truebill subscription, the purchase of an automobile or the purchase or refinancing of a house, a debt consolidation loan or the installing solar panels on someone’s home. We need to be confident that we can capture this value for life. Without the ability to engage that customer over the next five, 10, 15 years, as soon as things get tougher, margins are squeezed for a lot of our competitors. They will have to stop. It’s kind of a dangerous spiral because once you stop marketing, your production slows down even more and your business shrinks.
That’s why marketing alone without the real value to the customer, the product, the tools to engage them, to deliver value to them, if you can actually help them with a mortgage – it’s very hard to compete just on the marketing expenses.
Crypto is very interesting to me. I think we’re in a place now where you have to embrace it. This will disrupt the banking system. You now have a whole new level of efficiency brought to the table that the traditional rails we ride on don’t allow. It will be difficult, but blockchain will replace some of the traditional methods of tracking titles, whether automatic titles or home titles. Blockchain can handle the securitization of loans or mortgages compared to the traditional process, providing speed and reduced cost. We remain very close. We have a small team of people who research and understand it every day. I don’t see a world where he doesn’t play a significant role here in the years to come.
A better customer experience means a sustainable business. Dan Gilbert always says, “We’re in the get-rich-slow business. Anything that will stand the test of time takes hard work and you have to be very careful when chasing after items. Instead, invest your time, energy, and effort to really make something better for your customer.
So we talked about all these things that people do. We talked about crypto, and it’s very interesting. But the lesson is to never, ever take your eyes off the ball and the ball is the customer. What does the customer need? How can you improve the customer? And how can you do that in a way that protects your business so that you’re here for the long haul regardless of interest rate changes or disruptions in our economy or all those things that we’ve seen eliminated so many of our competitors.