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UWM's Q2 Profit Up YOY, Despite Steep Drop In Originations

David Krechevsky
Aug 09, 2022
Uwm front building with sign

Q2 net income was up 55% from last year, while originations were down nearly 50% YOY

Facing higher mortgage rates and a cooling housing market, UWM Holdings Corp. (UWM) saw its mortgage originations cut nearly in half in the second quarter, but still managed to increase profit year over year.

The publicly traded parent of United Wholesale Mortgage today reported net income of $215.4 million, or 9 cents per diluted share, for the second quarter of 2022. That was down 52.5% from $453.3 million in the first quarter, but up 55% from net income of $138.7 million in the second quarter of last year. 

The results beat analysts expectations of 5 cents per diluted share, as reported by ETF Daily News.

Net income for the second quarter included a $26.2 million increase in fair value of mortgage servicing rights (MSRs), the company said. Unpaid principal balance of MSRs increased to $308.1 billion, with a weighted average coupon (WAC) of 3.19% as of June 30, 2022, compared to $260.5 billion with a WAC of 2.97% at June 30, 2021. The WAC is the average gross interest rate of the underlying mortgages in a mortgage-backed security.

Loan origination volume for the quarter was $29.9 billion, which included $22.4 billion in purchase volume, the company said. Overall, originations were down 23% from the first quarter and down 49.5% from the second quarter of last year. Total gain margin was 99 basis points (bps) in the second quarter, up from 81 bps in the same quarter last year.

Refinance volume totaled $7.5 billion, down 62% from the first quarter and down 78.7% from a year earlier.

The company said it anticipates third-quarter production to be in the $23 billion to $28 billion range, with a gain margin from 30 to 60 bps.

"UWM's scale and agility, coupled with the momentum of the broker channel, drove outstanding results in the second quarter,” said UWM Chairman and CEO Mat Ishbia. “Not only were we able to deliver strong profitability, we also continued our streak of delivering significant purchase volume. We remain committed to providing elite service, technology, and speed to enable our clients — independent mortgage brokers — to shine and grow in any market environment."

During an earnings call with analysts and news media, Chief Accounting Officer Andrew Hubacker acknowledged that UWM has continued to reduce its staffing levels through attrition, but did not provide details on the number of positions that have not been filled. Ishbia has publicly criticized other companies in the industry, including its crosstown rival Rocket Mortgage, for laying off workers.

UWM also noted that BOLT, its latest underwriting technology that launched in the third quarter of last year, saw an increase in adoption in the second quarter from the first quarter. 

“We continue to see this groundbreaking technology cut application to CTC (clear to close) on conventional loans that utilize BOLT by an average of approximately 4 business days, while also improving underwriting efficiency,” UWM said.

UWM said it averaged 19 business days from starting an application to getting it cleared to close in the second quarter, while estimating the industry average of 44 days for the first quarter.

Also in the quarter, UWM launched Boost, an exclusive platform that provides independent mortgage brokers with streamlined access to purchase tailored leads, and helps them stay in touch with past clients, connect with real estate agents, and opt into live call transfers, the company said. The new platform is designed to support additional long-term business growth for the wholesale channel.

On June 22, UWM also launched its "Game On" pricing initiative, which it said will help capture market share and promote and grow its broker channel.

“As we look forward, I am confident that our strategy to grow the broker channel is working,” Isbhia said. “With our Game On initiative, we are already seeing the benefits of new brokers working with us as well as an uptick in new loan officers joining the channel, and an acceleration of traffic to our site. All of this gives us the chance to demonstrate our elite service, speed and technology, helping us further grow the broker channel and our own market share.”

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