UWM Hldgs (NYSE:UWMC) reported third-quarter financial results on Wednesday. The transcript from the company’s third-quarter earnings call has been provided below.
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View the webcast at https://uwm.zoom.us/webinar/register/WN_RqGxxp-XQKaIaIeRpjkbKg#/registration
Summary
UWM Hldgs is focusing heavily on AI initiatives to improve business operations, reduce costs and increase loan volumes, with tools like ChatUWM and BrokerX playing significant roles.
The company remains confident in its market share despite competition, particularly from Rocket, emphasizing strong broker partnerships and growth in the broker channel.
UWM Hldgs has successfully brought 700,000 loans in-house, reducing expenses and planning for further optimization and efficiencies in 2026-2027.
The company is strategically managing its Mortgage Servicing Rights (MSR) sales, aiming for smaller sales to optimize liquidity and align with market conditions.
UWM Hldgs plans to expand its servicing book to $400-$500 billion without altering its strategy, focusing on opportunistic growth and sales.
The company is leveraging its strong capital position, aided by partnerships like Oaktree, to navigate market headwinds and prioritize deleveraging and de-risking.
There is a strategic focus on maintaining gain on sale margins within the 115 to 130 range, despite competitive pressures.
Management is considering share buybacks as a potential use of excess cash, balancing this with other strategic investments and debt reduction.
Full Transcript
Mat Ishbia (Owner)
Are coming out and we’re doing a lot of business. You’ve seen MIA, you’ve seen some stuff. We’ve got the income calculator we built and we’ve got some cool things. ChatUWM has been really powerful and so we have some really big AI initiatives that have really impacted the business, which also is helping with things with BrokerX and Success Track and training and growth. And so AI can definitely help you cut costs and expenses and you’re seeing some of that benefit, but you got to make a massive investment in it to do that.
And then you also got to see can it help you do more loans, help you grow your business, drive the top line revenue as well. And we feel really good about that and the things we’ve done in the past and we’re continuing to do right now. Thank you for the question on that as well. Let’s see, Jeff Adelson, how are you responding to defend market share? In particular, Rocket announced 200 brokers representing 12 billion from your potential volume, from your perspective is holding market share. So first off, Rocket means zero to me. They just make numbers up. None of that’s true. But either way they can say what they want to say. If you remember back they said All In was a great thing for them and obviously we understand what’s happened with that because brokers are winning.
The nice part about this statement is that Rocket’s trying to do whatever they can to try to get involved and be… they’re not getting any business, they’re not growing any broker market share and they’re not going to because all the brokers work with UWM Hldgs, but more importantly because they’re not helping to partner with brokers and do things the right way. So I don’t need to talk about what Rocket does, but what I will say is what I do like about what Rocket’s doing is they realize, along with everybody in this market, the brokers are the place to win.
The brokers do the purchase business, the brokers are the growing channel. The brokers are the winners right now. And so they’re going to continue to talk about, I think they’re talking about for five, six years. If you go back to their stuff, they’re going to take over the market share, do 25% of the broker channel, you know, take 25% of the overall market. I mean, you know, I guess people can say what they want to say. UWM Hldgs’ market share is fantastic.
We’re strong, we’re dominant and we’re growing and we’re going to continue to grow and if we lose market share, I hope that happens because that means the broker market has gotten so big and it’s going to continue to grow. That’s my focus. My focus is growing the broker channel, helping every loan officer do a little bit more loans and helping every real estate agent that works with brokers do more business, like help them all win. And that’s how we’re going to win.
And on the last note on that is, I mean I just met with them personally. You know, I think Rocket’s 4th biggest client, 9th biggest client. Like all these people are moving over to work with UWM Hldgs. And so I think it’s just kind of, it’s silliness to see those questions. Not the questions, fine, but silliness to see Rocket saying what they’re saying about things in general because they’re just trying to be in the broker channel, which is great because the broker channel is growing and it will continue to grow and we’re continue to focus on it.
