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United Wholesale Mortgage (UWM) is currently the largest mortgage lender in the United States, thanks to its low-interest strategy, which has put serious pressure on its competitors.
UWM raised $33.5 billion in the third quarter, beating rival Rocket Mortgage’s $25.6 billion. Purchase loans accounted for 82.7% of UWM’s mix in the third quarter.
“We recently said that our strategy of adding games will further differentiate us from our competitors.
“Thousands of lending professionals tried us for the first time since launching Game On, tested our technology and services, and quickly realized that our partnership with UWM could help us win in every market.”
With its Game On pricing initiative, UWM cut the price of all loans by 50-100 basis points starting in June, hurting competitors already struggling with shrinking margins.
Lenders struggling include lenders Homepoint and loanDepot. According to Game On pricing strategy, pure wholesale lender Homepoint reported a loss of $44 million, while loanDepot exited the wholesale channel after losing $224 million in the second quarter.
Ishbia said more than 17,000 lenders have joined mortgage brokerage channels this year, with about half of them coming directly from retail channels.
UWM reported third-quarter revenue of $325 million, up 51 percent from $215.4 million in the second quarter of 2022.
Compared to the third quarter of 2021, profit was down 1.29 % when there was a lot of REFI. “Over the last six quarters, we’ve bought an average of $24 billion (of mortgages).
We’re winning the buying market,” Ishbia said. Ishbia predicted UWM would account for 50 percent of the wholesale market share and was bullish on the channel’s growth even as its competitors’ exit, in part because of margin pressures.
“Game On is a strategy game that helps you grow your channel. Although UWM’s market share has dropped from 40% or 50% to 25%, it usually does more business if the mortgage broker is a 40% channel. But the strategy comes with a price.
Lenders’ sales revenue fell to 52 bps from 99 bps in the previous quarter. UWM had $799.5 million in cash and cash equivalents in the second quarter, compared with $958.7 million in the prior quarter and $950.9 million a year ago.
While he reiterated that Game On pricing is an investment, Ishbia did not say how long UWM would continue its pricing plan. “I don’t even see the Game On edge as a disadvantage. I see it as a long-term investment.”
Although the company focuses on loans, UWM said the fair value of its mortgage loans increased by $236.8 million, supporting third-quarter earnings. UWM’s principal balance was $306 billion as of Sept. 30, compared with $308.1 billion 12 months ago.
“To improve liquidity, we launched an unsecured credit facility with our largest shareholder in the third quarter in August,” said Andrew Hubecker, the company’s chief financial officer.
“At the end of September, we created a credit line secured by part of MSR with a load capacity of 1.5 billion.”
Management expects fourth-quarter sales of $19 billion to $26 billion and an operating margin of 40-70 bps. UWM expects revenues in 2022 to be approximately 75-100 basis points higher than sales margins.
“We went up when others went down, so look at the current numbers,” Ishbia said, citing “market re-tightening” that will push seasonality and buying volumes into the last quarter of 2022.
Reference Source: Housing Wire
