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The nation’s largest mortgage lender is expanding its rivalry with Rocket Companies into the arena of loan servicing, but will have a lot of catching up to do with Rocket set to acquire the biggest servicer in the business, Mr. Cooper.
United Wholesale Mortgage (UWM) announced Wednesday that it’s signed a long-term agreement with ICE Mortgage Technology and will bring its loan servicing — the collection of monthly payments from borrowers — in-house.
Mat Ishbia
“This will mean a better experience for borrowers and a stronger, stickier relationship with their brokers, which we believe could result in more repeat business and referrals — the foundation for long-term growth and success,” UWM CEO Mat Ishbia said in a statement.
Rocket’s pending $9.4 billion acquisition of Mr. Cooper prompted UWM — which surpassed Rocket Mortgage as the nation’s largest mortgage lender in 2022 — to pull its mortgage subservicing contract with Mr. Cooper this month.
UWM, which famously won’t work with mortgage brokers who do business with Rocket, owned the servicing rights to 729,781 mortgages with a total outstanding balance of $242.4 billion at the end of the year — a business that generated $637 million in fee income in 2024.
UWM’s shrinking mortgage servicing portfolio
Mr. Cooper, Rocket Mortgage and UWM mortgage servicing rights (MSR) portfolios, including subservicing. Source: Company earnings reports.
Rocket and Mr. Cooper, by comparison, were together servicing (or subservicing) more than $2.15 trillion in mortgages at the end of the year — a combined portfolio nearly nine times larger than UWM’s.
Loan servicers collect monthly mortgage payments from borrowers on behalf of lenders or investors in mortgage-backed securities who own the loans. It’s an attractive business for many mortgage lenders, because the fees they can earn from loan servicing are a steady source of income that can even out ups and downs in home sales.
By maintaining close contact with borrowers, lenders who service their own loans are also in a better position to do repeat business with them when they’re ready to refinance or buy their next home.
Rocket claims that it “recaptures” 83 percent of its servicing clients when they’re ready to take out another loan. The Detroit-based lender’s client base is about to get a lot bigger, with Rocket setting its sights on acquiring not only Mr. Cooper but real estate brokerage Redfin for $1.75 billion.
Together, Rocket and Redfin attract 62 million visitors to their websites every month, while Rocket and Mr. Cooper’s combined client base of 9.5 million servicing customers represents opportunities for repeat business.
“Integrating Rocket’s originations-servicing recapture flywheel with Mr. Cooper’s servicing platform will drive down costs and improve the experience for the companies’ nearly 10 million combined clients,” company executives said in outlining the rationale for the deal.
Lenders who want to be in the loan servicing business can retain the mortgage servicing rights (MSRs) on the loans that they originate when they are bundled up into mortgage-backed securities (MBS) and sold to investors.
They can also acquire MSRs from other lenders who need the cash — or don’t want to be in the servicing business. Lenders who want to keep their MSRs but don’t want to service the loans can also contract with subservicers, as UWM has done in the past.
UWM’s MSR portfolio has been shrinking since 2021, as the Pontiac, Michigan-based lender sold servicing rights to raise money. As an example of one such deal, at the beginning of last year, UWM sold the MSRs on $70 billion in mortgages for $941.2 million.
Using tech to leverage economies of scale
Loan servicers benefit from economies of scale, as executives at Mr. Cooper have said of the company’s investment in AI and other technology to slash expenses. Two years ago, Mr. Cooper executives revealed the company was spending “several hundred million dollars a year” on call center operations, and expected to achieve $50 million in annual savings at the outset of a “multiyear” artificial intelligence project.
By partnering with ICE Mortgage Technology, UWM gets immediate access to what the companies claim is ICE’s “industry-leading MSP loan servicing system.”
UWM said it selected MSP “for the system’s powerful features, scalability and capacity to support outstanding customer service that fosters borrower retention, and the fact that ICE is an independent, neutral and proven technology provider.”
UWM will also employ ICE Servicing Digital, a homeowner portal with “retention and recapture features,” aimed at winning repeat business, and ICE Loss Mitigation, which helps homeowners facing hardship connect with assistance.
“While we are excited about the cost savings for UWM, we’re even more excited about the opportunity to help brokers deepen their relationships with borrowers by leveraging MSP,” Ishbia said.
Ben Jackson
ICE President Ben Jackson said in a statement that the company is “honored that UWM has entrusted us to supply the technology underpinning its new servicing strategy.”
It’s the second big tech partnership for UWM this month, following the announcement of a “strategic, industry-transformative agreement” to integrate Google Cloud AI and machine learning tools into UWM’s lending platform.
Interest rate risk
While mortgage servicing has been a profitable business for Mr. Cooper, it’s not without risks. Loan servicers are expected to help homeowners avoid foreclosure, a task that can prove demanding during economic downturns.
MSR portfolios are also sensitive to fluctuations in mortgage rates.
When interest rates go up, demand for purchase mortgages and refinancing often wanes. But MSRs become more valuable because borrowers are less likely to refinance and end up with another loan servicer.
When mortgage rates go down, loan servicers must often make adjustments to the fair value of their MSR portfolios, as borrowers are more likely to refinance and exit the portfolio.
Servicers who purchased MSRs during the pandemic era “have found themselves in the sweet spot, as mortgage holders remain reluctant to trade in low-priced loans,” outsourcing and advisory firm SitusAMC said in an analysis released Wednesday, “Mortgage Servicing Rights in 2025: Navigating Market Volatility.”
Mark Garland
The “million-dollar question” is where interest rates and mortgage origination volume will land over the next 12 to 18 months, SitusAMC executive Mark Garland said in a statement.
“Volume is everything,” Garland said. “Volume is going to be the issue that will keep people in the [loan servicing] business or drive them out.”
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