While UWM Holdings Corp. logged record mortgage production in the fourth quarter, those numbers might have been higher were it not for some credit tightening the company did earlier in the year.
"We have chosen, even in the fourth quarter, less volume, less market share for quality and that's what we're always going to focus on because we're trying to win long-term," President and CEO Mat Ishbia said on the first conference call the company held since
The company reported fourth quarter income of $1.37 billion, largely driven by record origination volume of $54.7 billion. It was able to achieve a gain on sale margin of 305 basis points.
This compares with net income of $1.45 billion
For the fourth quarter in 2019, UWM earned $148.9 million. It originated $31.9 billion, but the gain on sale margin was 110 bps.
In particular, the company's purchase volume — not just in the fourth quarter, but for all 2020 — was lower than it could have been. That's because, at the start of the pandemic, UWM stopped originating Federal Housing Administration loans and
"I'm OK doing less business, because I'm going to make sure we steer this ship safely for the long-term," Ishbia said.
UWM brought back FHA products in December and plans to add jumbo back to the menu in March; both moves should boost purchase volume during 2021.
For the full year 2020, UWM originated $182.5 billion, of which just $42.9 billion was purchase. In 2019, the company did $107.8 billion, with $49.8 billion coming from purchase.
In the first quarter, UWM said it expects to have closed loan volume of between $52 billion and $57 billion. In the first quarter of 2020 it did $42.4 billion.
However, it is expecting to record a gain on sale margin of between 200 bps and 235 bps, which on a quarter-to-quarter basis would be 23% to 34% lower. But when compared with the first quarter of 2020, it would be an increase of between 111%-and 142%.
Ishbia aims to grow UWM's market share of 35% in the wholesale channel to 50% by 2025 or 2026. At the same time, he expects the wholesale share of the originations pie to grow from its current 25% to 33%.
"I think that share…will actually come from some of the top players in wholesale, the top 10. There's a wide gap in technology, in delivery, in speed of close where we are winning right now and a lot of other people have to significantly lower their margins just to get even close to the amount of volume that they want to compete with us," Ishbia said in response to a question.
Going public enhanced UWM's liquidity profile, Ishbia said, and the company expects to generate excess cash on its books.
"We will not let it sit here and go to waste," he said. "We either use it to grow the business or deliver it back to the shareholders."
