Canadian mortgage strategist blames the country’s securitization market, which allows the country’s six biggest banks to sell mortgages to investors but is closed to smaller lenders.
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Saying it will focus on growing its business in America, U.S. mortgage giant Rocket Companies is winding down its unprofitable Canadian home lending subsidiary, the company announced Thursday.
Rocket Mortgage Canada will fund loans in process before shuttering for good on June 27, the company said in a statement. Some employees will have the option of working at Rocket’s other Canadian businesses — Lendesk and Rocket Innovation Studio — but most will be let go with 3 to 6 months of salary.
Originally a mortgage brokerage known as Edison Financial, Windsor-based Rocket Mortgage Canada rebranded as Rocket Mortgage in 2022 and began making direct loans.
Rocket’s Canadian operations generated a $21.5 million 2024 loss before income taxes, and similar losses in 2023 ($22.8 million) and 2022 ($21.5 million), the company disclosed in its most recent annual report to investors.
Detroit-based Rocket Companies, which employed approximately 14,200 team members in the U.S. and Canada as of Dec. 31, declined to say how many employees will be laid off, or what drove the decision to close Rocket Mortgage Canada.
But Canadian mortgage strategist Rob McLister blamed the country’s mortgage securitization market, which he said allows Canada’s six biggest banks to sell mortgages to investors but is closed to smaller lenders.
Rocket “fizzled in Canada mostly because our mortgage market is custom-built to shield the Big Six banks from most competition,” McLister wrote in a column for the Toronto-based Financial Post. “Countries like the U.S., U.K., and Australia have well-oiled mortgage securitization markets, giving smaller lenders easy access to funding beyond just deposits. Not here.”
McLister also said that in his opinion, Rocket Mortgage Canada “wasn’t lean enough and its marketing had much room for improvement,” but called those issues “as fixable as a flat tire.”
Rocket brought Edison Financial back to life
Rocket’s foray into Canadian mortgage lending was an outgrowth of its 2019 acquisition of Canadian mortgage technology provider Lendesk.
Hash Aboulhosn
Lendesk Chief Financial Officer Hash Aboulhosn — who founded Edison Financial in 2017 before winding the company down in 2018 — led the effort to relaunch Edison with seed funding from Rock Holdings.
In a 2020 investor prospectus for Rocket Companies’ initial public offering, executives said they believed they could leverage their U.S. success to claim a share of what was then a $761 billion (Canadian) mortgage originations market.
In addition to providing loans as a mortgage broker — offering financing options from more than 50 lenders in all 10 Canadian provinces — in 2023, Rocket Mortgage Canada expanded into direct mortgage lending.
Rocket’s U.S. home lending subsidiary, Rocket Mortgage, does most of its business directly with consumers, but also operates as a wholesale lender that works with third-party mortgage brokers.
Last year, Rocket Mortgage grew 2024 closed loan volume by 29 percent, to $101.2 billion, helping its parent company post a $649 million fourth quarter profit that pushed the company into the black.
In addition to Rocket Mortgage, Rocket Companies’ stable of U.S. brands includes the personal finance app, Rocket Money; real estate brokerage and search site, Rocket Homes; and title and settlement services provider Amrock.
Rocket says those offerings — coupled with its $593 billion mortgage loan servicing rights portfolio — make the company a “fintech” (financial technology) platform, providing a range of tools to help people manage their finances.
In January, Rocket launched a new website at its recently acquired Rocket.com domain, positioning it as a one-stop destination for home search and mortgage financing that’s aimed at high-intent users.
CEO Varun Krishna told real estate agents attending Inman Connect New York that Rocket has combined its home search and mortgage experience “into a single portal that reflects all of the things that we’ve learned, and put a serious bet on AI technology on top of it.”
Rocket Mortgage Canada was attempting to leverage technology to achieve a similar competitive advantage, but on a smaller scale.
In 2023, Rocket Mortgage Canada announced a partnership with RESAAS in which the companies agreed to share revenue generated by new mortgages, mortgage renewals and refinances. Most Canadian mortgages have a term of five years or less and borrowers typically renew their mortgages several times before they own their homes.
“As a fintech company, Rocket Mortgage Canada understands the value of a digital experience to help simplify the mortgage process for both clients and their real estate agents,” Aboulhosn said at the time. “That’s why this partnership with RESAAS makes sense — their technology for the real estate professional provides yet another digital touchpoint on our way toward fully digitizing the mortgage process.”
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