Let me do one more and then let’s just open up the live questions because I think I’m reading these questions and so many of them overlap. Let’s do this one. This one’s Mikhail Goberman, Jeff Adelson, a couple other people saying, could you give an update on how the build out of the in-house servicing platform is coming along? So let me answer that question for you. You know, we brought in 700,000 loans in-house at UWM Hldgs along with all the loans we do on a daily basis this year, which is amazing. And with that being said, our expenses still went down. Right. And so we expect a huge value and benefit of, you know, optimization of this.
So 2025, we made the announcement. 2026, we brought them all in. Most people can’t bring 700,000 loans in in two years, let alone one year. And we did all that. And then 2026, 2027 is going to be optimization efficiencies. And so I think you’ll see some of the cost savings there, but also the benefits for the brokers. The benefits through our partnership with Bilt, but also just through the people wanting to stay here and refinance with UWM Hldgs because the servicing platform is just better than everyone else in the country.
And so we feel really good about our servicing platform and the in-house structure we’ve done. We’ve used AI and leveraged AI in ways that you can’t do if you had a servicing book for 20 years. Right. Being able to, we brought it in-house in the AI times, if that makes sense, and we’re able to use AI to keep our costs. And so you’ll see costs down, service levels up on the servicing book and hopefully retention continues to be up. And that’s a win, win, win for our brokers and for our investors and for everyone around. So with that being said, let’s see.
Do we have some questions? We have no questions right now. I’m happy to take any live questions. If not, I can try to see if there’s anything else in any of my papers to reach through. If not, we can end it early, too. Is there a question coming? It looks like there’s a question coming in. So raise your hand once again if you have a question. We’ll try to call on you and then we’ll open it up for you. So if you want to. Go ahead, Lee, and open it up.
It’s open. Bose. George. Okay, go ahead, Bose.
Bose George
Hey, Matt. Yeah, I had a question on MSR hedging. So you guys had hedge on this quarter. I did not hear… Can you hear me?
Mat Ishbia (Owner)
You. Any question? I don’t. Can you unmute, Bose? Nope. All right, well, I can’t hear your question, Bose. I’m sorry. Let’s try Doug Harter. Well, yeah, if we don’t have any. If we can’t get a question through.
Doug Harter
Hi, Matt. Can you hear me?
Mat Ishbia (Owner)
Can you hear the question? All right, well, then why don’t you someone read it out, say it out loud to me.
OPERATOR
Sure. Matt, I was hoping you could give us an update on the timing of the fourth quarter MSR sales, you know, how much of those are completed?
Mat Ishbia (Owner)
Harter or Bose. George, who’s going to speak? Doug, go ahead.
Doug Harter
Great. You know, just update on the timing of when those sales are completed and how those sales compared to your current marks.
Mat Ishbia (Owner)
Update on the MSR sales, how they compare to the current marks and when they’ll be completed. Yes, the MSR sales and how we look at that is, you know, in the current marks, we look at a lot of different things from a perspective of when we sell MSRs or whether we’re not going to sell MSRs. The current marks on our MSR book we feel are pretty good and strong now. Doesn’t mean that we’re not going to. Sometimes we’ll make a little money, sometimes we’ll lose a little bit of money on some of these deals. And so we don’t really focus on it too much as a concern, but what we do focus on is as our size when we sell $40 billion of MSRs, for example, there’s always going to be a liquidity discount there when we’re doing such a big sale.
So we are going to look strategically at maybe making smaller sales in 2027 which opens up more buyers and continues to help us be closer to those marks, if that’s the way you think about it in a positive way. Jeff Adelson next. Jeff Adelson.
Jeff Adelson
Hey, can you guys hear me? Okay, thanks for taking my question. Just maybe wanted to ask about the plans for the servicing book. I know in the past you’ve talked about getting that into the $400 billion rang. You know you complete the in-house transition and hold more servicing but just with the near-term sale. I know you, you talked about some, some smaller MSR sales next year. But just how do we think about the timeline to get into 400 billion from here and, and you know, the strategic vision around the servicing book.
