Performance was influenced by MSR sell-off
UWM Holdings Corporation (UWMC) has reported a profit decline in the second quarter of 2024 as mortgage origination volumes softened.
United Wholesale Mortgage’s parent company posted a net income of $76.3 million for Q2, down from $180.5 million (57.7%) in Q1. This decline was tied to a $115.3 million decline in mortgage servicing rights (MSR) value.
UWMC chairman and CEO Mat Ishbia (pictured) explained that UWM has been actively managing its MSR portfolio in response to fluctuating interest rates. The company has reduced its MSR holdings through sales and has benefited from rising prepayment speeds.
“We continued to execute on our consistent strategy of opportunistically selling MSRs, and we have generated close to $2.4 billion in net proceeds from bulk and excess sales through the end of the second quarter,” Ishbia said in the company’s earnings call.
The company’s unpaid principal balance of MSRs decreased to $189.5 billion at the end of the second quarter, down from $229.7 billion at the end of the first quarter.
“Proceeds from these sales have been used to delever our balance sheet, increase production and invest in our business while also maintaining a consistent dividend for our shareholders,” Ishbia added. “These sales have been targeted at our higher coupon MSRs and allowed us to significantly derisk the portfolio.”
The wholesale giant continued to invest in technology and platforms to support its growth strategy. Recent initiatives include the launch of TRAC+, a title review and closing platform, and ChatUWM, an AI-powered smart search tool for mortgage brokers.
Despite lower profits, total loan origination volume for Q2 2024 reached $33.6 billion, up from $27.6 billion in the first quarter and $31.8 billion a year ago. Purchase originations accounted for $27.2 billion of the total volume.
“Industry volume in the first half of 2024 versus 2023 is about the same,” said Ishbia. “Most people are living in the purchase-driven market, but there’s still tremendous upside that lies ahead.”
UWMC reported a total gain margin of 106 basis points, up from 88 basis points in the second quarter of 2023. Adjusted EBITDA came in at $133.1 million, compared to $125.4 million in the same period last year.
The lender ended the second quarter with approximately $2.7 billion of available liquidity, including $680.2 million in cash and available borrowing capacity under secured and unsecured lines of credit.
Looking ahead, UWMC anticipates third-quarter origination volume between $31 billion and $38 billion, with a gain margin ranging from 85 to 110 basis points.
UWM remains the largest wholesale mortgage lender in the United States, with a market share of approximately 15%.
“With wholesale channel market share at a 15-year high, we are in a prime position to capitalize and grow when rates inevitably drop. UWM has never been as prepared for the upcoming opportunity as we are now,” Ishbia said.
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