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UWM CEO Mat Ishbia’s quest to become “the king of mortgages and basketball” is the subject of a lengthy article in The Wall Street Journal that alleges the “fast-talking 43-year-old billionaire” is “charting a risky path in both business and sports.”
Wednesday’s profile of Ishbia details the “aggressive deal-making” the Phoenix Suns have engaged in since Isbhia and his brother, Justin, bought a controlling interest in the NBA team in February. The 2,200-word article by Journal reporters Ben Eisen and Robert O’Connell compares Ishbia’s determination to win an NBA title to United Wholesale Mortgage’s aggressive “push to grab market share.”
Not everyone who works in mortgage lending will care how the Phoenix Suns’ new owners are faring after firing head coach Monty Williams and loading the team’s roster with stars like Kevin Durant, Bradley Beal and Devin Booker, who together will earn more than $120 million this season.
But Eisen and O’Connell also take a critical look at the risks UWM took to surpass Rocket Mortgage as the nation’s biggest mortgage lender last year — and the profits the Ishbia family is raking in even when the company is losing money.
‘Game on’ pricing initiative
Last summer, UWM announced a “Game On” pricing initiative that brought its rates down by 50 to 100 basis points (0.5 to 1 percentage point) across all loan types. With margins shrinking to as low as 0.51 percent per loan, UWM was in the red for two of the past four quarters — (Q4 2022 and Q1 2023).
According to the Mortgage Bankers Association, three out of four independent mortgage banks lost money in the last three months of 2022 as their business dropped off faster than they were able to trim expenses, resulting in an average loss of $2,812 per loan. Much of UWM’s first quarter net loss was driven by a $337 million write-down in the fair value of the company’s mortgage servicing rights (in addition to making loans, UWM collects payments on nearly $300 billion in mortgages on behalf of investors).
Profits have since rebounded — UWM last week reported $301 million in third-quarter net income, and Ishbia boasted that the company had onboarded 1,000 new employees to be prepared when rates come down and business booms.
“When rates turn we will be ready because we are investing heavily right now to ensure our brokers will win bigger than ever in the next refi cycle,” Ishbia said on a Nov. 8 call with investment analysts. “The combination of our purchase business and the scale and quality of our servicing book is so strong that our business can thrive in virtually all markets. We embrace these cycles each time they happen and we come out stronger, and no other lender can say that.”
But Eisen and O’Connell note that if demand for mortgages doesn’t pick up, “it might prove costly to retain employees and chase market share. High rates tend to be hardest on the kind of smaller shops that UWM relies on to send it customers.”
And if rates do fall, “there is no guarantee that UWM will hold its market share,” the Journal reporters noted. “Mortgage lenders are all effectively selling the same product, and customers tend to go wherever the rates are lowest.”
A UWM spokesperson declined Inman’s request for comment on that and other questions raised by The Wall Street Journal.
Millions in dividends paid to Ishbias
Regardless of whether the company is profitable, Ishbia and his family — including brother Justin and father Jeff, who both sit on the UWM’s board of directors — collect $150 million in dividend payments every quarter, the Journal noted.
“Over the 12 months through Sept. 30, the company [UWM] earned $329 million and paid out $601 million [in dividends] to Ishbia’s holding company,” the Journal reported.
A spokeswoman for the UWM told the Journal that UWM’s board of directors is comfortable with the distributions. But the Journal noted that the board is “stocked with his allies,” including former Detroit Pistons star Isiah Thomas.
Ultimatum to mortgage brokers
In addition to slashing rates and introducing new loan products and technology, in 2021 UWM launched a controversial initiative aimed at growing its business. As a wholesale mortgage lender, UWM works exclusively with mortgage brokers, and Ishbia often credits brokers’ ties to local real estate agents and homebuyers for the company’s success.
Ishbia took to Facebook in March 2021 to announce that UWM would no longer do business with mortgage brokers who send loan applications to rivals Rocket Mortgage or Fairway Independent Mortgage. At the time, he claimed that those companies were attempting to poach mortgage brokers’ clients through their direct and retail channels.
UWM faced criticism for Ishbia’s “All In” ultimatum to mortgage brokers and also became entangled in litigation as both a defendant and a plaintiff.
In its latest quarterly report to investors, UWM said it remains a defendant in a 2021 lawsuit filed by The Okavage Group LLC over the policy and continues to pursue a 2022 complaint it filed against mortgage broker America’s Moneyline Inc. for allegedly violating a pledge to work only with UWM. America’s Moneyline has denied the allegations and filed a counter-complaint.
Citing data from mortgage analytics firm Modex, The Wall Street Journal reported that “partly as a result of” Ishbia’s 2021 ultimatum, “thousands of mortgage brokers send nearly all of their business to UWM.”
“We’re trying to win every day,” Ishbia told The Journal, of both UWM and the Phoenix Suns.
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