But United Wholesale Mortgage's home purchase originations were the best for any first quarter in the company's history.
"Operationally with higher margins and great volumes, we actually made money," Mat Ishbia, chairman, president and CEO, said on the earnings call. "And if you look at it compared to Q1 of 2022 actually, core-wise made more money operating than we did in 2022, which is still a good quarter in the industry."
UWM lost $138.6 million in the first quarter because of that servicing mark, compared with a
However, using adjusted EBITDA, which is not a generally accepted accounting principles measurement, UWM earned just under $141 million, compared with $60.4 million in the prior quarter and $128.4 million in the first quarter of 2022.
Origination volume ended the quarter at $22.3 billion, of which $19.2 billion came from purchase loans. This compared with $25.1 billion ($21.7 billion purchase) for the period ended Dec. 31, 2022 and $38.8 billion ($19.1 billion purchase) for the first quarter of last year.
Total originations were slightly lower than Keefe, Bruyette & Woods expectations of $23.6 billion.
Gain on sale margins rebounded to 92 basis points from 51 basis points in the fourth quarter. For the same period last year, gain on sale was 99 basis points. That also missed KBW's estimates of 95 basis points.
The company also reported lower total expenses of $300.9 million, versus $371.7 million in the fourth quarter and $364.5 million for the first quarter of 2022, "which also contributed to our strong core operational performance in Q1," said Andrew Hubacker, chief financial officer.
But those expenses are likely to increase in the current quarter, as UWM just hired approximately 100 people. "We're preparing for doubling this business over the next couple of years, right from the volumes that you're seeing right now and I'd be shocked if that didn't happen," Ishbia said.
UWM's results
"We still think the broker channel can be more effective for borrowers in a high interest rate environment because they're more likely to shop for a rate, which we think pairs nicely with having among the fastest turn times in the industry for borrowers to get approved and close their loan," Eric Hagen, an analyst with BTIG, said in his report on the results.
"We think the company can hold onto its momentum and market share in the channel without sacrificing credit quality, even as competitors like Rocket try
UWM conducted two MSR bulk sales and two sales of excess strips with an unpaid principal balance of $98 billion for net proceeds of $650 million, Hubacker said; after the quarter ended it conducted two additional MSR sales.
The company ended the quarter with liquidity of approximately $2.9 billion of available liquidity. That consisted of $1 billion of cash and self-warehouse funding capability. It also has $1.9 billion of available borrowing capacity, made up of a $1.4 billion facility secured by agency and Ginnie Mae MSRs and $500 million of unsecured credit.
During the quarter, UWM arranged for
For the current quarter, UWM guided to between $23 billion and $30 billion in originations, with margins between 75 basis points and 100 basis; that gain on sale outlook was similar to what it forecast for the first quarter.
Those margins are based on the current "trough times" for the mortgage industry, Ishbia said.
"I think that's what you'll see while the rest of the industry
If mortgage rates were to go down 100 basis points, Ishbia said UWM's originations would double and its margins would improve. "Anyone that understands the mortgage business or just the economy in general realizes that rates aren't going up too much more from all of our perspectives," he continued.
When asked about opportunities in jumbo originations because of
"But with that being said, that's all upside because right now our jumble production is very low," Ishbia said.
