United Wholesale Mortgage News: Expert Analysis of Lender News and Business Strategies

United Wholesale Mortgage has made significant strides in recent years, expanding its reach and capabilities to meet the evolving needs of the mortgage industry.

The company has been at the forefront of digital mortgage solutions, investing heavily in technology to streamline the lending process and improve customer experience.

In 2022, United Wholesale Mortgage announced a major partnership with a leading fintech firm, further solidifying its position as a leader in the industry.

This strategic move has enabled the company to enhance its offerings and better compete in a rapidly changing market.

UWM Holdings is a mortgage company that's dominating its niche and growing while others are shrinking. The mortgage business is notoriously cyclical, and it can pivot from feast to famine almost overnight.

In 2021, mortgage bankers made a killing on easy refinances courtesy of the Federal Reserve's policy to keep rates near zero. But in 2022, the Fed began to hike rates to defeat inflation, and these easy refinances evaporated.

Mortgage bankers have been struggling to secure their piece of a shrinking pie in 2022, with virtually every big banker reporting declines in origination volume. That is, except for UWM Holdings.

UWM reported an origination volume of $22.3 billion in the first quarter, down from $25.1 billion in the fourth quarter of 2022 and $38.8 billion a year ago. This was a decrease of 11% quarter over quarter and 43% from a year ago.

UWM is outperforming its crosstown rival, Rocket, which reported a volume of $16.9 billion, down 69% compared to a year ago.

United Wholesale Mortgage's business model is unique in that it operates in the wholesale channel, which is different from the typical mortgage shop. This is a key factor in its success as the top mortgage originator in the third quarter of 2022.

Retail shops, on the other hand, find the borrower and assemble the loan, as seen with Rocket Companies. They use their app to source borrowers and put together the loan, which is then sold to the market.

There are three basic business models for mortgage originators: retail, correspondent, and wholesale. Retail shops are the most common business model, with Rocket Companies being a well-known example.

PennyMac Financial Services is a great example of a company that uses the correspondent lending model, buying completed loans from smaller retail lenders and selling them at a small markup.

United Wholesale Mortgage, or UWM, is facing some challenges in 2024. It lost $69.8 million in 2023, a significant drop from its $931.9 million net income the previous year.

The company's struggles are partly due to an $854.1 million mark-to-market value hit to its mortgage servicing rights. This has left UWM with a tough pill to swallow, but its CEO, Mat Ishbia, is optimistic about the future.

UWM's fourth quarter purchase production of $20.68 billion was a highlight, topping Rocket's total fourth quarter closed loan volume of $17.26 billion. However, its total volume of $24.4 billion for the period was lower than $29.7 billion UWM reported in the third quarter.

The company is also dealing with a National Labor Relations Board ruling that its employment contract violates labor laws. A judge found that the contract prohibits employees from discussing workplace conditions, wages, and union efforts, among other things.

UWM plans to appeal the ruling, but if it's confirmed, the company will have to post a 60-day notice in its offices stating the NLRB's findings and reasserting workers' rights.

To stay ahead of the competition, UWM is offering a special 100-basis point pricing promotion for conventional rate-and-term refi rates, called Refi 100. This move is a proactive step to help its broker partners get ahead in the next wave of refinances.

United Wholesale Mortgage's business strategy is built around the broker model, where they assemble loans without using loan officers to find borrowers. They work with independent mortgage brokers who gather the required information from the borrower and then hand it over to UWM to complete the process.

The broker model is a unique approach that sets UWM apart from other mortgage originators. Under this model, UWM can focus on what they do best: efficiently processing and closing loans.

In contrast, companies like Mr. Cooper Group use a correspondent lender model, where they buy completed loans and then flip them into the market at a small profit. This approach is different from UWM's broker model, but it can be effective in its own right.

The wholesale channel has seen significant exits, with some of United Wholesale Mortgage's biggest competitors folding entirely, going bankrupt, or exiting the market.

LoanDepot is a notable example of a major player that has exited the wholesale channel. This has driven brokers to do business with United Wholesale Mortgage, as they seek more reliable partners.

About 17,000 loan officers have become brokers this year, thanks in part to United Wholesale Mortgage's Game On program. This program aims to sell loan officers on the benefits of becoming a broker.

The company's focus on purchases and developing the broker space has paid off, with a 12% increase in volume in the third quarter of 2022 compared to the second quarter.

UWM trades at about 8.7 times expected 2022 earnings per share, which is a relatively low multiple compared to other industries.

Mortgage lenders generally don't command big multiples due to their volatile income streams.

In good times, mortgage companies typically trade at mid-single-digit multiples.

UWM is one of the few mortgage banks that pays a decent dividend yield, currently at 9.7%.

The mortgage business has been sluggish lately, with refinance activity at multidecade lows and housing affordability low.

A Fed pivot and a decrease in bond market volatility could lead to a sizable drop in mortgage rates, which would stimulate home purchase activity.

UWM shines in home purchase activity, making it a leader in the mortgage space.

The broker model is a great way to manage in a crisis, as seen with UWM, which assembles loans without using loan officers to find borrowers.

UWM works with independent mortgage brokers who interact with the borrower, gather required information, and then give it to UWM to finish the process.

This model allows UWM to be more agile and responsive to changing market conditions, which is crucial in a crisis.

In a crisis, the ability to adapt quickly is key, and the broker model enables companies like UWM to do just that.

By working with independent brokers, UWM can tap into a network of professionals who are already in touch with the purchase market.

Brokers get their leads by developing relationships with real estate agents, title attorneys, and other industry professionals, giving them a unique perspective on the market.

This is especially valuable in a market with little financial incentive for borrowers to refinance their loans, making the purchase business the key focus.

By focusing on the purchase business, companies like UWM can thrive even in a crisis.

The purchase business is a tough nut to crack, especially when interest rates are high. Mortgage lenders are forced to concentrate on this business, which is more relationship-driven.

Real estate agents usually recommend mortgage brokers because they can deal with any wholesale lender, giving the borrower the most options. This is a crucial factor in the purchase business.

Declining volumes have been a story since the Federal Reserve started hiking interest rates over a year ago. Lenders have been losing money, with an average loss of $1,972 per loan.

In the fourth quarter of 2022, lenders lost even more, with an average loss of $2,812 per loan. This has forced many originators to exit the business.

Loan Depot exited the wholesale business, and Wells Fargo got out of the correspondent business. These are significant exits that highlight the challenges of the purchase business.