United Wholesale Mortgage (UWM) returned to profitability in the third quarter, reporting $212.6 million in net income after a $451.9 million loss in the previous quarter, even as loan production and gain-on-sale margins declined.
The nation's largest wholesale mortgage lender reported Wednesday that total expenses fell 9.3% to $576.2 million, down from $635.1 million in the second quarter. The nearly $59 million reduction comes as UWM continues investing in artificial intelligence and broker technology while working to strengthen its balance sheet.
Total originations fell nearly 16% to $33.4 billion from $39.7 billion in the second quarter, with refinance volume accounting for most of the decline. Revenue slipped to $811.1 million from $888 million, while gain-on-sale margins narrowed to 124 basis points from 133 basis points.
The final results confirm preliminary figures UWM disclosed in October, when the company outlined plans for a substantial mortgage servicing rights sale and further debt reduction.
Expenses Fall Alongside Production
UWM's total quarterly expenses declined by $58.9 million, with reductions across several operating categories.
Salaries, commissions, and benefits fell to $197.7 million from $213 million in the second quarter. General and administrative expenses declined to $74.1 million from $89.7 million, while direct loan production costs dropped to $52.6 million from $72.2 million.
Excluding interest expense and servicing costs, UWM's operating expenses totaled approximately $377.3 million, down from $426.4 million in the second quarter, an 11.5% reduction.
That narrower measure also came in within the $375 million to $385 million range UWM projected in its October preliminary financial disclosure.
Chairman and CEO Mat Ishbia attributed part of the company's efficiency improvements to investments in technology.
"At the same time, the investments we’re making in artificial intelligence and technology are driving greater efficiencies across the business and helping lower expenses," Ishbia said in the earnings announcement.
The reductions are significant for a lender managing lower production volume, although the decline in direct origination costs also reflects fewer loans moving through the business.
UWM's cost structure matters because operating efficiency can influence how aggressively wholesale lenders compete on pricing while maintaining service levels and investing in their platforms.
Profit Rebounds After Second-Quarter Hedge Loss
UWM's return to profitability follows a second quarter marked by substantial losses on interest-rate derivatives.
As NMP previously reported, Ishbia attributed a $603.2 million derivatives loss to a hedge established around the company's unsuccessful attempt to acquire Two Harbors Investment Corp.
UWM said the hedge was associated with its expectation of potentially adding a substantial servicing portfolio through that transaction.
The third-quarter financial results reflected a considerably smaller combined impact from servicing-rights valuation changes and interest-rate derivatives.
UWM recorded a $470.3 million increase in the fair value of its mortgage servicing rights, compared with a $122.7 million decrease in the second quarter. Losses on other interest-rate derivatives narrowed to $481.5 million from $603.2 million.
The combined effect of those two reported items was a net loss of approximately $11.2 million in the third quarter, compared with a $725.9 million loss in the preceding quarter.
That swing helped drive the improvement in reported net income.
Adjusted EBITDA, which excludes certain valuation and hedging effects, declined to $178.3 million from $185.9 million in the second quarter and $211.1 million a year earlier.
UWM's reported earnings improved substantially, while its adjusted operating profitability remained under pressure.
Refinances Retreat, Purchase Lending Holds Steady
UWM's $33.4 billion in third-quarter originations represented a decline of approximately 20% from $41.7 billion a year earlier.
Refinance production fell to $10.6 billion from $15.9 billion in the second quarter, down roughly 33%. Purchase originations slipped approximately 4% to $22.8 billion from $23.8 billion.
Purchase loans accounted for about 68% of third-quarter production, compared with roughly 60% in the second quarter.
The shift highlights UWM's reliance on purchase lending when refinancing activity weakens.
Margins also tightened. UWM's total gain-on-sale margin declined nine basis points quarter over quarter and six basis points from the third quarter of 2025.
For brokers and loan originators, the results offer a window into the economics facing wholesale lenders. Lower refinance activity reduces production opportunities, while narrower margins place additional emphasis on operating efficiency and the profitability of each loan.
Balance-Sheet Restructuring Continues
The earnings report also provides an updated picture of UWM's financial position as it prepares to sell a substantial portion of its mortgage servicing rights portfolio.
The unpaid principal balance of mortgages underlying UWM's servicing rights increased to $269.8 billion at Sept. 30, up from $247.6 billion at the end of June.
UWM plans to sell servicing rights associated with $70 billion to $80 billion in mortgages during the fourth quarter, with anticipated proceeds exceeding $1.8 billion.
Those proceeds, together with $400 million in anticipated gross proceeds from the company's rights offering, are intended to support further repayment of non-funding debt.
UWM ended the third quarter with $4.98 billion in net non-funding debt, down from $5.56 billion at the end of June.
Its net non-funding debt-to-total preferred and common equity ratio declined to 1.77 from 5.65. The non-GAAP measure reflects both lower debt and a larger equity base, including $1.5 billion in redeemable preferred stock reported at quarter-end.
The restructuring follows UWM's $1.65 billion preferred-equity financing earlier this year and its decision to suspend common dividends after the second-quarter loss.
Selling servicing rights would provide additional cash for debt repayment, although it would also reduce the portfolio generating future servicing income.
Broker Technology Remains A Priority
UWM's financial restructuring has not stopped the company from expanding its broker-facing technology.
During the quarter, the lender introduced enhancements to ChatUWM, including AI-assisted document analysis, pipeline management, industry research, and marketing content creation.
It also launched a mobile version of ChatUWM featuring an AI voice assistant and introduced a Mortgage Matchup integration with ChatGPT to help consumers find mortgage professionals and access homebuying information.
The lender has continued expanding its use of VantageScore 4.0, including an extension into select non-agency loan products.
UWM reiterated that approximately 25% of borrowers evaluated through its VantageScore offering have received a more advantageous credit result, a figure NMP first reported in September.
The technology and credit-score initiatives form part of UWM's broader effort to expand the tools available to mortgage brokers while reducing operating costs.
UWM has put a $452 million quarterly loss behind it, but the lending side of the business remains under pressure. Loan volume is shrinking, margins are tightening, and the company's profit rebound owes more to a swing in servicing valuations and hedging results than to stronger originations.
