Rocket Companies (RKT) risk factors, FY2024 10-K

Risks Relating to Technology and Cybersecurity

1. 01The success and growth of our business, results of operations and financial condition will depend upon our ability to adapt to and implement technological changes to meet our business needs and the changing demands of the market and our clients
2. 02Cyberattacks, security breaches or a failure to comply with information security laws or regulations could result in serious harm to our reputation and adversely affect our business
3. 03Technology disruptions or failures, including a failure in our operational or security systems or infrastructure, or those of third parties with whom we do business, could disrupt our business, cause legal or reputational harm, and adversely impact our results of operations and financial condition
4. 04Reliance on digital platforms and app marketplaces poses growing risks to client acquisition and business growth
5. 05Some aspects of our Rocket technology platform include open-source software and any failure to comply with the terms of one or more of these open-source licenses could adversely affect our business
6. 06Issues related to the development, proliferation and use of AI could give rise to legal and/or regulatory action, damage our reputation or otherwise materially harm our business

Risks Related to Our Business and Operations

1. 07We are, and intend to continue, developing new products and services and our failure to accurately predict their demand or growth could have an adverse effect on our business
2. 08We may not be able to continue to grow our loan origination business or effectively manage significant increases in our loan production volume, both of which could negatively affect our reputation and business, financial condition, and results of operations
3. 09We are required to make servicing advances that can be subject to delays in recovery or may not be recoverable in certain circumstances
4. 10Our counterparties may terminate our servicing rights and subservicing contracts under which we conduct servicing activities
5. 11A failure to maintain the ratings assigned to us by a rating agency could have an adverse effect on our business, financial condition and results of operations
6. 12Our origination and servicing businesses and operating results may be adversely impacted due to a decline in market share for our origination business, a faster than expected increase in payoffs of serviced loans and an inability to recapture loans from existing serviced clients
7. 13We may be required to repurchase or substitute mortgage loans or MSRs that we have sold, or indemnify purchasers of our mortgage loans or MSRs
8. 14Our underwriting may not accurately predict the likelihood of default for all loans, which can result in substantial losses that could adversely affect our financial condition
9. 15We rely upon the accuracy and completeness of information about borrowers and any misrepresented information or fraud could result in significant financial losses and harm to our reputation
10. 16Failure of vendors to perform to contractual agreements embedded in our products and services and our failure to effectively oversee vendor operations could adversely affect our business
11. 17Rocket Loans, as a rapidly growing business, faces a range of interconnected risks and challenges that could have a material adverse effect on its operations
12. 18Our Rocket Homes business model is subject to challenges not faced by traditional real estate brokerages
13. 19We may be unable to make acquisitions and investments, successfully integrate acquired companies into our business, or our acquisitions and investments may not meet our expectations, any of which could adversely affect our business, financial condition and results of operations
14. 20Negative public opinion could damage our brand and reputation, which could adversely affect our business and earnings
15. 21Instability caused by acts of violence or war may affect the lending industry and capital markets generally and our business, financial condition and results of operations
16. 22Our business is subject to the risks of natural disasters and other natural catastrophic events and to interruption by man-made issues such as strikes
17. 23Our risk management efforts may not be effective at mitigating potential losses resulting in increased costs or business disruption
18. 24We face intense competition that could adversely affect us

Risks Relating to the Financial and Macroeconomic Environment

1. 25Our Rocket Mortgage business relies on our loan funding facilities to fund mortgage loans and otherwise operate our business. If one or more of such facilities are terminated, we may be unable to find replacement financing at commercially favorable terms, or at all, which could be detrimental to our business
2. 26As of December 31, 2024, we also had available to us $2.2 billion of financing through a master repurchase agreement facility specialized for the early buy out of certain mortgage loans in agency mortgage pools and up to $1.2 billion available through a syndicated unsecured revolving credit facility
3. 27Our ability to refinance existing debt and borrow additional funds is affected by a variety of factors
4. 28Our loan origination and servicing revenues are highly dependent on macroeconomic and U.S. residential real estate market conditions
5. 29If the value of the collateral underlying certain of our loan funding facilities decreases, we could be required to satisfy a margin call and an unanticipated margin call could have a material adverse effect on our liquidity
6. 30A disruption in the secondary home loan market, including the MBS market, could have a detrimental effect on our business
7. 31We originate loans eligible for sale to Fannie Mae and Freddie Mac and government-insured or guaranteed loans, such as FHA and VA loans eligible for Ginnie Mae securities issuance
8. 32Challenges to the MERS® System could materially and adversely affect our business, results of operations and financial condition
9. 33Our hedging strategies may not be successful in mitigating our risks associated with changes in interest rates
10. 34We rely on internal models to manage risk and to make business decisions. Our business could be adversely affected if those models fail to produce reliable and/or valid results
11. 35As a result of the time and resources, including technical and staffing resources, that are required to perform these processes effectively, it may not be possible to replace existing models quickly enough to ensure that they will always properly account for the impacts of recent information and actions
12. 36We measure the fair value of our mortgage loans held for sale, derivatives, interest rate lock commitments (“IRLCs”) and MSRs on a recurring basis and we measure the fair value of other assets, such as mortgage loans held for investment, certain impaired loans and other real estate owned, on a non-recurring basis

