Tuesday, January 02, 2018 1:00 am
Quicken gunning for tech talent
Hoping Detroit's low cost of living can help
Laura J. Keller | Bloomberg
Billionaire Dan Gilbert's Quicken Loans outgrew almost every U.S. mortgage provider by unfurling technology like its online Rocket Mortgage platform faster than big banks.
Now closing in on the industry's leader, Wells Fargo, he's picking more fights: Luring top tech talent to Detroit from Silicon Valley giants like Facebook and Google.
“Everything is about innovation, creativity, newness, trying to keep the culture non-bureaucratic,” Gilbert, 55, said in a phone interview. “To me, that's how you compete in the world today.”
Gilbert, who owns 77 percent of the mortgage lender he founded more than three decades ago, boosted stock awards to employees 56 percent to $1 million during the first nine months of 2017, according to a marketing document for a $1 billion bond sale in December. The closely held firm runs an internal system that lets recipients – many of them technology recruits – eventually cash out their equity.
Gilbert is counting on creative millennials, who he said “love that Detroit thing,” to be drawn to a city with an underdog mentality and a dirt-cheap cost of living compared with Silicon Valley. Estimated to be worth $8.5 billion by the Bloomberg Billionaires Index, he's been a big investor in Detroit and Cleveland, where he owns real estate, casinos and the Cavaliers basketball team.
Even in a rough year for mortgage providers, Gilbert has invested aggressively. Spending on tech staff contributed to a roughly $50 million increase in compensation costs and an 8.6 percent increase in total expenses in the first nine months of 2017, according to the bond document obtained by Bloomberg. Companywide, net revenue fell 5.1 percent and net income tumbled 38 percent. By contrast, mortgage-related revenue fell 27 percent at Wells Fargo and 75 percent at Bank of America as a refinancing boom ended.
As a closely held firm, “we have that luxury of just investing back in” instead of constantly worrying about earnings targets, Gilbert said. He said the firm's culture adheres to Amazon founder Jeff Bezos's philosophy of staying in “Day 1” mode – pushing itself to behave like a startup.
Tech know-how has enabled Quicken to close loans faster and more profitably than banking rivals. It typically funds loans about 33 days after applicants upload their information. The industry average is 40 to 45 days, according to newsletter Inside Mortgage Finance.
Quicken has an average gain-on-sale margin of about 4.1 percent, according to the bond document. The broader industry booked a 1.3 percent effective margin in early December, according to a Mortgage Bankers Association proxy for gains on such sales.