UWM posts strong Q1 in the midst of Two Harbors battle

UWM Holdings, locked in a battle with CrossCountry for Two Harbors Investment, had a banner first quarter, with GAAP net earnings of $170.4 million.

This compared with $165.5 million in the fourth quarter, and a net loss of $247 million for the first quarter of 2025.

Addressing the transaction, Chairman, CEO and President Mat Ishbia said that UWM always planned on paying $12 per share for Two Harbors, noting it had "a pristine servicing book."

When the deal was first announced, UWM saw significant synergies in the combination, as well as Two Harbors' capital markets and financial expertise.

Ishbia "not impressed" with Two Harbors management

Two Harbors has some team members who are very good, "but their leadership team, we were not as impressed with," Ishbia said.

So the management team went hunting for new bids and did not engage with UWM, he claimed. A shareholder vote on the UWM agreement on March 16 was adjourned due to a lack of quorum.

Ishbia, in response to the CrossCountry bid, made the cash alternative offer. If anything, he said, "I'd rather pay it in cash than in stock, because I feel like I'm giving my stock away at a really low price." Later he said it doesn't matter to him whether UWM has to pay the compensation in cash or stock.

Two Harbors has some "really great shareholders," which Ishbia wants to come aboard at UWM. But the management team and board of directors at Two Harbors do not have any value to his company.

Results were released prior to the stock market opening on Wednesday. UWM started the day at $3.69 per share, 26 cents higher than its Tuesday close, and at one point got up to $4. But it declined to its prior close before turning up again following the earnings call to almost $3.61.

After not taking any questions during the fourth quarter call, UWM switched to a Zoom format, where Ishbia only answered queries submitted prior to the call.

First quarter financials

Adjusted EBITDA, a non-GAAP number which among other things removes any changes to the fair value of its mortgage servicing rights, totaled $160.9 million, versus $232.8 million for the prior three months and $7.8 million for the prior year.

For the first quarter, UWM reported a negative change in the fair value of its MSRs of $10.3 million. This is still better than the negative adjustments of $247.6 million in the fourth quarter and $388.6 million one year ago.

"While operating trends were solid, serving missed on derivative losses which reduced the net mark on the MSR," Bose George of Keefe, Bruyette & Woods, wrote in a flash note which came out before the earnings call.

This resulted had a 5 cent negative effect on UWM's earnings per share. On a GAAP basis, the company had EPS of 9 cents for the quarter.

UWM's first quarter production

Total volume for the quarter was just under $45 billion, down from an unusually strong fourth quarter, when it did $49.6 billion, but well over the first quarter of 2025, which had volume of $32.4 billion.

George estimated UWM would originate $47 billion for the period. Mortgage production income of $554.6 million beat his estimate by 1 cent per share.

Purchase volume made up $18.7 billion of originations for the most recent period, slightly below the fourth quarter, when it did $18.9 billion. But a year ago, loans for this purpose totaled $21.7 billion.

Gain on sale margins for the quarter were 123 basis points, beating George's prediction of 115 basis points. The Street estimate was for 123 basis points.

In the fourth quarter, GOS was 122 basis points, while a year ago, it was 94 basis points.

When it comes to the margins, "I see this range that they're in right now, being the right range," Ishbia said. Going forward, they are to continue to remain at these levels, not significantly higher, not significantly lower.

Bringing servicing in-house

UWM also announced that all of its new production is now being serviced on the proprietary platform it created with ICE Mortgage Technology. The company is on pace to bring substantially all of its MSRs in-house by October, ahead of the previously announced timeline.

So far, the company has fewer than 100,000 loans on the platform, but it already has moved a portion of the portfolio that Cenlar was subservicing over.

As of March 30, it serviced $229.5 billion, versus $240.8 billion at the end of last year and $214.6 billion on the same day in 2025.

UWM reported loan servicing income of $213.4 million for the first quarter, up from $186.4 million during the fourth quarter. A year ago, servicing income was $190.5 million.

It's not FICO versus VantageScore, it's both

On the call, Ishbia was asked about the changes in credit scoring recently announced by the Federal Housing Finance Agency. UWM is one of the companies participating in the pilot and already has loans in the system.

It's not either FICO or VantageScore, both are great, Ishbia said. The key is "Can we help consumers in a better way qualify for a mortgage? Can we have better credit profiles?" he asked rhetorically.

The best model is the one which gets the borrower the better deal, Ishbia said.

UWM rolls out new promo, HEL product

In a separate release, UWM announced its latest promo, a free 1-0 temporary rate buydown. The borrower will get a payment equivalent to a 1% lower interest rate for the first year, at no cost to them or the mortgage broker. The promo is scheduled to run through June 30.

Effective immediately, UWM is covering the cost of lender-paid temporary rate buydowns on conventional and government purchase mortgages by giving an offsetting credit.

In addition, UWM is now offering a home equity loan product, both as a standalone and a piggyback offering.

The piggyback version will close concurrently with the first mortgage and can be used to avoid private mortgage insurance or bring the balance below the conforming loan limits.

Piggyback loans were common during the boom days of the early and mid-2000s but when the market turned, they were a primary cause of borrower distress.