Rocket Loans

• Type: Online personal-loan platform; SBA subcontractor.
• Legal entity: RockLoans Marketplace LLC, doing business as Rocket Loans; a subsidiary of Rocket Companies, Inc.
• HQ: 1274 Library Street, Detroit, Michigan (address on the February 2021 congressional letter).
• CEO in 2020–2021: Jay Farner, also CEO of Quicken Loans and Rocket Companies, according to the House committees' letters.
• Pandemic-relief role: First-tier subcontractor to RER Solutions on SBA's disaster loan-recommendation contract (No. 73351019D0001), which processed COVID-19 EIDL applications.

Rocket Loans named 20 employees who worked on SBA's COVID-EIDL loan-recommendation contract and kept $232,931,265.65 from it through February 2021, according to invoices the House Select Subcommittee on the Coronavirus Crisis obtained.¹ The prime contractor, RER Solutions, kept more; Rocket's affiliate Rapid Financial Services, which built and ran the system and paid the data costs, received $148 million.¹ Rocket Companies' 2020 annual report credited "increased revenues from Rocket Loans of $369.1 million in 2020, from $24.8 million in 2019," mainly from processing economic injury disaster loans.² We found no criminal charge against Rocket Loans over the contract.

Who it is

Rocket Loans is the personal-loan business of Rocket Companies, the Detroit mortgage group controlled by Dan Gilbert. The company's 2021 annual report describes it as an "asset-light, online-based personal loan business" whose loans are originated by Cross River Bank.³ SBA's Inspector General identifies the contracting entity as RockLoans Marketplace LLC, doing business as Rocket Loans, and calls it "an affiliate of Rock Holdings and Quicken Loans, one of our nation's largest mortgage lenders."⁴

The pre-pandemic contract

In early 2018 SBA solicited help processing disaster loans after hurricanes Harvey, Irma and Maria. It limited the competition to small businesses and, out of 10 proposals, awarded the contract to RER Solutions, with Rocket Loans as subcontractor under a teaming agreement signed September 7, 2018.⁴ The Inspector General found that "Team RER-Rocket" priced its work 55.7 percent above the government's own estimate. The award memo said: "It is hard to tell what we are paying for or what the level of effort is for the first 6 months."⁴ Rocket supplied the software that produced the automated loan recommendations under the pre-pandemic contract.¹

The Inspector General concluded that SBA never checked whether RER and Rocket were affiliates under the ostensible subcontractor rule. "RER on its own may have been a small business, but RER relied on Rocket to perform vital contract requirements, which made them affiliates," the report says. On that reading, it wrote, "the $850 million in government funds set aside for a small business was not used as intended."⁴

COVID-19 EIDL

When COVID-19 EIDL applications arrived in March 2020, Rocket's system, built mostly for home-damage loans after physical disasters, could not handle the volume or the type of application.¹ Rapid Financial Services, a Rocket affiliate but not a subsidiary, began processing recommendations through a subcontract with Rocket in late March 2020.⁴¹ SBA then raised the contract's ceiling without competition, first to $600 million and then to $750 million; the Inspector General gives a final ceiling of $850 million.¹⁴ Rocket continued to fund and disburse approved loans through SBA's E-Tran payment system.¹

SBA paid per application. Through February 2021 it paid RER $738,294,057.09. The staff report divides that three ways:

Source: House Select Subcommittee, "Idle on EIDL Fraud," June 14, 2022, based on company invoices and letters.¹

Asked repeatedly how many people worked on the contract, Rocket said "at least" 20 and counted its executives among them. The report says it saw no sign in the documents that significantly more contributed.¹ Rocket Companies' annual reports say Rocket Loans processed more than 19.9 million unique loan recommendations in 2020 and more than 3.9 million in 2021. Its revenue fell in 2021 "mainly as a result of a reduction in revenues earned from processing economic injury disaster loans."²³

The congressional inquiry

On July 30, 2020, Chairman James Clyburn of the Select Subcommittee and Chairwoman Nydia Velázquez of the House Small Business Committee wrote to Farner, then addressed as CEO of Quicken Loans. They asked for Rocket's documents on the EIDL work, including communications with "any affiliated company."⁵ Their February 11, 2021 follow-up said Rocket and Rapid were "expected to receive more than $360 million in taxpayer funds," that "Rocket has refused to cooperate with this inquiry," and that it had produced nothing on Rapid's behalf.⁶ By June 2022 the Select Subcommittee had reviewed 17,000 pages of documents from SBA, RER, Rocket and Rapid. The staff report called the payments to RER and Rocket "windfalls."¹

The Inspector General's six recommendations were addressed to SBA.⁴

Related profiles

• RER Solutions: the prime contractor.
• Errin Green: RER's chairman and chief executive.
• Will Tumulty: chief executive of Rapid Finance, the second-tier subcontractor.
• Dan Gilbert: founder and chairman of Rocket Companies.
• Cross River Bank: the bank that originates Rocket Loans' personal loans.

Sources

1. House Select Subcommittee on the Coronavirus Crisis, staff report, "Idle on EIDL Fraud," June 14, 2022. ↩
2. Rocket Companies, Inc., Form 10-K for 2020 (filed Mar. 24, 2021). Original: https://www.sec.gov/Archives/edgar/data/1805284/000180528421000010/rkt-20201231.htm ↩
3. Rocket Companies, Inc., Form 10-K for 2021 (filed Mar. 1, 2022). Original: https://www.sec.gov/Archives/edgar/data/1805284/000180528422000011/rkt-20211231.htm ↩
4. SBA Office of Inspector General, Report 22-10, "Evaluation of SBA's Contract for Disaster Assistance Loan Recommendation Services," Apr. 14, 2022. Original: https://www.sba.gov/sites/default/files/2023-11/SBA%20OIG%20Report%2022-10_0.pdf ↩
5. Letter from Chairman James E. Clyburn and Chairwoman Nydia M. Velázquez to Jay Farner, CEO, Quicken Loans, July 30, 2020. ↩
6. Letter from Chairman James E. Clyburn and Chairwoman Nydia M. Velázquez to Jay Farner, CEO, Rocket Loans, Feb. 11, 2021. ↩