UWM's Ishbia on the rationale for going public via merger over IPO

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Going public through a special-purpose acquisition company is "a more efficient, better process" than doing an initial public offering," according to United Wholesale Mortgage President and CEO Mat Ishbia.

UWM will accomplish thisby combining with a publicly-traded investment vehicle, Gores Holdings IV.

Speaking with National Mortgage News, he said the company began looking at going public at the end last year as a way to "put fuel on the fire of our growth," as well as bring attention to, and invest in technology for, the mortgage broker community.

"You only go public once, so I'm going to have someone ride shotgun with me and be a partner and helping guide us through this process in the most advantageous way," Ishbia said. "So to me, it was a no-brainer. I think that SPACs will become much more of the norm versus an IPO based on how much crisper of a process this was."

While Ishbia could not yet provide details on the stock shares that will be going to UWM employees, he commented that it will be a grant program for all of the nearly 7,000 team members at the Pontiac, Mich.-based company.

"We're a family company, everyone's going to win together, so everyone's going to get a grant in stock at UWM," said Ishbia, aformer college basketball player at Michigan State, and then briefly a coach, who is fond of using sports analogies. Family has another meaning here, as UWM's forerunner United Shore Financial Services was founded by Ishbia's father Jeff in 1986.

A benefit of going public is that the stock becomes a currency to acquire other companies. Could another deal be in the future for UWM?

"We're looking at all opportunities to grow," Ishbia said. "We're an organically grown company and that's probably where we lean."

Even though the company is seeing a large share of refinancings right now, when those rates rise again, it has two countercyclical areas of focus: purchase loans and its mortgage servicing rights portfolio, which is expected to end the year at $208 billion, nearly triple the size it was on Dec. 31, 2019, of $70 billion.

The 30-year fixed-rate mortgages in the portfolio have an average interest rate of 2.82%, which makes them less vulnerable to refinancing.

"So when rates do go up, we have a large portfolio of MSRs that's very low rate," Ishbia said. "And so obviously that value will go up and that will be worth more and it's a nice hedge to the origination business.

"But the reality of why we retain servicing on a higher level is because it really aligns our brokers more and helps make sure that we protect their clients for them to continue to grow and help them build their business growing forward."

After the deal is completed, Gores will not have any seats on UWM's board.

"The investors I spoke with during the road show all made the point they love the vision, they love the broker channel, they love our purchase focus," Ishbia said. "And they wanted my leadership with my leadership's team vision and strategy to continue."

Ishbia, who will end up with 94% of the stock when the deal is completed in the fourth quarter, will continue to have complete control of the business along with the current management team, but "with extra resources, so it's only a plus-one in that respect, only more and better."

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M&A IPOs Stocks United Wholesale Mortgage MSR Mortgage brokers Purchase Refinance Originations