UWM 2Q 2021 Profits Fall, Originations Soar From 2020

For UWM Holdings Corp., parent of United Wholesale Mortgage (UWM), the second quarter of 2021 was a mixed blessing.

The company reported earnings in the quarter of $138.7 million, a steep 84% drop from first-quarter earnings of $860 million and a 74% fall from the $539.5 million in the second quarter of 2020.

The decline in earnings was not unexpected, as the COVID-19 pandemic produced historically high profit margins for publicly traded, independent mortgage lenders in 2020 that could not be sustained as the economy reopened. UWM reported that its net income for the second quarter of 2021 included a $219.1 million decline in fair value of mortgage servicing rights. In addition, it noted that its total gain margin for the second quarter of 2021 was 0.81%, compared to 2.19% in the first quarter of this year and 2.43% in the second quarter of last year.

Even with the precipitous drop in earnings, UWM reported record loan origination volume for the quarter, with $24.1 billion in purchase volume, a 288% increase from $6.2 billion in the same quarter last year.

Mat Ishbia, chairman & CEO of UWM, said the earnings repot “demonstrated the strength of our business by delivering our best quarter of all time in terms of overall production and purchase production. As we have said previously, UWM is built to succeed not only when there is a refi boom and margins are at record highs, but also when margins are compressed and purchase business drives the volume.”

Richard Roque, Ph.D., managing director of Menlo Co., a boutique mortgage investment banking firm based in Wilbraham, Mass., said last week, however, that margins are not, in fact, compressed.

“This isn’t margin compression,” he said. “In 2018 we had margin compression because of compliance costs. Now we have margin correction; we’re going back to normative profit margins.”

UWM’s report follows the release last week of Rocket Companies’ impressive second-quarter earnings report, which showed the parent of Rocket Mortgage and other subsidiaries posted $1 billion in earnings for the quarter. While that was down from $3.8 billion for the second quarter of 2020, the company said it met or exceeded guidance for closed loan, net rate-lock volume, and gain-on-sale margins for the fourth consecutive quarter, while achieving a record loan origination volume of nearly $84 billion.

Roque had said Rocket Companies likely would do better than other publicly traded, independent mortgage lenders because of the diversity of its products and services.

Ishbia has said previously that the goal for UWM is to surpass Rocket Companies in loan origination, and with the second-quarter results UWM is a step closer to that goal.

“Consumers are increasingly coming to realize that working with a broker is the cheapest, fastest, and easiest way to get a mortgage, and as long as the wholesale channel flourishes, so will UWM as the undisputed leader and champion of the channel,” Ishbia said.

To read the full earnings report, click here.