Home News United Wholesale Mortgage second-quarter profits surge as loan volumes fall

United Wholesale Mortgage second-quarter profits surge as loan volumes fall

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The publicly traded parent of Pontiac-based mortgage lender United Wholesale Mortgage did the unthinkable in the second quarter as the mortgage market struggled. Improved profitability.

UWM Holdings Corp. (NYSE: UWMC) reported Tuesday morning that its second-quarter net income (earnings) increased more than 55% year-over-year to $215.45 million. This is despite a 50% decline in mortgage originations.

Tuesday’s quarterly report and subsequent earnings call gave UWM chairman and CEO Matt Ishbier a slight hit in the head, following last week’s earnings call to his main rival Detroit. Headquartered Rocket Companies Inc. reported: Sharp drop in profitability.

“UWM has been waiting for a rising interest rate environment so I can prove what I have been saying all along: gaining market share when other companies are exiting the business,” Ishbia told analysts. I continue,” he said. “We are aggressive in this environment.”

Ishbia reiterated that a key part of the company’s “aggressive” strategy is reflected in “Game On,” a pricing initiative announced in late June.

While this could be a boon for consumers who face rising mortgage payments as interest rates rise from record lows, Ishbia said the initiative will help UWM dominate the market. He stressed that it would also help advance the company’s goal of growing the wholesale channel in the lender mortgage market. GameOn’s initiative will bring more brokers and loan officers to the channel, said Ishbia.

Ishbia said other lenders cannot compete with the pricing his firm offers, which he hopes will lead to an increase in UWM’s market share.

“Our cost to originate (a loan) is clearly lower than anyone else in the wholesale and retail channels, thanks to our technology,” said Ishbia. “So[the other lenders]are holding back a bit. And they’re all lowering interest rates, which helps all brokers … but none of them reached the level we’re at. I can’t…because the transmission cost is too high.”

For wholesale loans, the lender gives the mortgage broker a discount on the loan, and the broker adds a commission to this. Retail lenders deal directly with borrowers for a built-in fee.

UWM’s reported earnings per share and earnings numbers beat analyst expectations, with the company’s stock up about 4% in early morning trading to about $4.18, compared to about $4 in intraday trading. began to return to

The company’s total loans in the second quarter were just under $30 billion, of which three-quarters were purchases rather than refinancings.

By comparison, rival lender Detroit’s Rocket Companies Inc. last week reported a 94% drop in profitability, reaching $60 million in the second quarter. Rocket, his mortgage parent company, also saw total lending decline by about 50% as interest rates, inflation and other factors tightened the housing market.

UWM had about 7,000 personnel as of June 30, a spokesperson told Crain’s. That’s a reduction of about 1,000 employees since the spring, according to UWM’s securities report.

A spokeswoman said the headcount reduction was due to “attrition.”Ishubia has resolute Talking about not implementing job cuts at his company, he told analysts on Tuesday that the strategy will help the company be ready when the overall market returns to its growth trajectory.

UWM’s earnings report on Tuesday showed salaries and other related costs were down about $34 million from last year.

For the third quarter, the company expects loan volumes of $23 million to $28 million, with a margin on sale (a key measure of a lender’s profitability) in the range of 30 to 60 basis points. .

Such margins would be down from the 99 basis points the company reported in the second quarter, and executives attribute the expected decline to Game On’s pricing initiatives.

Ishbia has repeatedly emphasized that the initiative is worth the investment, saying the investment is cheaper than buying the company and will allow the company to become a dominant player in the years to come.

“I haven’t played the third quarter game. I haven’t played the fourth quarter game,” said the CEO. “I’m playing the 2023, 2024, 2025 game and I’m really happy about it.”

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