UWM Swings to Loss, Secures $2.05 Billion Investment
The mortgage lender’s gain margin widened 20 basis points from a year earlier to 133 basis points.
UWM Holdings (UWMC), the wholesale mortgage lender, swung to a $451.9 million second-quarter loss as interest-rate derivatives weighed on results, prompting a strategic capital investment and suspension of the common dividend.
The reversal came even as revenue grew from a year earlier and operating profitability improved sequentially. Other losses widened to $725.9 million from $148.5 million in the first quarter, principally because losses on other interest-rate derivatives reached $603.2 million.
Revenue rose 17% from a year earlier to $888.0 million, though it slipped 1.5% from the preceding quarter. The diluted loss was $0.24 a share, compared with earnings of $0.09 a share in the first quarter and $0.11 a share a year earlier. Adjusted EBITDA increased 15.5% sequentially to $185.9 million but declined 5% from a year earlier.
Loan-origination volume fell 11.7% from the first quarter to $39.7 billion and was essentially flat from a year earlier. Purchase volume rose 27.4% sequentially to $23.8 billion, while refinancing volume dropped 39.4% to $15.9 billion. Compared with a year earlier, purchase originations declined 12.9% as refinancing volume increased 28%.
The wider gain margin partly cushioned the lower production volume, though loan-production income declined sequentially to $527.2 million. Loan-servicing income rose to $220.5 million, while interest income increased to $140.3 million. UWM’s mortgage-servicing-rights portfolio grew 7.9% from the first quarter and 17.2% from a year earlier to an unpaid principal balance of $247.6 billion.
Expenses rose 10.4% sequentially and 20.6% from a year earlier to $635.1 million, with general and administrative expense climbing to $89.7 million. Total equity fell 38.4% from the first quarter to $985.3 million, while non-funding debt increased to $6.04 billion and the non-funding-debt-to-equity ratio nearly doubled sequentially to 6.13.
UWM announced a $2.05 billion strategic capital investment from Oaktree Capital Management and the Ishbia family, including $1.65 billion of preferred equity at closing and a planned $400 million Class A rights offering if needed. The proceeds are intended primarily to repay debt and mortgage-servicing-rights financing. The board also suspended the quarterly common dividend, directing capital toward the debt-reduction plan.