Ratings agency flags CEO Mat Ishbia and reliance on wholesale channel as risks for downgrade
Fitch Ratings has assigned a 'BB-' rating to UWM Holdings' $800 million unsecured notes maturing in 2030. The notes, issued with a 6.625% interest rate, are guaranteed by United Wholesale Mortgage (UWM), the primary operating company of UWM Holdings.
The proceeds will be used to repay part of the company’s outstanding mortgage servicing rights (MSR) facilities, according to Fitch.
Fitch’s assessment is supported by UWM's position as the leading wholesale mortgage lender in the US, holding a 43% market share in the wholesale channel. The company was also recognized as the nation’s largest mortgage originator in 2023 and in the first nine months of 2024.
“The company has a dominant position within the wholesale channel with a market share of 43%, and was the nation's largest mortgage originator in 9M24 and FY23,” Fitch said in a note, citing data from Inside Mortgage Finance.
“The positive outlook reflects the significant strengthening of UWM's franchise over the last several years, which should increase the durability of its business model through market cycles. It also reflects improvements to the company's funding profile and liquidity resources.”
Fitch also pointed to several risks that constrain UWM's rating, including the cyclical nature of mortgage origination and the company's reliance on secured, short-term, uncommitted funding. UWM’s exclusive focus on the wholesale mortgage channel limits its potential to capture a larger share of the overall mortgage market.
The report also said president and CEO Mat Ishbia is an “elevated key person risk”.
Fitch noted that changes in leadership or reduced involvement by the Ishbia family could negatively impact UWM’s growth trajectory and operating performance.
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Fitch also outlined other factors that could lead to an upgrade in UWM's rating, including successfully refinancing or repaying the $800 million unsecured notes due in 2025 without further encumbering assets. Maintaining corporate leverage at or below 1.0x and improving liquidity resources above 30% of total debt were also identified as factors that could enhance UWM’s financial standing.
Meanwhile, a rating downgrade could result from sustained corporate leverage above 1.5x, diminished liquidity resources, or increased reliance on secured funding that reduces unsecured debt below 10%. Regulatory scrutiny or substantial fines could also negatively affect UWM’s rating.
Fitch stressed the importance of UWM maintaining its leadership position in the wholesale market and demonstrating strong corporate governance practices to preserve its financial stability and rating.
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