Lawsuits, promo financing and other news on No. 1 lender UWM

March 27, 2024 5:30 AM

Enjoy complimentary access to top ideas and insights — selected by our editors.

United Wholesale Mortgage kicked off 2024 as the number one lender in the U.S. in overall and wholesale production as well as purchase mortgage originations, but it has not been all smooth sailing.

The company's fourth quarter purchase production of $20.68 billion topped Rocket's total fourth quarter closed loan volume of $17.26 billion, though its total volume of $24.4 billion for the period was lower than $29.7 billion UWM reported in the third quarter and $25.1 billion during the fourth quarter of 2022.

For the full year, UWM lost on a GAAP basis $69.8 million in 2023, as compared with $931.9 million of net income one year prior. The 2023 loss was driven by an $854.1 million mark-to-market value hit to its mortgage servicing rights.

Despite the lender's MSR challenges, Mat Ishbia, UWM's chairman and CEO, is undeterred: "I look at these things as opportunities," he said in the company's earnings call in February.

UWM is also facing challenges of another kind. Following a legal dispute over an employment contract the lender's employees were required to sign in recent years, a National Labor Relations Board judge ruled on Jan. 11 that it does in fact violate numerous labor laws.

Administrative Law Judge Susannah Merritt said in her decision that employees would read many of UWM's terms as unlawfully prohibiting them from discussing workplace conditions, disputes, wages, union efforts and more. The judge also found language around arbitration, social media use and media contact in violation of labor laws.

UWM announced in a statement that it disagreed with the judge's findings and planned to appeal, but should the NLRB ruling be confirmed, in addition to rescinding unlawful portions of the contract and distributing a revised version to current and former workers, the company must post a 4-page appendix, digitally and around its office, for a 60-day period which states the NLRB found it in violation of labor law and reasserts workers' rights.

While waging this and a number of other legal battles on the originations side of the business, UWM has taken a proactive step to help its broker partners get ahead of its rivals in the next wave of refinances by announcing Refi 100, a special 100-basis point pricing promotion for conventional rate-and-term refi rates.

In a November third quarter earnings call, Ishbia said the firm had hired more than 1,000 workers in preparation for a big, or mini, refi boom. Indeed, refis in the week ending Jan. 26 made up 34.2% of total mortgage applications, up from 32.7% the prior week according to the Mortgage Bankers Association's latest survey. In addition, Fannie Mae in January projected 2024 single-family refi volume to shoot up $490 billion from just $246 billion last year.

Catch up on all our recent coverage of the nation's top lender.

UWM claims spot as No. 1 lender while sustaining MSR-based net loss

UWM emerged as the nation's No. 1 lender at the end of last year, despite taking a loss on a GAAP basis for both the fourth quarter and full year 2023 resulting from a large mark-to-market hit to the values of its mortgage servicing rights.

"With respect to MSRs, unlike some of our competitors, we have not historically specifically hedged the MSR portfolio," said Andrew Hubacker, chief financial officer, during the company's earnings call. "Rather, we maintain our portfolio at levels such that we are confident that fair value impacts due to interest rate declines will over time be more than offset by an increase in origination income."

The servicing mark of $634.4 million turned the company from an operating profit as measured by the non-GAAP metric of adjusted EBITDA of over $99 million to a net loss of $461 million. The fourth quarter net loss compared with net income of $301 million in the third quarter and a fourth quarter 2022 net loss of $62.5 million.

Read more:

UWM posts loss due to MSR hit, but dominates purchase market

Statue of lady justice on bright background - Side view with cop

Studio_East - stock.adobe.com

UWM goes on the offensive in trademark infringement and EPO case

After sending a cease-and-desist in December to Ramon Walker, owner of brokerage Client Direct Mortgage and creator of a Facebook group dubbed "Rocket Pro TPO vs. UWM," the lender followed up by filing suit Feb. 14 in Michigan federal court, accusing Walker of using its logo in the Facebook group's banner. UWM also demanded that Walker pay an outstanding early payout balance of $124,011.37.

Using the logo has intentionally caused confusion in the mortgage marketplace and among customers of UWM's products and services, the wholesale lender claims. (The group removed it as of Jan. 5.) Regarding the early payout balance, Walker had done business with UWM as a non-delegated correspondent lender. From June 2020 through May 2023, at least twelve loans delivered by the broker were paid off within 180 days of disbursement, the suit states.

Walker has claimed that UWM has filed this suit as a warning to showcase "to all the other brokerages right now, those who may own millions in EPO, of what can happen [if they walk away]."

Read more:

UWM files suit against creator of Facebook group for brokers

justice lawyer / judge gavel working with legal documents in a court room

memyjo - stock.adobe.com

UWM gains upper hand against broker in ‘All-In’ lawsuit

U.S. Magistrate Judge Laura Lothman Lambert is recommending tossing a lawsuit over UWM's "All-In" initiative, suggesting the mortgage broker, The Okavage Group, didn't back up claims that the lender's decree is anticompetitive.

In March 2021, UWM made brokers agree not to do business with wholesale competitors Rocket Mortgage and Fairway Independent Mortgage Corp., and claims it had overwhelming buy-in from its partners. The Okavage Group's complaint, filed shortly after UWM's announcement in 2021, is one of five pending claims over the wholesale addendum detractors have deemed an "ultimatum."

"Plaintiff includes no factual allegations to plausibly allege the potential for genuine adverse effects on competition and thus, fails to allege a sufficient link between the ultimatum and harm to competition within the overall mortgage market or the wholesale retail mortgage market," the magistrate wrote in her recommendation.

Read more:

Broker's UWM "All-In" complaint should be tossed, judge says

Dennis - stock.adobe.com

UWM steals a march on rivals with refi pricing promotion for brokers

At the end of January, UWM announced Refi 100 for its broker partners, a 100-basis point pricing promotion for conventional rate-and-term refi rates. The deal, eligible for new locks through March 29, comes as refis remain muted amid elevated rates and sluggish origination activity.

"While big banks and retail lenders wait for the refi boom, UWM is making it happen for our partners right now," the company said on its website.

A UWM spokesperson said the promotion is intended to help brokers "build their book of business ahead of expected Federal Reserve rate drops later this year." Qualifying loans must be at least a year from their previous note date, and no seasoning is required for non-UWM loans, the lender said.

Read more:

UWM gives brokers 100 basis points for rate-and-term refis

UWM disputes charge its employment contract was unlawful

UWM must rescind unlawful portions of an employment contract it made employees sign in recent years and distribute a revised version to current and former workers, according to a Jan. 11 decision by Administrative Law Judge Susannah Merritt.

The ruling, still pending final approval by the 4-member National Labor Relations board, would apply to the lender's contracts in effect any time since Dec. 21, 2021. Merritt agreed with federal prosecutors that large portions of the contract were "overly broad, ambiguous and/or discriminatory."

UWM claimed its employment agreement is in compliance with current law. "We disagree with the finding of the Administrative Law Judge who failed to follow existing law and plan to appeal this politically driven ruling," said UWM in a statement.

Read more:

Judge finds UWM employment contract violated workers' rights