United Wholesale Mortgage (UWM) may be the nation’s largest mortgage originator, but even it isn’t immune to the challenges of the current housing market.
UWM Holdings Corp., the publicly traded parent of UWM, on Wednesday reported its second-consecutive quarterly loss as the value of its mortgage servicing rights (MSRs) sharply declined, and revenue and loan origination volume fell.
It still managed, however, to top its intrastate rival, Detroit-based Rocket Companies, in originations for the third straight quarter.
The Pontiac, Mich.-based company reported a net loss in the first quarter of $138.6 million, or 13 cents per diluted share, more than double the net loss of $62.5 million, or 3 cents per diluted share, it reported in the fourth quarter of last year. The result missed analyst expectations of a profit of 3 cents per share.
A year ago, UWM reported net income of $453.3 million, or 22 cents per diluted share.
UWM attributed the loss to a $337 million decline in fair value of MSRs. Its net revenue fell 46.7% to $161.3 million from $302.4 million in the fourth quarter of last year, and was down 80.4% from $821.8 million a year earlier.
'We Made More Money'
During an earnings webcast with analysts, UWM Chairman & CEO Mat Ishbia rebuked “silly reporters,” whom he said would focus on the quarterly loss because “they don’t understand the business.”
“We made more money in the first quarter than we did in the fourth quarter, or even in the first quarter of last year,” he said.
That was a reference to UWM reporting adjusted EBITDA of $141 million in the first quarter, more than double the $60.4 million reported in the previous quarter and $128.4 million from the first quarter of last year.
EBITDA — earnings before interest, taxes, depreciation, and amortization — is a widely used measure of core corporate profitability, but it is not a metric recognized under generally accepted accounting principles (GAAP).
“UWM is firing on all cylinders right now,” Ishbia said. “Our product portfolio is very strong; we are currently hiring in large numbers, and margins are healthy.”
The company reported a total gain margin of 92 bps in the quarter, up from 51 bps in the fourth quarter but down from 99 bps a year earlier.
Originations Fell 11.2%
UWM reported a significant drop in overall loan originations, which fell to $22.23 billion in the first quarter. That was down 11.2% from $25.1 billion in the fourth quarter and down nearly 43% from $38.8 billion a year earlier.
Despite the decline in originations, the total still topped Rocket Companies, which last week also reported its second-consecutive quarterly loss as originations fell to $16.93 billion.
Of the loans it originated, purchase loans totaled $19.2 billion in the first quarter, down 11.5% from to $21.7 billion in the previous quarter and roughly the same as the $19.1 billion it reported in the first quarter last year. Still, UWM noted that the $19.2 billion in purchase originations was a first-quarter record for the company.
Refinance volume, meanwhile, fell to just under $3.1 billion in the quarter, down 11% from $3.5 billion in the fourth quarter and down 84% from $19.7 billion a year earlier.
The unpaid principal balance (UPB) of MSRs totaled $297.9 billion as of March 31, compared to $312.5 billion as of Dec. 31, and $303.4 billion as of March 31, 2022, the company said.
UWM reported total equity of $2.9 billion as of the end of the quarter, compared to $3.2 billion as of both Dec. 31, 2022, and March 31, 2022.
The company ended the first quarter with approximately $2.9 billion of available liquidity, including $1 billion in cash and self-warehouse, and $1.9 billion of available borrowing capacity.
"The results of the first quarter again demonstrate that UWM will do what we say we are going to do,” Ishbia said. "We are on track with our plan and extremely well-positioned to take advantage of the next upcycle.”
Ishbia said the company’s production volume “was at the high end of our expectations, setting us up for a better 2023 than originally anticipated.”
He continued, “We had another dominant purchase quarter. We continued to arm brokers with great new product launches, positioning them to win in any market environment, and bolstering channel growth. While we can't control interest rates or the effect of those fluctuations on our MSR portfolio, we can control our operational profitability and have demonstrated that our business model performs despite the natural cyclicality that occurs in the mortgage industry. I am excited for what UWM has in store for the rest of 2023 and beyond."
