A well-qualified buyer these days can find a mortgage at historically low interest rates. But that’s not good enough for United Wholesale Mortgage CEO Mat Ishbia. He’s looking to hook borrowers at stupid-low mortgage rates, though not all applicants will be able to make the numbers work, as HousingWire Magazine Editor Kelsey Ramírez detailed about a month ago.
In an interview this week with HousingWire, the 40-year-old Ishbia dished on how the third quarter is shaping up; capacity limits in the mortgage industry; the likely impact of the upcoming adverse market fee; and the company’s latest low-rate mortgage product, a 30-year fixed cash-out refi at rates as low as 2.5%.
Here’s the interview, which has been edited for length and clarity:
HousingWire: Mat, can you walk us through the pricing on these products? Let’s start with the recent 30-year fixed rate cash-out refinance, which was introduced last week on conventional loans, with rates between 2.5% and 2.99%.
Mat Ishbia: For certain borrowers, if they have a lower credit score and are not putting any money down and a couple of other nuances, it might be more expensive for them because of all the Fannie Mae and Freddie Mac pricing adjustments. But to us, it’s all the same at UWM. So if the numbers work for them and they want the lowest rate, they can do that and the mortgage brokers can figure out what works for them and get that deal for them.
Let’s use the cash-out [as an example]. Two-and-a-half to 2.99. So let’s call it 2.75, it saves on the back of the rate sheet 2.5 points. So that means that if they’re doing a cash-out and they have a 70 loan-to-value, Fannie Mae will charge them three quarters of a point.
Okay, so that was from 2.5 to 1.75. If they’re working with a broker that charges 1.5 points for their services, then they actually only have a quarter of a point left over so they get a 2.75 as a $400,000 loan including cash out, they get a… quarter of a point, or $1000 credit toward their closing costs. So the broker got paid, Fannie Mae got paid and the borrower still got a thousand dollars back.
Now if that same borrower said, “I want 2.5%,” demand is still the same. So Fannie Mae is going to get their 75 basis points for their adjustment, the broker gets their 150 basis points. But the 2.5 only pays 1.5 points, so I’m only giving you 2.5 points for it and it costs 2.25, therefore, you’d actually have to pay 75 basis points, or on a $400,000 loan, $3,000 in fees.
HW: What kind of volume do you expect to do on this product, the cash-out refi? And how many of the borrowers will get the 2.5% rate?
MI: We got about 1,000 locks in the first two days on it. The average rate was about 2.67%. By the end of the month we’ll probably have 10,000 or 15,000 or so [in volume].
HW: Can you talk a little bit about the 30-year conventional, what you’re doing in terms of volume and rates?
MI: The average rate right now on our 30-year conventional fixed is probably more like 2.5. We do a lot of 1.999s but the borrower has to pay for that. A 30-year fixed in the 2s is available and we’re doing a lot of them. Actually, those are the only loans we’re doing – 98% of our loans are in the 30-year fixed in the twos or the ones.
We’re having record months. We’re the second largest mortgage company in the country right now behind Rocket Mortgage and so we’re going to have a huge quarter and [see] more buying than ever before. Our previous record was $42 billion in a quarter and we’re going to exceed that by quite a bit.
HW: There’s been a lot of talk about lenders being at capacity and struggling to hire good talent to process applications quickly. What’s the situation like at UWM?
MI: We’re busy. However, we’re not having a hard time finding people. We get about 300 people a day who apply to work here, so about 6,000 people a month. And we’ve hired about 1,800 in the last three months combined…so we don’t have the same problem as everyone else. We’re not having the constraints. We’re closing loans in 15, 16, 14, 13 days. Most of my competitors right now are taking 60 days.
When people say they’re [increasing] capacity, what they’re doing is they’re just trading each other’s capacity. They’re not really hiring across the board. So the reality is, it’s just Flagstar taking from Freedom and Freedom is taking from Caliber, they’re all just moving people around. There are definitely capacity issues across the board and people are taking 60-days-plus to do refinances, and we’re doing them in 15.
HW: What does it mean for brokers when refinancings are taking so long?
MI: If it takes 60 days to close, they’re going to end up losing clients…Having certainty, having ability to close your loans, that’s why we’re so large.
HW: How are you navigating issues with appraisal and title? It seems like a lot of lenders are getting hung up once they reach that stage.
Ishbia: We aren’t really having any problems with it. We work with multiple AMCs and our brokers have great title company partners we’ve cut different deals with them to help…Once again, I think a lot of people have a lot of issues that they point out and blame everything else for why it takes them 60 days to close. If I’m doing them in 17 days, 15 days, and I’m using the same appraisers and the same title companies and the same originators. It’s just your own process. You’ve got to build your own technology and we have our own technology that does a lot of work for us.
HW: A few companies have sent out notifications about the adverse market fee on conventional refinances, saying this is the last day they can lock for 60 days without being assessed the 50 bps. What’s UWM’s timeline for baking in the fee?
MI: Heavy lenders are putting it back on their rate sheet now – Citi and Guaranteed Rate and loanDepot all take 60 days to close loans, right? And so if they brought the rate sheet right now, close it by November 15 so that they can sell it to Fannie and Freddie by December 1, or they’re going to have to charge this fee to the consumers. At UWM we close them so fast we’re not putting it on the rate sheet this month at all. Everyone else is adding that fee in, and we’re not starting it at all.
I said the earliest would be October 1st, but I don’t think it’s going to be that because we’re closing in 17 days, 15 days, 12 days, but we don’t need to charge borrowers. Borrowers can get a better deal by working through a broker and working with UWM gives loan officers an advantage right now too. It gives all the brokers that work with us a few extra weeks to offer better rates to consumers.