Mat Ishbia isn’t sweating a projected drop in gain-on-sale margins, all the way down to 75 to 110 basis points. Quite the contrary. In his estimation, a higher rate environment and hyper-competitive pricing will provide United Wholesale Mortgage an opening salvo to win a war of attrition and build an even bigger army of loyal mortgage brokers. Anybody can make a killing in a market like 2020. But those days are over.
On UWM’s first-quarter earnings call, Ishbia offered up a vision for the future. Those gain-on-sale margins that had reached their zenith in the third quarter of 2020? They have gradually been falling back to earth. And they’re going to keep falling, Ishbia said. For UWM, that means 75 to 110 bps may be the norm for a few quarters. It depends on the 10-year.
“Will margins compress? Absolutely, they will compress,” the UWM CEO told analysts and investors on the earnings call. “They usually go from all-time highs to all-time lows. That’s what happens in the mortgage biz, and then they’ll settle in, [to] normal numbers. We didn’t expect them to go down to this point in this part of 2021, but we’re excited about it because we’re going to still produce a lot of income, where our competitors might not. And at the same time, we’re going to take market share and show you that we are the elite mortgage company.”
UWM is hardly the only top lender espousing the sunny side of reduced profits — rivals Rocket Mortgage and loanDepot have also said in recent days that they’ll be able to expand their territories in upcoming quarters. Basically, their largesse, a growing number of partnerships, and the strength of their respective technology platforms will allow them to grow their slice of the pie, even in a time of waning refis, rising rates and limited home inventory. Rocket even boldly proclaimed that it would be the largest purchase retail lender in America within 24 months.
So, what exactly differentiates UWM from the crowd? Why would they succeed when plenty of other lenders with grand ambitions and gobs of cash wouldn’t? If you take Ishbia’s word for it, a combination of the company’s strict adherence to the wholesale channel, its history of strong purchase business, and an ability to produce loans at a lower cost than its competitors gives them an edge.