Credit ratings and equity researchers are generally moderating their view of public nonbank mortgage companies as earnings get reported, but they foresee outlooks potentially stabilizing if they address certain market changes.
For one, while some origination volume numbers did get somewhat of a seasonal lift in and a bit of a reprieve in the second quarter, analysts' responses show they expect the conditions to be more challenging given
Stock analysts at Keefe, Bruyette & Woods reduced the price target for United Wholesale Mortgage's rival Rocket Mortgage from $20 to $19 and with a nod to the broader challenge of "a smaller second-half origination market amid the higher rate environment."
Also researchers at BTIG cut projections for Better's adjusted earnings per-share from -$2.42 to -$3.68 for 2026, from $1.50 to -$0.24 for 2027, and from $4.50 to $3.04 for 2028, pointing to a slower industry recovery reflecting "the impact of higher rates on origination volumes."
The analyses are in line with the fact that while the average Freddie Mac mortgage rate did plateau for a period during the second quarter, it was still generally higher than in the previous fiscal period and has been rising since July.
Other takeaways from earnings
Also worth noting is that Fitch's downgrades of UWM's mid-range speculative grade BB-minus to a lower-end B-plus highlight another hurdle related to the "highly cyclical nature of the mortgage origination business" as other
The downgrades show analysts are focused on how companies manage efforts to raise capital to keep funding originations and servicing strategies in an environment where loan volumes may be lower going forward.
Fitch ratings across nonbank mortgage firms have typically ranged from a low-end investment grade ratings of B to BBB, according to an April report a spokesperson said was indicative of broader trends. That suggests at least some of UWM peers will be in a similar rating position.
Fitch's chief concern about UWM in the downgrades is a jump in leverage from 3.2x in the first quarter to 6.1x during the second. It also offers a mixed but ultimately stable outlook for
The rating agency calls the investment "leverage neutral" given the intended use to repay secured debt. It also notes that the investment includes "an offering of stock purchase rights that could reduce leverage."
However, Fitch said that it's treating the perpetual preferred stock deal as debt in its ratings, because coupons must be paid in cash with less favorable terms if certain triggers are breached.
Coupons must be paid in cash: after year five, if liquidity drops lower than $500 million, tangible net worth slides below the liquidation preference of the preferred shares, or specified warehouse covenants get breached, Fitch noted.
That said, the difference in payments creates incentive to avoid these outcomes and Fitch assigned a stable outlook to UWM, suggesting it foresees current ratings being on an even keel going forward.
Additional reactions to United Wholesale's results that point to industry takeaways include a BTIG equity researchers' reduction in UWM's post-capital raise price target from $4 to $2, with notes about operating results and unexpectedly high hedge losses.
If unexpected rate shifts persist, more hedge losses may be on the way. While hedging with financial instruments is designed to address rate risk, making them helpful relative to leaving a company unhedged, movements outside of the anticipated rate paths can still lead to losses.
