Incorporated: 1985 as Rock Financial Corp.
NAIC: 522292 Real Estate Credit; 522298 All Other Nondepository Credit Intermediation; 524127 Direct Title Insurance Carriers
SIC: 6162 Mortgage Bankers & Correspondents; 6111 Federal & Federally-Sponsored Credit; 6159 Miscellaneous Business Credit Institutions; 6361 Title Insurance
Quicken Loans, Inc., is the top online mortgage lender in the United States. The company offers a variety of different loan options that it bundles for sale to larger financial institutions after closing, although it eschews the riskier subprime type. Rock Holdings, the parent company of Quicken Loans Inc., also owns Title Source, Inc., which offers title insurance and settlement services. The privately owned company's billionaire founder Daniel Gilbert serves as its chairman and continues to hold a sizable stake.
Beginnings
Quicken Loans was founded in 1985 as Rock Financial by Detroit-area native Daniel Gilbert, a 22-year-old Wayne State University first-year law student and part-time real estate broker. Gilbert, who had shown an entrepreneurial bent from childhood when he sold candy and pizzas to neighbors, saw an opportunity to increase his earnings by writing mortgage loans, which required no license in Michigan. Investing $5,000 to form the small company, he soon added the services of his brother and a friend. The business grew so quickly, however, that Gilbert never took up the practice of law after his 1987 graduation.
During the late 1980s and early 1990s Rock Financial opened a half-dozen branch offices in southeast Michigan and developed relationships with real estate professionals, home builders, lawyers, and financial planners to bring it referrals. Like many similar firms, after its loans were closed Rock sold them in bulk on the wholesale market to larger banking companies.
In 1992 the firm was organized as an S corporation, and Gilbert added the title of board chairman to his duties as president and CEO. By 1993 revenues had grown to $18.2 million, and net income to $1.1 million.
Creation of Fresh Start Division: 1994
In 1994 the firm founded a new division called Fresh Start that targeted the so-called subprime loan market, serving individuals with poor credit records or other financial problems. Over the next several years nearly 20 Fresh Start loan centers were opened in strip malls and office buildings in Michigan, Ohio, Illinois, Indiana, Texas, Nevada, and Missouri. Their services were typically marketed through direct mail and other advertisements.
In March 1997 Rock created a Specialty Lending division that offered "high loan-to-value" second mortgages for borrowers with little or no equity in their homes. The program was operated out of a call center at the firm's headquarters in the northern Detroit suburb of Bingham Farms, and marketed in nearly 20 states.
For 1997 the firm's revenues jumped to $52.1 million from the 1996 total of $29.6 million, with net income of $7.3 million recorded. Rock closed on 12,950 loans, which were worth $1.2 billion. About two-thirds of this dollar amount was made up of conventional home loans, with slightly more than a fifth being subprime loans and the rest consisting of second mortgage loans. Some 92 percent were made on property located in Michigan.
In May 1998 Rock Financial went public on the NASDAQ, selling 3.3 million shares for $10 each. After the offering, founder Daniel Gilbert held 52.9 percent of the firm's common stock and 75 percent of its shareholder votes. The firm was also shifted from an S to a C corporation. During 1998 the company signed loan agreements worth $2.35 billion, up 93 percent from the year before. It had nearly 30 branch offices.
Debut of Web-Based Loans: 1999
With the surging growth of the Internet Gilbert saw a new way to reach customers and increase the company's reach outside of Michigan. In January 1999 the firm closed nine branch offices that dealt primarily in subprime loans, and launched RockLoans.com, to which the managers of the closed offices were transferred. One of the first direct mortgage lenders on the Internet, it offered low rates and fast service, giving it an edge over many online competitors that served as middlemen.
After successfully test-marketing the new online loan program in several areas, the firm began working to get approval to write mortgages in all 50 states and preparing a national ad campaign. In July plans to close 12 of the remaining 15 Rock Financial offices were announced as online mortgage business surged. Although much of the loan process could be done via the Internet, the firm still needed trained mortgage bankers to finalize deals over the phone, with signed documents faxed or mailed to complete the agreement.
In the fall a deal for the firm to be acquired by Quicken/QuickBooks financial software maker Intuit, Inc. was announced. The stock-based deal was initially worth $370 million, but by the time it closed at year's end Intuit's booming share price had increased its value to $532 million. Rock subsidiary Title Source, Inc., was also purchased for $6 million in cash.