Mat Ishbia (Owner)
Plans for the servicing book. We’ve used the $400 billion number in the past. Is that still a target of ours and how do we plan on getting to that and with bringing servicing in-house has it shifted our strategy. Yeah. So the servicing, having servicing in-house does not shift our strategy about being opportunistic. As you said, we talked about $400 billion of MSRs at some point, us being able to originate as much as we can. I kind of put 400 and I think I might even said 500, 400 to 500 as the max I’d ever want to have, which is basically two times, you know, our origination capabilities. But we don’t really look at it like the strategy is not shifted at all.
If that’s the… The strategy has not shifted, as in I feel really good about where we’re at from an MSR servicing book perspective. Also our servicing ability and now not having external sources, Cenlar and Mr. Cooper, being involved with it at all, we have a lot more control of the process. And so we will continue to grow the servicing book because we do a lot of loans. But if there’s an opportunity to de-risk, deleverage and bring in a lot of cash, I think that’s a positive, which then puts our, you know, our debt holders, our equity holders, everyone in a better position across the board.
And so we will look at both those things. It’s not shifted my strategy as we’ve always been opportunistically growing but at the same time opportunistically selling as well. Bose
Bose George
Matt, hopefully you can hear me now, you guys had the MSR, you know, I guess the hedge on this quarter. Just curious, what going forward, is there a plan to have a hedge on the servicing or you kind of go back to what you used to do, which is just leave that asset unhedged.
Mat Ishbia (Owner)
MSR hedge strategy going forward. Keep it on or take it off? Yeah. So good question. So in general, I think you saw we hired a new Chief Investment Officer, Vandy Partage, who’s done a great job. His years of experience, 20 plus. I mean, he’s excellent. He has a great perspective on it. And I have him kind of running that at the highest level now in conjunction with our CFO, Rami Hasani. And we’re figuring all that stuff out. The way we look at it is, you know, in general, the best way to hedge is to do a lot more loans when rates drop.
As long as you can stomach the MSR values going down because rates drop, knowing you’re going to do a lot of business. We can do a lot of business when rates drop. So we don’t look at hedging. We’re definitely not 100% hedged. Where before, as we had the issue, we were over-hedged. We’re now very strategic with it. We have a great hedging policy and process. We partner with our Oaktree partners on that as well, and Vandy. And so we feel really good about the process and how we’re hedging and how much to hedge versus how much not to hedge.
And we’ll continue to make that evaluation on a quarterly basis. We met with the board yesterday about it and about just things in general tied to hedging, capital, liquidity. And so if you have less MSRs per the last sale, there’s obviously less of a hedge that’s needed. And obviously if you can do a lot of loans when rates drop, you’ll have an MSR write-down, if that’s the right way, but you’ll do, you know, make $500 million in the quarter running the business, so it will all balance out. But I think the hedge, the natural hedge, is the best way to do it.
And we’re not back to a natural hedge yet. However, we’re very strategic with how we’re handling it right now. And I feel great about the people making decisions. And once again, the last hedge was… we’ve hedged for years. And if you actually look at it, you know, there’s been situations that we’ve hedged in certain opportunities that we’ve done that for years. If you look at it since 2020 or 21, when, you know, we’ve actually made money on the MSR book versus the hedge over the time, we just had one bad quarter where I think everyone wants to talk about.
But if you look at over the last five years, we’ve actually were significantly hundreds and hundreds of millions plus. When you look at our competitors, they would not be able to say that. Once again, one mistake tied to a lot of things that we’ve talked about. But we feel like we’re in a really great position on the hedge and on just our MSR book in general. All right, Mikhail Goberman.
Mikhail Goberman
Yeah, thanks guys. Just a question on expectations for what you guys are seeing in terms of volumes and margins in the fourth quarter this far and expectations going into 2027. Thanks.
