UWM bucks market pressures, posts 55% increase in net income in Q2
United Wholesale Mortgage Holdings Corp. on Tuesday posted a net income of $215.4 million in the second quarter, a 55% increase from 2021 as it bucked the pressures of higher interest rates and economic concerns.
The Pontiac-based lender that originates mortgages only through independent brokers posted the profits on $29.9 billion in loan origination volume for the April-to-June quarter. That was a 50% decline year-over-year, though it came in the middle of UWM's $26 billion to $33 billion projection range shared earlier this year. Its 1% gain margin surpassed the 0.9% high end of its guidance, as well.
"UWM's scale and agility, coupled with the momentum of the broker channel drove outstanding results in the second quarter," CEO Mat Ishbia said in a statement. "Not only were we able to deliver strong profitability, we also continued our streak of delivering significant purchase volume."
UWM's profit for the quarter was greater than that of crosstown rival Rocket Companies Inc., which includes its Rocket Mortgage LLC lending business, title insurer Amrock LLC, automotive retail marketplace Rocket Auto and more. Rocket said last week it made $60 million in net income in the second quarter and closed $34.5 billion in mortgages.
On its quest to surpass Rocket as the country's largest mortgage lender, UWM's third-quarter production outlook is the same as Rocket's: between $23 billion and $28 billion.
UWM's expected gain margin between 0.3% to 0.6%, however, is substantially lower than Rocket's 2.5% to 2.8% because of the nature of UWM exclusively originating loans through the wholesale channel as well as the introduction of its "Game On" pricing program at the end of June that decreased rates by 0.5% to 1% on all the loans it offers.
In the second quarter, UWM's revenue rose 16% year-over-year to $564.2 million. Expenses increased 1% to $348 million. The time it took to close a loan on average was 19 days. The company is looking to decrease that to 12 with its technology.
Refinances represented a quarter of UWM's mix at $7.5 billion, a 79% decrease from 2021. The rest of the $22.4 billion in volume came from purchases, which increased 7%.
The decline in market demand because of higher interest rates, inflation and low inventories has prompted workforce reductions at competitors, including Rocket — a move Ishbia has criticized publicly. He says UWM will not lay off workers. The lender says it now employs more than 7,000 people, which is down from more than 8,000 last quarter. A spokesperson attributed the decline to natural attrition.
As refinances fall off, retaining servicing rights of especially low-interest mortgages that are unlikely to refinance can offer a buffer for income during challenging times.
Companies that also retain the servicing rights of especially low-interest mortgages that are unlikely to refinance can count on that for a stream of income. UWM's mortgage servicing rights totaled $308.1 billion at the end of June, up 18% year-over-year.
The company's more than 60-day delinquency rate was at 0.69%, and its forbearance rate was 0.49%. The company ended March with $958.7 million in cash and cash equivalents, an 8.5% decrease. On Oct. 10, UWM will pay a quarterly dividend of 10 cents per share owned as of Sept. 20.
"We remain committed," Ishbia added, "to providing elite service, technology and speed to enable our clients, independent mortgage brokers, to shine and grow in any market environment."