Intuit subsequently folded the company into its QuickenMortgage online loan service, which had been launched two years earlier to offer loan quotes from partners including HomeSide Lending, Chase Manhattan Mortgage Corp., and Countrywide Home Loans. QuickenMortgage typically made $400 to $600 per successful referral, but could earn $2,500 to $3,500 when loans were made directly through the former Rock Financial (whose name was retained in Michigan).
Rock CEO Dan Gilbert would head the unit, which was soon renamed Quicken Loans, Inc. Based at the firm's headquarters in Livonia, Michigan, it would offer conventional mortgages, jumbo loans, Federal Housing Administration (FHA) loans, home equity loans/credit, refinancing, and subprime loans. As it had always done, the firm closed loans but sold them in bulk to wholesale lending firms around the United States. At this time the number of mortgages that originated online was estimated at just 1.5 percent of the industry total.
Launch of QuickenLoans.com: 2000
The QuickenLoans.com web site was soon launched with a multimillion-dollar media campaign. It had been carefully designed after examining records of visits to predecessor sites and interviewing users. Quicken Loans would also be promoted via such Intuit products as the popular TurboTax and Quickbooks accounting software, and through ads on other web sites.
QuickenLoans.com initially continued to offer leads to outside lenders, but a problem immediately cropped up when Countrywide decided to exit. Because FHA rules required that lenders have a physical presence in the area where loans were made, Quicken had used its association with Countrywide to fulfill this requirement. The FHA problem was eventually resolved, while Countrywide and other "bricks-and-mortar" lenders subsequently founded their own online units, which became strong competitors of the firm.
Falling interest rates and a jump in refinancings helped business grow rapidly, and Quicken Loans soon announced plans to more than double the size of its call center. During 2001 the firm closed on $4.6 billion in loans and generated $172 million in revenue for Intuit.
In early 2002 the company promoted veteran executives Bill Emerson and Pat McInnis to the jobs of CEO and president, respectively, with Dan Gilbert continuing to serve as chairman. At this time the firm also announced it had resolved the issue of transmitting legally binding signatures electronically, which remained the one part of the mortgage process that could not be done electronically. Seeking to reach new users, Quicken Loans was partnering with a variety of other online firms to generate visits to its site including Yahoo! Real Estate, for which it provided content.
Gilbert Leads Buyback in 2002
In the aftermath of the dot-com shakeout of the early 2000s, Intuit began to reevaluate its corporate strategy and decided to divest a portfolio of e-commerce businesses that also included insurance and bill management units. In July 2002 control of Quicken Loans was bought by a group led by Dan Gilbert for an estimated $64 million, far less than the price of three years earlier. Gilbert took a 62 percent ownership stake.
The company became a unit of newly formed Rock Holdings, Inc., and remained headquartered in Livonia, Michigan. It struck a deal to license the Quicken Loans trademark in perpetuity, while its mortgage offerings would continue to be promoted at Quicken.com and through Intuit's Quicken and Turbo Tax software offerings. Title insurance and settlement subsidiary Title Source, Inc., was also a part of the deal, and the firm would continue to operate Rock Financial's three loan centers. The company employed 1,100.
In December 2002 Quicken Loans settled Federal Trade Commission charges that it had violated the Fair Credit Reporting Act by failing to notify rejected applicants that their loans had been denied because of bad credit scores. The company agreed to provide such information in the future, and avoided other sanctions.
In the summer of 2003 the firm announced plans to create the federally chartered Rock Bank, which would operate in all 50 states and offer savings and checking accounts online and at several retail locations in southeastern Michigan. It would also give Quicken Loans blanket federal exemption from the increasingly complex array of local laws restricting mortgage loans that were starting to appear. The plan was abandoned late the next year, however, as the company decided to sharpen its focus on the mortgage business. With interest rates rising, the firm also began working on new ways to win business including introducing adjustable-rate and interest-only loans and instant-approval online home equity loans.
During 2003 Quicken Loans signed a $1 million-plus deal to become a presenting sponsor of the Detroit Pistons basketball team, using the Rock Financial brand name, and became a sponsor of Roger Penske's Indy Racing Team. At year's end the firm was ranked 13th on Fortune magazine's list of the "100 Best Companies to Work For," where it would reappear consistently in future years. The company encouraged its employees with a variety of performance-based bonuses and awards, discounted home loans, paid educational opportunities, concert and sports tickets, and free slushie drinks from the in-house "Soft Rock Café." During 2003 the value of loans closed surged 75 percent to $12 billion, and its employee headcount to 1,700.
