UWM is hiring after banner year for purchase mortgage lending

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The nation’s biggest mortgage lender, UWM Holdings Corp., had its best year ever for purchase mortgage originations in 2024 — a year when home sales hit a three-decade low.

In reporting a $329 million 2024 profit Wednesday, UWM said it also tripled its refinancing volume by helping homeowners seize the moment when rates dipped briefly last fall.

At $1.83 billion, expenses were up 32 percent from 2023, driven by a 30 percent increase in salaries, commissions and benefits to $689 million, and a 53 percent increase in interest expense, to $491 million.

The Pontiac, Michigan-based wholesale lender finished the year with 1,800 employees — 400 more than it started with — and currently has more than 100 openings on its job board.

UWM Chairman and CEO Mat Ishbia said the lender continues to invest in its people and technology, and that company executives “believe we can do double the volume without adding to our fixed costs. The broker channel is incredibly strong right now, as it continues to post a higher share of the industry.”

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But UWM took some of the wind out of investors’ sails by issuing guidance indicating that executives expect mortgage originations for the first three months of 2025 to come in at between $28 billion and $35 billion.

That would represent a drop of as much as 27 percent from the $38.7 billion in purchase loans and refinancings UWM completed in Q4 2024.

In addition, UWM also trimmed its $242 billion mortgage servicing rights portfolio — a reliable source of fee income when lending slows down — by 19 percent from a year ago.

Shares in UWM, which in the last 12 months have traded for as little as $5.31 and as much as $9.74, initially fell 12 percent from Tuesday’s close of $6.58 after earnings were released. After hitting a low for the day of $5.81, UWM shares climbed back to close at $6.20, down 6 percent for the day.

UWM sets new record for purchase mortgages

According to the National Association of Realtors, last year was the worst year for existing home sales since 1995. But thanks to rising home prices, purchase mortgage lending measured by dollar volume edged up slightly last year, growing by 1.5 percent to an estimated $1.3 trillion.

UMW, which surpassed Rocket Mortgage as the nation’s biggest provider of home loans in 2022 by slashing rates, grew its purchase mortgage volume by 2.3 percent last year, to $96.1 billion — the company’s best year ever.

“We actually think that might be the highest of all time for any direct lender in history,” Ishbia said on a call with investment analysts.

When rates on 30-year fixed-rate mortgages descended to a 2024 low of 6.03 percent on Sept. 17, UWM also reaped the resulting “mini refi” boom, Ishbia said.

“We did over $17 billion [in refinancing] in the month of October,” Ishbia said. “There’s like a five week, minor rate drop … and with that little thing, we almost doubled our business.”

While total 2024 refinancings remained relatively subdued at $43.3 billion, that represented 201 percent growth from 2023, besting the 76 percent growth achieved by the industry as a whole.

As a wholesale lender, UWM works with independent mortgage brokers that shop around for the best loans on behalf of consumers. Although UWM has been mired in a controversy over its insistence that mortgage brokers not work with two of its rivals — Rocket and Fairway Independent Mortgage — the company says it’s growing its market share by offering better rates and the latest technology to homebuyers and mortgage brokers.

“We continue to dominate the purchase market by leveraging our competitive advantage, talent technology and world class service,” Ishbia said.

In the process, he said, UWM has helped the broker channel grow its share of the mortgage market to the highest it’s been in years.

Servicing portfolio shrinks as UWM sells rights

In addition to providing home loans, UWM also acts as a loan servicer for many of the mortgages it originates after they’re sold to investors.

UWM collects monthly mortgage payments from borrowers on behalf of investors — a business that generated $637 million in fee income last year.

But UWM’s loan servicing fee income dropped by $182 million compared to 2023, as the lender trimmed $57 billion from its mortgage servicing rights (MSR) portfolio to take advantage of generous offers from other servicers.

At the beginning of last year, for example, UWM raised more than $1 billion by selling nearly $90 billion in MSRs.

While it retained the servicing rights on 91 percent of the loans it originated last year, that’s down from 95 percent in 2023 and 97 percent in 2022.

Ishbia said UWM monitors its servicing portfolio “very closely” and could easily grow it back if it chose to by retaining the rights on more of the loans it originates.

“But at the same time, when people are going to pay us, you know, a seven multiple — I’ll sell it for a seven multiple, right?” Ishbia said. “Sometimes people are looking at paying those numbers, and if they’re not, then we retain it, because we feel really good about the asset.”

Demand for MSRs soared in the first half of 2024, but multiples on more recent bulk MSR trades have been closer to 5 to 5.5 times the servicing fees they generate, according to MCT’s February market update.

UWM revenue, profits rebound

Changes in interest rates can affect the fair value of MSRs — paper gains or losses that are reflected in a company’s bottom line.

Declining mortgage rates can require servicers to write down the fair value of their MSRs, since borrowers are more likely to refinance their new loan and might be serviced by someone else. Loan servicers can use interest rate derivatives to hedge against such writedowns.

While UWM saw revenue grow by 65 percent from 2023 to 2024, to $2.16 billion, it generated nearly three times as much profit in 2022 ($931.9 million) on similar revenue ($2.37 billion).

But UWM’s 2022 net income was boosted by an $869 million write up of the fair value of its MSRs, compared to a $330 million writedown in 2023 and a $295 million writeup last year.

After factoring that and other assumptions out, UWM’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were up 63 percent from 2022, to $460 million, bringing them in line with $478 million 2023 adjusted EBITDA earnings.

“These operational results were largely consistent with the prior year, even as we invested significantly in people, processes and technology to prepare the company for continued growth,” UWM Chief Financial Officer Andrew Hubacker told investment analysts. “We’ve invested in growing our operations, underwriting and technology teams to support increased production volume, and we believe that we have greater operational capacity than we did in 2021 when our origination volume exceeded $226 billion.”

In other words, “we believe that we can currently handle more than $100 billion of additional origination volume without increasing our fixed expenses,” Hubacker said.

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