Mat Ishbia (Owner)
Yeah, so I think the mortgage market’s got a lot of headwinds right now. So I think that that’s, people have to realize that. But I also think based on where we’re at, we’re in the best position to take advantage of it, take advantage of the opportunity from a rate perspective. Take advantage of opportunity. Like we talked about MSRs a bunch on this call and also from the AI and expense perspective. And so the volume numbers are definitely not going to be higher than they’ve been.
Right. If you think about the mortgage market, I think I looked at something that showed that, you know, where the 10-year, this is like the second highest it’s been in five, six years. And so it’s definitely a tougher market in general. But I think we’re going to continue to sustain and do more business. And since we’re mostly purchased, I’m not as concerned about the volume going down as much as a lot of refinance shops will. But, you know, it’s not going to be, I wouldn’t project, you know, us doing 40, 50, 60 billion this quarter.
Like, I think it’s definitely going to be different in the fourth quarter. And the mortgage market’s always traditionally fourth quarter, first quarter, always the tougher times. But once again, last comment is expenses are down, AI is winning, brokers are growing. We feel like we’re in the best position of anybody to capitalize on the opportunity. Is there any other questions? Ryan Nash
Ryan Nash
Hey, Matt, so just picking up on the back of what you just said. You know, obviously it’s not a great environment for the mortgage market. Assuming things don’t change from a rate perspective, can you maybe just lay out a more cohesive plan on the Oaktree note repayment? You know, do you expect to be selling all MSR production. And how would you define success in your plan on managing it? Thank you.
Mat Ishbia (Owner)
Yeah, so thank you for the question. And so I would say in general on the Oaktree partnership is, you know, we understand the mortgage market’s headwinds, as I’ve told you already, are out there. And I think, as I mentioned the very beginning, I think every mortgage lender out there of any size or relevance has some holes. Right. And so our hole we’ve been able to solve for with the capital from Oaktree and myself and obviously we’re putting in more here now with the rights offering or myself again.
And so I feel like capital wise, we’re in a good spot. How and when do we pay it off? Obviously the plan is it’s expensive money and so how do we pay it off more efficiently rather than less efficiently? And we’re going to be using earnings as that opportunity. And so as we made a couple hundred million dollars in adjusted EBITDA this quarter and we continue to build our earnings, we’ll be able to pay that down, make sure we’re doing all the right things for our debt holders, our equity holders and the mortgage brokers in our business.
And so we feel good about that. I don’t have a concise plan because obviously I can’t predict what the market’s going to be and how much income, but it’s definitely a priority of ours to take care of that preferred and at the same time to continue to deleverage and de-risk the business so that we can not only capitalize when the opportunity comes with lower rates or a little bit better mortgage market, but dominate and grow and not only make a lot of money, but also help our brokers grow and make a lot of money and everyone succeed together.
So I feel like we’re on a great trajectory going forward. But at the same time, you know, I can’t control interest rates. So I can do everything I can do outside of the control and be prepared for rates going up, rates going down, paying off Oaktree right at two years and a day or, hey, does it take three years or four years? Like what’s the process on that? And we’re prepared for all those things and we’re excited about the partnership and what we’re doing with it.
Awesome going. Jeff Adelson next. All right, I think we got one more. Jeff Adelson is asking a question. Go ahead.
Jeff Adelson
Hey, just to maybe follow up on the question on the near-term outlook for volumes. Just curious what you’re seeing on gain on sale, I think you’re still near the higher end of that 115 to 130 range you’ve talked about. Is there an opportunity to stay at the higher end or even grow that from here? Thank you.
Mat Ishbia (Owner)
Yeah, good question. On gain on sale. Yeah, I think we’re consistent. People don’t use UWM Hldgs because we’re the lowest rates. The only way other competitors, if you see our competitors’ wholesale margins, the only way they can compete is by having the lowest rate. That’s the only way they have a chance. And they still can’t get the business because they’re not a great partner. They don’t do all the things. And so for us, gain on sale, I think I expect it to be steady in the fourth quarter in the ranges that you described.
