Pontiac-based United Wholesale Mortgage Holdings Corp. posted third-quarter net income of $325.6 million on Tuesday on closed loan volume of $33.5 billion, outpacing rival Crosstown Rocket by 31%. Mortgage LLC as the leading originator for the quarter.
The step achieves a goal long sought after by UWM CEO Mat Ishbia, a billionaire who joined his father’s 12-person company after graduating from Michigan State University, where he played on his team. championship basketball in 2000. He took it over in 2013 and turned it into the publicly traded mortgage giant it is today with around 7,000 employees.
Ishbia pledged last year to make UWM the nation’s largest mortgage lender by 2024. And the company has waged PR wars against Rocket Mortgage’s parent company, Rocket Cos. Inc., and attacked its business model.
The feat is particularly telling because UWM originates mortgages exclusively through independent brokers who work directly with buyers and homeowners to find the best loan for them from multiple lenders. Brokers account for more than 20% of originations in the highly fractured industry, and UWM has dominated the channel as the top wholesale lender for the past seven years. Rocket, on the other hand, lends directly to customers as well as brokers.
Investors rewarded the news, sending UWMC shares up 8.1% to $3.34 in premarket trading on Friday. Rocket’s, meanwhile, fell 4.9% to $6.19.
“The third quarter results speak for themselves,” Ishbia said in a statement. “The momentum in the broker channel is accelerating. I’ve never been more proud of our team members and the broker community than I am today. Being #1 is amazing for UWM, but probably even more incredible for all Mortgage Brokers across America. is confirmation that Mortgage Brokers are the best place for consumers to get a loan and for Loan Officers to work, and that our sole purpose of helping brokers to win was the right strategic decision.
“Winning this championship will be celebrated, but we realize there is still a lot of work to do to help brokers continue to thrive and for UWM to continue winning with them.”
UWM’s victory comes as its profit fell 1.3% year-over-year on revenue of $684 million, which fell 0.9%. Rising interest rates have turned a refinance boom, in which Rocket has been particularly strong in recent years, into a buy-dominated market where brokers account for a larger portion of originations. And low levels of homes available for sale have limited the industry, prompting consolidation, buyouts at Rocket and layoffs at others.
UWM’s workforce shrank by more than 8,000 people as recently as the first quarter of 2022 through attrition, according to the company. It’s unclear how long he could stay at the top.
UWM expects loan volume to decline in the fourth quarter, forecasting it to be between $19 billion and $26 billion with a margin of gain between 0.4% and 0.7%.
Rocket, which also includes title insurer Amrock LLC, automotive retailer Rocket Auto and more, reported net income of $96 million on Thursday, down 93% year-over-year. other, on loan volume of $25.6 billion for the third quarter with a 2.69% gain-on-sale margin. For the fourth quarter, he expects closed loan volume of between $17 billion and $22 billion and a gain on sales margin of between 2.3% and 2.6%.
UWM had planned to beat Rocket in the July-September quarter. He offered a “Game On” pricing program to lower interest rates, which brought the company nearly 12,000 new brokers or those who hadn’t worked with UWM in the last quarter. It also set its quarterly outlook at the same level as Rocket’s: between $23 billion and $28 billion. Its 0.52% win margin, which was at the upper end of its 0.3% to 0.6% forecast, is significantly lower than Rocket’s due to the competitive nature of the wholesale channel. It is also down from 0.94% a year ago.
The market is unlikely to recover any time soon. Rocket CEO Jay Farner predicted further consolidation in the industry, with mortgage applications hitting their lowest level since the mid-1990s. The average 30-year mortgage rate in the United States was 7 .23% on Friday, according to Bankrate, compared to 3.28% a year ago. Earlier this week, the Fed raised interest rates by 0.75 percentage points for the fourth time this year and signaled that further hikes are likely.
In the third quarter, UWM’s expenses decreased 0.9% to $353.8 million. The average loan closing time was 17 days. The company said it was looking to reduce that number to 12 with its technology.
Refinances represented 17% of UWM’s mix at $5.8 billion, down 84% from 2021. The rest of the volume of $27.7 billion came from purchases, which increased by 4, 6%.
As refinances decline, maintaining servicing rights to particularly low-interest mortgages that are unlikely to be refinanced can provide a buffer for income during tough times.
Businesses that also retain the rights to service particularly low-interest mortgages that are unlikely to be refinanced can rely on this for a revenue stream. UWM’s mortgage servicing fees totaled $4.3 billion at the end of September, up 48% year-over-year.
The company’s 60+ day delinquency rate was 0.71% and its forbearance rate was 0.55%. The company ended September with $800 million in cash and cash equivalents, down 16%. On January 10, UWM will pay a quarterly dividend of 10 cents per share held on December 9.