In 2004 Quicken Loans announced its Livonia headquarters would be expanded and a new $29.1 million facility would be added in nearby Troy, which would create 1,200 new jobs. The latter was helped by city and state tax credits nearly equal to the project cost. During the year National Mortgage News reported that Quicken Loans had become the nation's number one online mortgage firm.
Ever the entrepreneur, Chairman Dan Gilbert had invested his own money in other businesses and as a partner in private investment firm Camelot Ventures, which took stakes in contact lens and software development companies and catalog retailer Red Envelope. After failing in a bid to acquire baseball's Milwaukee Brewers, in March 2005 he bought controlling interest in the National Basketball Association's Cleveland Cavaliers for $375 million, after which the Cavaliers' home was renamed the Quicken Loans Arena. The firm celebrated its 20th anniversary there with a concert by the Black-Eyed Peas and Kid Rock, with Gilbert busing his entire staff and their families to Cleveland for the weekend.
Opening of New Branch in Cleveland: 2006
In April 2006 the company opened a new Internet loan office in Cleveland that would employ more than 300, bringing Quicken Loans' total payroll to about 3,500.
In May a U.S. appeals court in California ordered the firm to pay refunds to customers in that state who had been charged interest from the day of their mortgage signing, rather than from the date the loan was recorded in county offices, which often occurred weeks later. The firm vowed to appeal the decision.
In October 2006 the Rock Financial Junior Achievement Finance Park opened in downtown Detroit, with $1 million in funding from the company. It was expected to give 10,000 middle school students exposure to the world of business each year. A short time later Dan Gilbert also announced he was investing $10 million to found Bizdom U., a free two-year business training program based at Wayne State University. The program would teach young people how to become entrepreneurs, and would invest $25,000 to $500,000 in their new businesses upon graduation. The first 13 students were enrolled in January 2007.
For 2006 Quicken Loans closed $18 billion in mortgages, up from $16 billion the year before. Revenue jumped to an estimated $750 million from $554 million. Despite a downturn in the industry brought on by the subprime lending crisis, the firm was continuing to grow, hiring an average of 200 new employees per month, and its headcount increased to 3,900 by year's end.
The company continued to rely heavily on advertising to bring in new customers, and spent more than $50 million during the year on a variety of promotional efforts. On the technological front, it was operating in a completely paperless environment, processing 175,000 phone calls and 2.4 million internal emails each day.
In the summer of 2007 Gilbert helped found a new company called RockBridge Equity Partners, LLC, which was headquartered in the Quicken Loans offices, but set up as a separate financial entity. RockBridge would seek growing companies to fund, particularly those in Michigan. Gilbert's other side ventures included stakes in sports wall graphics firm Fathead LLC, ticket broker Flash Seats LLC, and ePrize, Inc., an online promotions company.
As the subprime crisis deepened, in the fall of 2007 the firm froze hiring of loan writers in Michigan and stopped writing "nonconforming" mortgages to less-qualified borrowers that it could no longer be sold on the wholesale market. Nonconforming loans accounted for less than a third of the total and were phased out within a few weeks' time.
Move to Downtown Detroit
In November 2007 Quicken Loans announced its suburban Detroit offices would be consolidated in the city's struggling downtown after their leases expired in 2010. City and state incentives of $200 million over 20 years had helped sweeten the pot, with Detroit banking on the creation of thousands of ancillary jobs in the area and many millions of dollars spent over time by the firm's well-paid workers. Gilbert was also working to convince other suburban business owners to move downtown in a bid to support the city's long hoped-for comeback.
During 2007 the company also opened another Internet Home Lending Center in North Scottsdale, Arizona, which would employ less than 100 to start. For the year mortgage volume topped $19 billion.
Nearing the end of its first quarter-century, Quicken Loans, Inc., had become the top Internet-only mortgage firm in the United States. The firm was weathering the subprime lending crisis by eschewing loans that it could not sell on the secondary market, and continued working to streamline the process of lending money online so it could grab a bigger piece of the overall mortgage pie.
In January 2008, Fortune announced that Quicken Loans had risen to number two on its list of the "100 Best Companies to Work for in America." It was the fifth year the company had appeared within the list's "Top 20" best companies.
