United Wholesale Mortgage CEO Mat Ishbia said on Tuesday his controversial ultimatum that required mortgage brokers to choose between his business or Dan Gilbert’s Rocket Companies had been a big success for UWM.
“I could not have imagined it going so well,” Ishbia, 41, said during an earnings call with Wall Street analysts. “Obviously my competitors don’t like the decision, but our company is not designed to make them like us.”
Ishbia ultimatum required brokers by March 15 to stop working with Detroit-based Rocket and a Wisconsin-based competitor, Fairway Independent Mortgage Corp., if they wanted to continue working with UWM. Rocket Companies is the parent company of Quicken Loans.
The ultimatum was a threat to Rocket, because while Quicken Loans is highly profitable and the nation’s leading mortgage lender in overall business, it trails UWM in the key underwriting lending segment for independent mortgage brokers. UWM is the leader in this segment, known as wholesale mortgages.
UWM said that of the approximately 12,000 brokers it had done business with before the ultimatum, about 600 refused to sign the pledge and 1,000 did not respond. Many mortgage industry observers have called the tactic an ultimatum, although Ishbia calls it an “all in” UWM initiative.
One measure of the tactic’s success is that in April, the remaining brokers submitted 17,000 more loan applications to UWM than it received from brokers in February.
“In February, rates were much lower than they were in April, but we made an additional 17,000 new loans – and that’s net of the loans we lost,” Ishbia told The Free Press in a subsequent telephone interview. “We really liked 20,000 extra loans., And we lost 3,000 (of) brokers who used us before.”
Overall, UWM reported first quarter net profit or net profit of $ 860 million, up from $ 20.3 million in the same quarter last year and $ 1.37 billion in the fourth. quarter of 2020. About 25% of UWM’s first quarter mortgages were for the purchase of a home. loans, versus 75% of mortgage refinances.
UWM has more than 8,600 employees and went public on January 22 on the New York Stock Exchange through a special purpose acquisition company. Despite its profitability, the UWM share price fell. It closed Tuesday at $ 6.78.
The company also announced on Tuesday a $ 300 million Class A share repurchase program that could begin Wednesday and last for up to two years.
‘Do the right thing’
Ishbia hasn’t accused Rocket or Fairway of anything illegal. During his call to analysts, he described the ultimatum as a response to how “these other two lenders are actually trying to hurt the broker channel” to boost their direct-to-consumer business with higher profit margins. “, so we decided to do the right thing and make that decision.
Brokers who didn’t stop working with Rocket had to pay “damages” of $ 50,000 or maybe more if they still wanted to work with UWM.
Rocket did not respond to a request for comment on Ishbia’s final remarks on Tuesday. The company before denounced Ishbia’s ultimatum as anti-competitive and reducing choices available to consumers.
The ultimatum prompted a Florida mortgage broker last month to sue UWM and Ishbia in federal court over a possible class action lawsuit, charging them with violations of antitrust laws.
The lawsuit called Ishbia’s tactic a “desperate attempt to stifle competition” and claimed that since UWM went public, UWM’s wholesale lending competitors, including Rocket and Fairway, had increased their market share. market share by offering better prices and lower rates to mortgage brokers ”, which, in turn, has led to lower rates for potential consumers / borrowers. “
The lawsuit seeks class action status and was brought by Florida broker Daniel Okavage of the Okavage Group, who did not sign the UWM pledge.
UWM declined to comment directly on the pending litigation.
Ishbia pointed out that brokers who work with UWM can still choose to work with about 70 other wholesale mortgage lenders – but not Rocket or the Wisconsin company.
Refi boom plans to fade
Refinancing activity amid historically low interest rates pushed the U.S. mortgage industry to a near record year in 2020, a circumstance few predicted when the COVID-19 pandemic hit early in the year. ‘year.
Industry is expected to contract 14% this year as interest rates gradually rise as the refinancing boom wears off, according to the Mortgage Bankers Association.
Rocket companies reported last week first quarter profit of nearly $ 2.8 billion, slightly below its fourth quarter 2020 results.
Ishbia told the Free Press that he expects UWM to counter the industry trend and enjoy a better 2021 than 2020. This would be largely because it doesn’t rely as heavily on refinances. mortgage than some competitors.
Refinances are a traditional force for Rocket, which does not disclose the amount of its refinancing activity compared to home purchase loans.
“UWM will do more business in 2021 than in 2020. I don’t think I said that when calling the results today, but I should have made it very clear to everyone,” he said. -he declares. the first and second trimester, I guide from year to year. “
Ishbia also said he expects UWM’s workforce to remain between 8,000 and 11,000 over the next two years.