Rocket CEO Jay Farner saw tech upend mortgages. He’s bracing for bigger changes.

Jay Farner had just graduated from college in 1996 when he got a job at a small mortgage bank near Detroit called Rock Financial.

The 10-year-old company was then going through big changes. Co-founder Dan Gilbert was pushing to streamline the way it did business, by minimizing the need for face-to-face meetings with clients, and relying more on technology. Back then, that largely meant phones and fax machines.

Then the dot-com boom happened, unleashing waves of tech innovation that touched pretty much every industry — including mortgages.

Farner and Rocket have been riding those waves ever since. Now CEO of Rocket Companies, he has watched the mortgage industry adapt to new tools that make it possible to process home purchases faster and with less hassle.

Rocket has grown into a $27 billion holding company that includes Rocket Mortgage, the nation’s biggest mortgage lender. (That included a Silicon Valley interlude when it was acquired by Intuit in 1999 and spun off in 2003.)

Today, the company is grappling with even bigger tech changes, led by AI, data analytics and blockchain. Mortgages remain at the core of its business and it’s remained dominant in the space. It has closed $320 billion in mortgage volume in 2020, and has processed more than $1 trillion in mortgages since it launched in 1985. It now has 26,000 employees.

Rocket is gearing up for more tech disruptions. Amid stiffer competition with the rise of startups like Better.com, Blend and Divvy Homes, Rocket has expanded to other markets, including auto loans, solar panels and personal finance. It just acquired Truebill, a personal financial management app.

Read on for Farner's insight. The interview has been edited for clarity and brevity.

It was my first job right out of college. I graduated in December [1996] and my father said, “You have a week to find a job.” I found this one and I was blessed to find it. I remember riding up in the elevator and meeting a guy who asked if I worked at Rock Financial. He was pretending that he was a client. He actually was our chief operating officer, I believe. He started to ask me what I knew about the company. Later on that day, I went into a training session and there he was. The gig was up.

It was a great small company of then maybe 150. I was a mortgage banker so I worked with clients to determine which programs and pricing were best for them. I stayed and here I am 26 years later.

Dan Gilbert, our founder, said we’re not going to meet with people face-to-face. We are going to do all of this over the telephone. We’re going to send our clients the applications, they’re going to sign it and they’re going to mail it back to us. That was new back then. Dan was really focused on the marketing component. How do we get clients directly to reach out to us?

One of the funny things I recall is I structured a deal to buy fax machines and we told every client that we'd send them a free fax machine to make it easier to send the information back to us. I probably bought maybe 500 or 600. That didn't work because setting up the fax machine proved more complicated than putting the documents in the UPS envelope.

I share the story because that's the culture we worked on creating which is: Try something. Learn quickly. Adjust.

The way technology is impacting real estate can be put into three buckets. If you look at the traffic going to Realtor.com or Zillow, the vast majority of people don't do anything. They look and they leave. Only a very small fraction of a percent will create a lead and even a smaller percentage will wind up engaging with a real estate agent or mortgage company. That’s the top bucket.

The second piece is the application piece. This is where someone says, “Okay, now I'm ready to move forward.” This third piece is the actual tooling underneath the real mechanisms that take all the data and give you a decision and close your loan with certainty at a high degree of pull-through. That's where we've put the vast majority of our work the last three or four years because it's hard.

Our mission is to continue to eliminate the amount of data that a client has to provide us and actually have that data always ready and so when a client is ready to purchase a home or refinance with a press of a button, they have a guaranteed approval and in a matter of days, they're able to close their mortgage.

We're always out looking for strategic initiatives that can propel our business forward. Every month, there are probably hundreds of thousands of people that we preapprove or give verified approval to who want to buy a home. There are also hundreds of thousands of people for whom we do initial reviews who aren't ready to buy a home. To stay in contact with those clients, Truebill will give us the ability to really bring something of value so they can start saving some money. They can begin to put that money aside to fulfill the dream of homeownership. This becomes the bridge from the initial inquiry that we're receiving today to get to the place where we can actually help them with the purchase.

A low-interest-rate market like we've seen the last few years helps all competitors succeed. It's more challenging because everyone has the opportunity to grow market share. We've had to be sharper to compete in a market where everyone is able to be successful. I'm looking forward to the more challenging market in 2022. That's when it gets harder to earn money. That's where it gets harder to invest in technology. That's where it gets harder to invest in marketing. We'll see our competitors pull back a bit. It gives us the opportunity to get farther ahead with our tech investments.

To offer real value to the customer, you need to have multiple products and services. The mortgage, which is incredibly challenging and difficult, is where we started. I like the fact that we're able to figure that out because the additional challenges we take on typically require less of everything compared to what a mortgage requires. So additional products and services will be easier than the work we did for mortgages. But mortgages feed everything.

We've done a great job, I believe, of strengthening our brand. But the cost to market without a way to engage clients over the lifetime is too great. That's not sustainable unless you have all the components.

We focus on the lifetime value of the client when we make a marketing dollar investment. We've got to know that our platform will monetize that at some point in time, whether it's through a Truebill subscription, a purchase of an automobile or the purchase or the refinance of a home, a debt consolidation loan or putting solar panels on somebody's home. We have to have that certainty that we'll be able to capture that lifetime value. Without the ability to engage that client over the next five, 10, 15 years, the minute things become more challenging, margins are reduced for a lot of our competitors. They'll have to stop. That's kind of a dangerous spiral because once you stop the marketing, then your production slows even more and your business shrinks.

That's why marketing on its own without the real value to the client, the product, the tools to engage them, to bring them value, whether you can actually help them with a mortgage — it’s very hard to compete just purely on spending marketing dollars.

Crypto is very interesting to me. I think that we're in a place now where you have to embrace it. It's going to shake up the banking system. You now have a whole other level of efficiency brought to the table the traditional rails that we run on don't allow for. It'll be challenging but blockchain is going to replace some of the traditional ways that we keep track of title, whether it be auto titles or home titles. Blockchain can handle the securitization of loans or mortgages versus the traditional process, offering speed and reduced cost. We are staying very close to it. We’ve got a small team of people that is researching it and understanding it every day. I don't see a world where it doesn't play a significant role here in the coming years.

A better customer experience means a sustainable business. Dan Gilbert always says, “We're in the get-rich-slow business.” Anything that's going to stand the test of time takes hard work and you need to be very cautious of running after objects. Instead, invest your time, energy and effort in really making something better for your client.

So we talked about all of these things that people are doing. We talked about crypto, and it's very interesting. But the lesson is never, never take your eye off the ball and the ball is the client. What does the client need? How can you make the client better? And how can you do it in a way that protects your business so you're there for the long run, regardless of interest rate change, or disturbances in our economy or all of those things that we've seen take out so many of our competitors.