United Wholesale Mortgage’s (UWM) revenue margins “don’t stand out like” one would expect if the company was overcharging borrowers, analysts at BTIG said on Monday. The comments follow a Hunterbrook Media report from last week stating that UWM pressures brokers to send loans its way, resulting in higher costs to customers.
“We think the premise of the thesis is misplaced,” Eric Hagen and Jake Katsikas wrote in the company’s weekly mortgage finance roundup.
According to the analysts, the short thesis alleges some borrowers overpay for loans due to brokers’ incentive to steer business to UWM, but this is not reflected in the wholesale lender’s earnings.
UWM’s total gain-on-sale margins increased to 92 basis points in 2023, compared to 77 bps in 2022. Margins were close to the 99 bps level before the Game On pricing initiative. But, according to Moody’s, the average gain-on-sale margin in the wholesale channel was around 100 basis points in Q3 2023.
UWM’s parent company non-GAAP adjusted net loss was $57.1 million in 2023, compared to a profit of $719.4 million in the previous year.
After analyzing millions of federal and state records, Hunterbrook Media estimates that 8,682 loan officers at independent brokerages sent UWM more than 99% of their mortgages in 2023, with a total value of at least $11.7 billion. That was more than double the 3,831 brokers who sent at least 99% of their business to UWM in 2020.
However, according to the report, UWM is not 99% of the time the most affordable option for homebuyers. Hunterbrook claims that borrowers paid in UWM loans a total of $229 million more in closing costs over the past four years than the average-priced loan.
In a lawsuit filed right after the report’s release, borrowers stated that UWM created a scheme with mortgage brokers to apply excess fees and costs and steer loans.
The document attacked the “All-in” initiative, which prohibited brokers doing business with UWM from sending loans to rivals Rocket Mortgage and Fairway Independent Mortgage Corp. – the latter recently exited the wholesale channel.
Borrowers also alleged UWM imposes a restrictive “Lock-In” policy, requiring brokers not to shop after locking a loan at the beginning of the origination process. Plaintiffs also mentioned the company’s FindAMortgageBroker.com website and its loyalty system as tools to steer loans.
UWM called the lawsuit a “sham.”
BTIG analysts say UWM “openly and deliberately has loyalty incentives in place to support more active brokers.” The company’s “loyalties points typically get applied toward helping the borrower buy down their rate, in turn empowering the broker to offer the best rate and win more business,” they added.
According to the analysts, UWM can apply concessions and close loans quickly, a function of its scale.
UWM ended 2023 as the top U.S. mortgage company, with more than $108 billion in home loans produced in the period. It exceeded its primary competitor, Rocket Mortgage, which generated $78.7 billion in closed loan volume last year, down from $133.1 billion the previous year.
The Hunterbrook Media report reignited more testy exchanges between the two mortgage giants.
UWM president and CEO Mat Ishbia told reporters on Thursday during a Phoenix Suns/Mercury campus tour that Rocket and Dan Gilbert were behind the Hunterbrook report. “That’s Rocket Mortgage and Dan Gilbert doing Rocket Mortgage and Dan Gilbert things, and that’s what it’s been funded by,” Ishbia said.
In response, Rocket Mortgage spokesperson Aaron Emerson said, “Rocket Mortgage and Dan Gilbert have no involvement in the deep, detailed 50-page Hunterbrook Media article exposing the business practices of Mat Ishbia and United Wholesale Mortgage.”
He continued: “Dan Gilbert and Rocket Mortgage have no investment, other financial interests or relationship to Hunterbrook Media. The professional investigation speaks for itself and appears to be based on factual, public information uncovered by the journalists who conducted the investigation.”
