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While others are downsizing, the nation’s biggest mortgage lender hired 1,000 employees and remained profitable during the third quarter even as rising interest rates kept a lid on loan production.
Mat Ishbia, the chairman and CEO of UWM Holdings Corp., said the Pontiac, Michigan-based wholesaler is investing in new technology and hiring new team members to ensure UWM is prepared when mortgage rates come down and business booms.
In the meantime, UWM reported $301 million in third quarter net income Wednesday, a 31 percent boost from Q2, as revenue grew by 15 percent from the previous quarter to $677 million.
That’s despite the fact that at $29.7 billion, Q3 loan production declined 7 percent from the previous quarter and was down 11 percent from a year ago.
While UWM’s bottom line got a boost from a $92.9 million markup in the fair value of its $281.4 billion mortgage servicing portfolio, it’s also making a bigger profit on the smaller pool of loans the company originates. Total gain on sale margin hit 97 basis points in the third quarter, up from 88 basis points in Q2 and 52 basis points a year ago.
Shares in UWM, which in the last year have traded for as little as $3.23 and as much as $6.98, soared more than 13 percent after earnings were announced and Ishbia briefed investment analysts Wednesday morning, sharing credit for the company’s success with the mortgage brokers it does business with.
Mat Ishbia
“You’re now seeing the reality of what I’ve been saying for years: When rates rise both UWM and brokers shine, while others struggle,” Ishbia said on a call with investment analysts. “Despite 25-year-high mortgage rates and low housing inventory, we continue to thrive in all aspects of the business — including having one of our best purchase quarters of all time.”
UWM mortgage originations by quarter
UWM originated $25.9 billion in purchase mortgages in July, August and September — the third-best quarter in company history and more than rival Rocket Mortgage’s total Q3 loan production of $22.2 billion.
Since overtaking Rocket last year as the nation’s biggest provider of home loans, UWM has put even more distance between the two companies. During the first nine months of the year, Rocket has originated $61.5 billion in mortgages, down 46 percent from the $114.1 billion in mortgage production at the same point a year ago.
So far this year, UWM has managed to originate $83.9 billion in mortgages, a more modest drop of 18 percent compared to the first nine months of last year.
“It’s no secret why UWM and the broker community continue to do so well in the purchase market,” Ishbia said. “Purchase transactions require an expert. They require more attention to detail. They require a higher level of service for real estate agents, consumers and brokers — everybody. And they require an efficient process where speed matters for hitting contract deadlines.”
Like other lenders, UWM has seen its refinancing volume shrink to a trickle. During the third quarter, the company refinanced $3.8 billion in mortgages — about the same as Q2, but less than a tenth of the refi business UWM was doing in late 2020 and early 2021, when rates were at historic lows.
“When rates turn we will be ready because we are investing heavily right now to ensure our brokers will win bigger than ever in the next refi cycle,” Ishbia said. “The combination of our purchase business and the scale and quality of our servicing book is so strong that our business can thrive in virtually all markets. We embrace these cycles each time they happen and we come out stronger, and no other lender can say that.”
In its most recent annual report to investors, UWM said it employed approximately 6,000 team members as of Dec. 31, 2022. In reporting second-quarter results, UWM did not provide a headcount but said the number of team members was down from a year ago. Ishbia has previously said that UWM hasn’t laid off employees, but can downsize through attrition.
“Our culture is vibrant,” Ishbia said Wednesday. “We are hiring. We are growing, we are investing in technology. In the first seven years we’ve been in business we’ve never laid off a team member. And in fact, in the third quarter, we hired over 1,000 team members and we’re gonna hire more again in the fourth quarter.”
Although UWM’s Q3 hiring would represent a 17 percent increase from year-end 2022 staffing levels, the company did not immediately respond to a request for the company’s current headcount.
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