UWM Holdings management believes that given its performance in 2024, especially with the down purchase market, it will continue to grow no matter what the environment is this year.
The last three years have been tough for the mortgage business, but UWM has been able to increase its volume and gain on sale margins, said Mat Ishbia, chairman and CEO of the holding company and its subsidiary, United Wholesale Mortgage.
“We continue to invest in cutting edge technology, including AI, invest in our people, and we’re the best positioned to capitalize on any change in the current market dynamics,” Ishbia said on the earnings call. “There are about $2.5 trillion and growing in mortgages [with] rates over 6% and so it won’t take much of a shift in range for those loans to be in the money.”
While mortgage rates did dip this past week, application volume failed to increase in tandem, the Mortgage Bankers Association reported.
In its February outlook, Fannie Mae became even more bearish on rate movements and originations for the year.
The business is strong enough that it is set to both win now while preparing the future, said Ishbia, a former college basketball player who currently owns the Phoenix Suns and Phoenix Mercury, and likes to speak in sports metaphors.
The Pontiac, Michigan-based wholesaler earned $40.6 million in the fourth quarter, an increase over the $31.9 billion net income for the third quarter. In the fourth quarter of 2023, due to a mortgage servicing rights write-down, the company lost $461 million.
But UWM missed both the Keefe, Bruyette & Woods and consensus quarterly forecasts on operating earnings per share due to higher mortgage servicing rights amortization and operating expenses, which was only partially offset by higher production and servicing income, Bose George wrote in a flash note before the earnings call.
The operating EPS calculation removes a positive MSR mark of $456 million, puts in a swap loss of $470 million and uses a 23.6% effective tax rate, George said.
For all of 2024, UWM earned $397.4 million. However, that write-down also impacted the full year results for 2023, as the company lost $69.8 million.
During the fourth quarter, UWM originated $38.7 billion, including $21.9 billion of purchase loans and $16.8 billion of refinancings.
Refi volume actually increased versus the third quarter, when it did $13.3 billion; UWM did a total of $39.5 billion for the period.
Approximately $17 billion of the fourth quarter production came during October following a five-week period where “a minor rate drop” took place, Ishbia said.
That equates to a full year run rate of almost $53 billion. “What can happen if actually a bigger rate drop happens? We’re going to all find out, but we are prepared here,” said Ishbia.
UWM is financially capable of adding volume at the current expense rate, added Andrew Hubacker, chief financial officer.
“We believe that we have greater operational capacity than we did in 2021 when our origination volume exceeded $226 billion,” Hubacker declared. “Said differently, we believe that we can currently handle more than $100 billion of additional origination volume without increasing our fixed expenses.”
Ishbia noted that the mortgage broker share of originations for the industry has doubled from four years ago (he cited figures for the third quarter that put it at over 27%).
He asked rhetorically if that could happen again in another four years; he didn’t know the answer, but UWM is working towards that.
Last year “was an investing year and a technology-building year and [20]25 is a dominant year,” Ishbia said. “That’s what we’re going for.”
For the fourth quarter of 2023, total production was $24.4 billion, with the vast majority, $20.7 billion coming from purchase activity.
UWM originated $139.4 billion for all of 2024, with its best year ever for purchase at $96.1 billion. Because of a strong second half of the year for refis, it did $43.4 billion of these loans.
This compared to $108.3 billion during 2023, with $93.9 billion of purchase and $14.2 billion of refis.
While fourth quarter gain on sale at 105 basis points was in the UWM guidance range, it was below KBW’s 110 basis point estimate. The third quarter margin was 118 basis points, while I was 92 basis points one year ago.
“The slightly lower margin [quarter-to-quarter] was in line with what we have seen in the broker channel from other large broker originators in [the period],” George said.
UWM reported a significant increase in mortgage servicing rights on its balance sheet quarter-to-quarter, to just under $4 billion from $2.8 billion on Sept. 30, 2024. On Dec. 31, 2023, it held slightly more than $4 billion.
The company has been an opportunistic seller of MSRs in the past. It doesn’t necessarily need to sell, but if someone were to offer a “7 multiple” for the product, the company would be interested in possibly making a deal, Ishbia commented.
Ishbia lauded the regulatory environment change brought by the Trump administration, saying “I think it is all upside, all positive.”
If the shift has a positive impact on mortgage rates, it will result in a “bull run like you haven’t seen probably since 2020, 21,” he said.
Ishbia added that the past leaders of the Federal Housing Finance Agency, the Department of Housing and Urban Development and the Consumer Financial Protection Bureau did not have a great connection with the mortgage industry.
With the new leadership at these agencies, “all these things will be better than we had before,” he continued.
Going forward, UWM guided to first quarter production in the $28 billion to $35 billion range, with its gain margin ranging from 90 basis points to 115 basis points.
KBW’s current estimates are for $33.8 billion in volume and 110 basis points of GOS. The Street production estimate is $36.4 billion, according to George.