In January 2008, Rock Holdings Inc., the parent company of Quicken Loans Inc. and Title Source Inc., made two acquisitions. Quicken Loans Inc. and RockBridge Equity Partners joined to acquire One Reverse Mortgage, a fast-growing provider of FHA-backed reverse mortgage programs headquartered in San Diego. Title Source Inc. acquired TransUnion Title and Escrow of California, enabling Title Source to expand its business in one of the country's largest real estate markets.
Principal Subsidiaries
Title Source, Inc.
Principal Competitors
CitiMortgage, Inc.; Wachovia Corporation; Bank of America Corporation; Lending Tree, LLC; E-Loan, Inc.; JPMorgan Chase & Co.; Washington Mutual, Inc.; Wells Fargo & Company; HSBC Finance Corp.; Countrywide Financial Corp.
Further Reading
Bergquist, Erick, "Quicken Loans' Many Motives for Seeking OTS Charter," American Banker, August 6, 2003, p. 9.
"Betting on the 'Net to Rock-et to the Top," Bank Advertising News, May 17, 1999, p. 1.
Burke, Monte, "Net Game: Dan Gilbert, the New Owner of the Cleveland Cavaliers, Likes to Play Rough," Forbes, October 10, 2005, p. 82.
Garritano, Anthony, "Quicken Loans to Embrace Electronic Closings," National Mortgage News, October 30, 2006, p. 12.
Grant, Rick, "Quicken Set to Sell Unit," National Mortgage News, July 8, 2002, p. 1.
Henderson, Tom, and Sheena Harrison, "Detroit Needs Entrepreneurs, and He's Put Serious Money into Getting Them Started," Crain's Detroit Business, January 1, 2007, p. 1.
Howell, Donna, "Quicken Loans Speeds Up the Mortgage Application Process Enabling Online Signatures," Investor's Business Daily, February 19, 2002, p. A8.
Howes, Daniel, "Inside the Go-Go World of Quicken Loans," Detroit News, September 14, 2006, p. 1.
------, "Quicken Sold on Detroit; Move to Bring 4,000 Suburban Jobs to Downtown Technology Park," Detroit News, November 13, 2007, p. 1.
Klayman, Ben, "Rock Closes $22 Mln in Internet Mortgage Loans in March," Reuters News, April 8, 1999.
Merx, Katie, "Quicken Ready to Rock: New Lenders Set $10 Billion Goal," Crain's Detroit Business, March 4, 2002, p. 3.
------, "A Quickened Pace," Crain's Detroit Business, October 20, 2003, p. 1.
Morath, Eric, "Housing Slump Hits Quicken," Detroit News, October 15, 2007, p. 1.
Murray, Michael, "Quicken Makes It Simple," Real Estate Finance Today, September 3, 2001.
Murray, Teresa Dixon, "Cavs Owner to Bring 350 Jobs to City," Cleveland Plain Dealer, September 9, 2005, p. A1.
"Quicken Agrees to Change Online Loan Disclosures," Associated Press Newswires, December 30, 2002.
"Quicken Loans Still No. 1," Mortgage Technology, November 1, 2007, p. 21.
"Quicken Moves Ahead to Become No. 1 Online Retail Lender," National Mortgage News, December 20, 2004, p. 16.
Ridgway, Nicole, "Intuit Unit to Offer Govt-Backed Home Loans Online," Dow Jones News Service, January 19, 2000.
Schiavone, Louise L., "Quickening the Pace," Mortgage Banking, December 1, 2005, p. 44.
------, "The Reincarnation of Quicken Mortgage," Mortgage Banking, March 1, 2000, pp. 24-31.
Schiffmann, William, "Intuit Buys Online Mortgage Provider Rock Financial," Associated Press Newswires, October 7, 1999.
Schwartz, Mathew, "Tweak This!" ComputerWorld, January 31, 2000, p. 64.
Stempel, Jonathan, "Quicken Loans May Face Mortgage Interest Refunds," Reuters News, May 24, 2006.
Story, Louise, and Vikas Bajaj, "Even As Industry's Troubles Grow, Mortgage Ads Keep Up the Pitch," New York Times, August 25, 2007, p. 9A.
Valade, Jodie, "Average Doesn't Cut It for Cavs' Next Owner," Cleveland Plain Dealer, February 20, 2005, p. A1.
— Frank Uhle
