UWM takes another step toward a price war  

Will price-match loans up to 40 basis points with that of 20 different competitors

United Wholesale Mortgage (UWM), the nation’s largest wholesale lender, has taken another step toward a price war. The Pontiac, Michigan-based company said on Wednesday it will price-match loans up to 40 basis points with that of 20 different competitors.

The initiative, effective until June 30, applies to any conventional, government or jumbo loan on a primary, secondary or investment property. UWM will match competitors’ 30-, 45- or 60- lock pricing by 1 basis point to a maximum of 40 basis points.

“For example, if UWM is outpriced by 31 basis points, they will give 32 basis points,” the company explained in a statement.

UWM’s price-matching guarantee includes the following competitors: Amerisave, Amwest Funding, NewRez/Caliber Home Loans, Cardinal Financial, Carrington Mortgage Services, Citizen Bank/Franklin American, CMG, Equity Prime Mortgage, Finance of America Mortgage, Flagstar Bank, Freedom Mortgage Corp., Homebridge Financial Services, Home Point Financial, Kind Lending, LoanDepot, Nations Direct Mortgage, Paramount Residential Mortgage Group, PennyMac Financial, Plaza Home Mortgage and Union Home Mortgage Corporation.

According to UWM, these companies do more than 90% of the wholesale business.

UWM has been aggressive on its strategies to put pressure on competitors.

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In March 2021, the company told brokers they could not continue to work with Rocket Pro TPO or Fairway Independent Mortgage and still work with UWM, which is why UWM didn’t mention the lenders in its current price-matching promotion. To reinforce the rule, the company this year sued three broker shops for sending loans to both rivals, among them America’s MoneyLine, Kevron Investments Inc. and Mid Valley Funding & Inv. Inc.

Since issuing the ultimatum, the lender has shown a willingness to drop prices. For about two weeks in June, UWM announced a price-match up to 30 basis points with 15 different competitors on any conventional loan for a primary residence.

However, the move has reduced the lender’s margins. UWM’s gain-on-sale margin fell to 80 bps in the fourth quarter 2021, down from 94 bps in the Q3 2021 and a huge decline from the 305 bps it notched in the Q4 2020. The company reported $1.56 billion in profits in 2021, down 53.6% from the $3.38 billion registered in the previous year. Its originations reached $226.5 billion last year, a 24% increase year over year.  

During a call with analysts in March, Mat Ishbia, president and CEO, said UWM is basically at the floor already in terms of margins. “Do I think that margins are going to go up in the second, third, and fourth quarters? Yes, or flat, but they will not go down, is my perspective,” Ishbia said. “I don’t see it (margins) going lower than the 75 bps, 85 bps, basically.”

Big lenders, such as Rocket and UWM, have an advantage in a shrinking mortgage market, in comparison to smaller ones, according to analysts.

Moody’s analysts wrote in March that competition will be intense over the next 12 to 24 months, driving gain-on-sale margins down even further. Profitability may resemble the market in 2018, when around one-third of nonbank lenders failed to turn a profit. “Companies with above-average capitalization, strong market positions, and scale will be better able to navigate the challenging operating environment,” the Moody’s analysts wrote. 

UWM will report its first quarter 2022 earnings on May 10.

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