And with that being said, I think other people will continue to try to buy the business, lower the rates as much as possible to try to get their nose in there, try to be competitive. But the reality is if lowest rate was the only thing that won business in the wholesale channel, there’d be one winner, which is I think Provident Funding, who I don’t think anyone really knows who they are, but they have the lowest rates. That’s not how it works. Right.
And so you have to have a better understanding of the overall business. Not you, I’m saying our competitors. And so you have to understand that. So I feel like we’re in a great, great position from a gain on sale perspective, a volume perspective and whether rates or gain on sale’s slightly higher or slightly lower than your range. But I definitely see it in that range. It’s not going back to, you know, 60 or 70 like some of our competitors are at, trying to win loans and stay afloat.
Okay, we’re at two more. We’re going to take one from Maura Farley from BlackRock. Okay. Sorry, there’s two questions left. Laura Mora, thank you.
Maura Farley (Analyst at BlackRock)
Hey, good morning. Thanks for taking the call. Wondering if you could speak a little bit about the planned delevering with the proceeds from the MSR sale in 4Q and help us think about kind of what specific instruments United is maybe looking to go down there and how we should kind of think about the cost of capital evolving.
Mat Ishbia (Owner)
Yeah. So good question. Thank you for the question. Understanding the capital we’re bringing in, which is quite a bit of liquidity, how do we use that the best? Right. Can we deleverage whether it’s our MSR lines, whether are we looking at maybe buying back some of the bonds and buying back some of the bonds earlier than expected, or how can we utilize that cash to be the best, most optimum use? And so Rami, our CFO, along with Vandy, who I already mentioned earlier, are digging into it and what’s the best use of those proceeds?
And we’re going to get the benefit of that. So, you know, I’m expecting, you know, we talk about expenses, you know, hopefully the interest expense will go down a little bit, because if we use that strategically, there’s obviously multiple things we can do, whether it’s, you know, you know, to save money on the interest expense, whether you can’t buy the Oaktree stuff back. So that’s already locked in for two years. So what’s the next best use of capital?
And that’s how we’re allocating it. But with the one comment I’ll say is cash is king. And so I will pay down stuff and we’ll do things, but having access to liquidity and the massive amount of cash that we have right now at UWM Hldgs is a huge competitive advantage, especially in this market. So we’re very conscientious of it, but we will use it to save some money on the interest expense and use it strategically. Last question. Daniel Alvarez. Daniel Alvarez, last question. Thank you.
Daniel Alvarez
Yes, thank you for taking my call. I understand the warrant situation, but I’m wondering if you guys would consider buying back some common shares in the future to reduce the increased dilution.
Mat Ishbia (Owner)
Yeah, so good question. So it’s definitely back to the last question. It’s definitely a cost, I mean, a benefit of extra cash. Can we buy back those shares, the common shares? Is that an opportunity? And so we’ve discussed that at the board level and we always balance. And I know you guys know this because we’ve been doing this for years together, balancing the float versus the actual buying back shares and how we do that. Everyone wants me to get more float out and then potentially buy back winners at such low prices.
And there’s always those opportunities. And so we’re looking at all things. I’ll say that the right way to think about is we’re looking at all ways to utilize the excess cash that we have coming in from the rights offerings, preferred, junior preferred from the MSR sales. How do we use that capital and liquidity? The best way to optimize our business. Some of those things are investments in AI. Some of those things are paying down debt. Some of those things.
So we’re looking at all those things across the board and definitely the one you brought up is definitely on the table as a discussion point. So with that, hopefully the format was good. Give us feedback on how to make it better, which we’re going to make some changes next quarter. But the most important thing is I thank you for taking the time and your interest in UWM Hldgs. Hopefully you get some value and understand how our business is going. We feel great about where we’re at and where we’re going. And like I said before, I think our business is in the best position possible in this market, a liquidity capital perspective and a growth perspective with AI and investments we made.
So thank you for the time. Look forward to talking to you guys all again next quarter. Have a great day.
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