CEO Mat Ishbia says aggressive “Game On” pricing is still in place, but acknowledges wholesaler is seeking to boost profit margins in 2023.

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United Wholesale Mortgage lost money during the final three months of 2022 but retained its position as America’s biggest provider of home loans, a title it claimed for the first time during the third quarter.

Parent company UWM Holdings Corp. reported a $62.5 million fourth-quarter loss Wednesday, as revenue fell 50 percent from a year ago to $302.4 million.

While UWM finished the year in the red, it posted a $931.9 million full-year 2022 profit, down 41 percent from $1.57 billion in 2021. With the profitable refinancing boom of 2021 slowing to a trickle in 2022 as mortgage rates climbed, UWM saw revenue decline by 20 percent from 2021 to 2022, to $2.37 billion.

But as was also the case during the third quarter, UWM’s $21.7 billion in fourth quarter purchase loan production exceeded rival Rocket Mortgage’s $19 billion in total loan production — both purchase and refinancing.

As a wholesale lender working exclusively with mortgage brokers, UWM CEO Mat Ishbia is careful to credit the mortgage brokers who send business to UWM for the company’s success.

Mat Ishbia

Mat Ishbia

“While my competitors are cutting investments and laying off thousands and thousands of people, we continue to invest in technology, take care of our people and have never laid off a single team member in our 37 year history,” Ishbia said on the company’s fourth-quarter earnings call. “I’m extremely proud of our team members and the brokers who continue to push forward and grind and ultimately win regardless of the market — 2023 is another huge opportunity for UWM and the broker community to continue to separate ourselves further from our competition, invest in the future and continue to win together as a team.”

Investors took UWM’s earnings report as a positive, with shares in the Pontiac, Michigan-based wholesaler up 10 percent in afternoon trading and approaching a 52-week high. Shares in UWM have traded for as little as $2.84 and as much as $4.95 in the last year.

Ishbia — whose family last month closed a deal to acquire a majority stake in the Phoenix Suns and its sister WNBA team, the Phoenix Mercury — noted it’s the ninth consecutive quarter that UWM has paid investors a quarterly dividend of 10 cents per share. That’s an annual yield of nearly 10 percent at the current share price.

“I explained nine quarters ago when we first went public, I feel comfortable paying this dividend in various market environments, and we continue to demonstrate this in the best market conditions and even in very tough market conditions,” Ishbia said. “This will continue.”

UWM mortgage originations by purpose

Source: UWM regulatory filings

While rising mortgage rates took a toll on all lenders’ refinancing business last year, UWM fared better than many, slashing rates in June with a “Game On” pricing initiative aimed at helping the mortgage brokers it works with do more business with homebuyers.

UWM managed to boost purchase mortgage originations by 4 percent in 2022, to a record $90.8 billion. While UWM saw fourth-quarter purchase loan production fall by 12 percent from a year ago, to $21.7 billion, the company claimed an 11 percent share of the overall mortgage market and a 54 percent share of the wholesale channel during that period.

That’s a big leap from the 8 percent share of the overall market and 38 percent share of the wholesale channel UWM claims for 2022 as a whole.

“We continue to focus on our effort to help brokers win in the market. Our 54 percent market share of the broker channel in the fourth quarter is proof that partnership has never been stronger,” Ishbia said. “As I’m sure everyone on this call knows, that is an all-time market share record in mortgage and it’s truly an amazing accomplishment for the broker channel and for UWM as the partner.”

In reporting a $493 million fourth-quarter net loss Tuesday, Rocket executives said they’re gearing up to go head-to-head with UWM in the competition for homebuyers taking out purchase loans.

Rocket plans to target would-be homebuyers using the company’s personal finance app, Rocket Money, and by strengthening partnerships with real estate agents and building up business with mortgage brokers through Rocket’s wholesale channel, Rocket Pro TPO.

On Feb. 14, Rocket Pro TPO Executive Mike Fawaz took the stage at a company event to pitch mortgage brokers, declaring that UWM has backed down from its aggressive “Game On” pricing strategy.

Rocket is also taking aim at UWM’s “All In” policy of not doing business with mortgage brokers who send loan applications to Rocket or Fairway Independent Mortgage, rolling out a “bully shield” promising to indemnify brokers who run afoul of UWM.

UWM executives said they’re anticipating first-quarter loan production to be in the $16 billion to $23 billion range, with gain margin rising to 75 to 100 basis points, up from about 50 basis points in both the third and fourth quarters.

Asked if the higher gain margins mean UWM will be less aggressive in implementing Game On pricing, Ishbia said the program is still in place but acknowledged that he wants to see higher profit margins than the company achieved in the second half of 2022.

“The way I look at it is Game On has made a big impact,” Ishbia said on a call with investment analysts. “We still have very, very competitive pricing. That’s why the margins are still in that 75 to 100 range. But I have control of it. I decide when we want to change things and tweak things. And we’ve done things to help our brokers in certain ways and we have different initiatives out there to help brokers succeed and excel.”

On Jan. 15, UWM announced a new “Control Your Price” program that lets mortgage brokers slash up to 40 basis points per loan, with an upper ceiling of 150 basis points per quarter.

“Sometimes 10-20 basis points is all an LO needs to win over a real estate agent or get creative on a borrower’s loan,” UWM said in an announcement provided to Inman. “With Control Your Price, they now have the ability to modify pricing as they see fit.”

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Email Matt Carter

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