Risks Relating to Regulatory Compliance and Litigation

1. 37We operate in heavily regulated industries and our activities expose us to risks of non-compliance with an increasing and inconsistent body of complex laws and regulations at the U.S. federal, state and local levels, as well as in Canada
2. 38Regulatory agencies and consumer advocacy groups may assert claims that the practices of lenders and loan servicers result in a disparate impact on protected classes
3. 39In addition to reputational harm, violations of the ECOA and the FHA can result in actual damages, punitive damages, injunctive or equitable relief, attorneys’ fees and civil money penalties
4. 40Government regulation of the internet, online marketing, data privacy, and other aspects of our business is evolving, and we may experience unfavorable changes in or failure to comply with existing or future regulations and laws
5. 41If we do not obtain and maintain the appropriate state licenses, we will not be allowed to do business in some states, which would adversely affect our operations
6. 42We are subject to guidelines, laws and regulations regarding our use of telemarketing; a failure to comply with such laws and guidelines, including the TCPA, could increase our operating costs and adversely impact our business
7. 43Changes in tax laws may adversely affect us, and the Internal Revenue Service (the “IRS”) or a court may disagree with our tax positions, which may result in adverse effects on our financial condition or the value of our common stock
8. 44Our reported financial results may be materially and adversely affected by future changes in accounting principles generally accepted in the United States
9. 45We are subject to various legal actions that if decided adversely, or if viewed unfavorably by the public, could be detrimental to our business
10. 46We are subject to securities litigation, which may be expensive and may divert management’s attention
11. 47The conduct of the brokers through whom we originate loans could subject us to fines or other penalties

Risks Relating to Privacy and Intellectual Property

1. 48The collection, processing, storage, use and disclosure of personal data could give rise to liabilities as a result of governmental regulation, conflicting legal requirements or differing views of personal privacy rights
2. 49We could be adversely affected if we inadequately obtain, maintain, protect and enforce our intellectual property and proprietary rights and may encounter disputes from time to time relating to our use of the intellectual property of third parties

Risks Relating to our Human Capital

1. 50We may not be able to hire, train and retain qualified personnel to support our growth, and difficulties with hiring, team member training and other labor issues could adversely affect our ability to implement our business objectives and disrupt our operations
2. 51If we cannot maintain our corporate culture, we could lose the innovation, collaboration and focus on the mission that contribute to our business
3. 52Loss of our key leadership could result in a material adverse effect on our business

Risks Relating to our Corporate Structure

1. 53We are a holding company and our principal asset is our equity interests in Rocket, LLC (“Holdings”), and accordingly we are dependent upon distributions from Holdings to pay taxes and other expenses
2. 54To the extent that we need funds, and Holdings or its subsidiaries are restricted from making such distributions, we may not be able to obtain such funds on terms acceptable to us or at all and as a result could suffer an adverse effect on our liquidity and financial condition
3. 55Our certificate of incorporation contains a provision renouncing our interest and expectancy in certain corporate opportunities
4. 56We are required to pay RHI and Dan Gilbert for certain tax benefits we may claim, and the amounts we may pay could be significant
5. 57Our organizational documents may impede or discourage a takeover, which could deprive our investors of the opportunity to receive a premium for their shares
6. 58The provision of our certificate of incorporation requiring exclusive forum in certain courts in the State of Michigan or the State of Delaware or the federal district courts of the United States for certain types of lawsuits may have the effect of discouraging lawsuits against our directors and officers

Risks Related to Ownership of Our Class A Common Stock

1. 59A material weakness in our control environment could have a material adverse effect on us including an inability to accurately or timely report our financial results and our stock price could be adversely affected
2. 60The 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
3. 61Future sales of our common stock, or the perception in the public markets that these sales may occur, may depress the price of our Class A common stock
4. 62The price of our Class A common stock has been, and may in the future be, volatile and your investment in our common stock could suffer a decline in value