UWM loses money in 4Q but remains top lender

While United Wholesale Mortgage had its best year ever for purchase originations in 2022, its parent company lost money in the fourth quarter from a hit to mortgage servicing rights values.

UWM Holdings reported Wednesday a $62.5 million net loss in the final three months of last year including a $150.8 million decline in the fair value of mortgage servicing rights. But it was still profitable from operations, UWM CEO Mat Ishbia contended. That's a freefall from the third quarter's $325.6 million profit and $239.8 million in the fourth quarter of 2021, when the market was still hot. 

The company reiterated its claim as the industry's top lender, boasting of a 54% share of the wholesale market and 11% share of the overall market in the fourth quarter; for the full year, this was 38% and 8%, respectively. Ishbia suggested those shares could moderate, but attributed its success to the Game On pricing promotion and briefly mentioned major competitors in crowning UWM's performance. 

"You heard Wells back out, you see Rocket falling through the ground," he said, referencing the competitors' recent pullback and declining performance. "All these companies are really struggling because they are charging so much more to consumers."

While both of those companies have let go of staff, his firm has never undertaken layoffs, according to the CEO. 

For the year, the wholesale giant counted $931.9 million of net income, with a $284.1 million increase in the fair value of MSRs. It's an over 40% fall from 2021's $1.6 billion profit that included a $587.8 million decline in the fair value of MSRs.

UWM originated $25.1 billion, of which $21.7 billion was purchase volume, in the fourth quarter. That was a dip from the $33.5 billion total over the prior quarter and less than half of the $55.2 billion total originated in the fourth quarter of 2021, the firm's best fourth quarter ever. The highlight of the earnings for UWM was its record $90.8 billion of purchase volume across 2022, surpassing the $87.3 billion mark in 2021. 

Overall, its $127.3 billion in total origination volume was a significant drop from 2021's $226.5 billion. Last year's total volume was a tick below UWM's competitor 30 miles south in Rocket Cos., which reported a $493 million fourth quarter net loss Tuesday with $19 billion in originations. But Rocket had $133.1 billion in total volume for the year.

The mortgage giants have publicly sparred over UWM's broker ultimatum, while Ishbia took the battle with Rocket counterpart Dan Gilbert to the NBA with the purchase of the NBA's Phoenix Suns and WNBA's Phoenix Mercury. Ishbia Wednesday emphasized to an analyst that the basketball venture wouldn't be a distraction from UWM but rather a positive with more exposure.

UWM counted $2.1 billion in available liquidity in the fourth quarter. That amount includes $886.2 million of cash and self-warehouse and $1.25 billion of available borrowing capacity from a $750 million line of credit secured by agency MSRs and $500 million from an unsecured line of credit with Ishbia. 

To close the year, UWM reported an unpaid principal balance of MSRs of $312.5 billion, slightly down from $319.8 billion to close 2021. The lender's gain margin also fell slightly to 51 basis points in the fourth quarter from 52 basis points in the previous three months, and a leap down from the 80 basis point gain margin at the same time last year. For 2022, the figure was 77 basis points; a major dip from 2021's 114 basis points. 

UWM anticipates production between $16 billion and $23 billion in the first quarter, and margins in the range of 75 to 100 basis points. The lender outperformed expectations by analysts at Keefe, Bruyette & Woods and its first quarter guidance led them to believe UWM would step away from its competitive pricing strategies. 

Ishbia didn't specify whether the promotions would end, but doubled down on their success in helping UWM grow and suggested he is in complete control of margins across the industry. 

"It's helping them grow their business right now," said Ishbia, referring to pricing strategies for brokers. "But we aren't going to be at that investment of being at 50 basis point margins as you saw for two quarters. I don't expect that to continue unless I decide to do it again in the future."