UWM concedes but defiant in its views on Two Harbors' board

UWM Holdings remains defiant following the vote by Two Harbors Investment shareholders to spurn its offer for the agreed to deal with CrossCountry Mortgage.

But the company might be better off for not having to go through with the deal, an analyst said.

"This chapter of the months-long saga with Two Harbors is now closed," a statement from UWM said. "Throughout this process, our offers were superior, but their Board's conduct was both inappropriate and consistent with their track record."

The deal with CrossCountry is for $12 per share cash, plus a stub dividend payment when it closes; Keefe, Bruyette & Woods estimates this will come out around 23 cents per share. The parties expect it to be completed in August.

UWM Holdings' final offer was to give Two Harbors' shareholders the option to take $12.50 per share in cash. However, the default offer remained throughout the process at 2.3328 shares of UWM stock for each share of Two Harbors.

Consequently, the value of the all-stock offer declined commensurate with each drop in UWM's per share price as the process continued.

Two Harbors opened a brief window in June, with CrossCountry waiving a no solicitation clause, for UWM to make a new offer. But this bid had to be all-cash. Prior to this comment, UWM said it was willing to make adjustments to the either/or bid.

A June 11 video meeting took place between the respective CEOs, Bill Greenberg of Two Harbors and Mat Ishbia of UWM. The outcome of the meeting resulted in dueling shareholder letters which sounded like they were describing two different events.

While UWM, parent of United Wholesale Mortgage, did not comment on what is next for the company, the analysts at Keefe, Bruyette & Woods said "a meaningful dividend cut is likely and see that as a positive catalyst as the company's leverage would start to decline."

The original transaction with Two Harbors would have improved UWM's leverage because it was all stock. Adding the cash option, if UWM had been victorious, risked increasing the already high leverage levels, because it would need to take on debt to fund the deal.

"Not winning this deal eliminates this risk," the KBW report said. Thus, not winning has limited downside for the parent company of the nation's No. 1 mortgage originator.

Bose George, an analyst at KBW in a note in June following his upgrade of UWM's stock, said he expected a dividend reduction once the Two Harbors process played out.

In his post-mortem report, George modeled dividend cuts of 50%, 70% and 100%.

"We believe that a dividend cut of 50% or higher would allow the company to move quickly towards reducing leverage," George said.

The analysts at BTIG previously also commented on a dividend reduction, with its base case bringing it down to 5 cents per share starting with the third quarter from the current 10 cents.

At the end of the first quarter, UWM's leverage ratio was 3.11 times debt-to-equity, up from 2.62 times three months prior.

This compared with 1.27 times at Rocket, which was lower than the 1.41 times at Dec. 31, 2025, while PennyMac Financial Services essentially remained flat 1.45 times versus 1.43 times over the same comparative periods.

George said a 50% reduction in the dividend would bring UWM's leverage ratio down to 2.4 times by the end of next year, while a 70% cut results in 2.2 times. Eliminating the dividend payment completely would bring the leverage ratio to 1.95 times.

On July 2, the day of the Two Harbors meeting, UWM closed at $2.17 per share. The markets closed for the Independence Day holiday and when they reopened on July 6, UWM traded at $2.18 per share.

Meanwhile, George included a paragraph on how CrossCountry, a privately held company, emerges as a result of the vote, "as a scaled, integrated player."

Adding the RoundPoint mortgage servicing rights portfolio brings CrossCountry's book to over $360 billion from the current $200 billion. KBW cited Inside Mortgage Finance data which would make this the eighth largest mortgage servicer when the deal gets completed.

Ironically, at the time Two Harbors agreed to the UWM bid, the pro forma $392 billion combined servicing portfolio also would have been ranked as the eighth largest. It would have added volume as well as marketing contacts to a servicing function UWM was bringing in-house.