Left at the Altar, UWM Fights for TWO

In some ways, Wednesday felt like Peak ⛰ UWM. The wholesaler produced a staggering $44.9B in Q1 originations, its tech bets appear to be gaining traction & after ignoring analysts last quarter, Mat Ishbia returned to the spotlight with his usual swagger. 

But in other ways, UWM suddenly finds itself in unfamiliar territory. Questions are growing about the company’s strategy, leverage & broader positioning in the market. Why is UWM fighting so hard for Two Harbors? And what happens if it loses?

In today’s edition of The Mortgage Scoop, we unpack the increasingly public battle over TWO as Ishbia takes direct shots at management while trying to win over shareholders. Plus, we reveal the mystery third bidder circling the deal, explain why the industry’s first VantageScore securitization appears to be a PR headline w/o much substance, break down loanDepot’s latest quarter, & more.

Most of this edition is just for Mortgage Scoop Insiders, so please upgrade your subscription. Here’s a 10% discount.

On the day that Bill Pulte announced the GSEs had officially accepted VantageScore 4.0, Newrez said it had already securitized $10M in loans w/ the new competing score model. But if a credit score drops in a forest & no one is around to hear it, does it make a sound? 

Pivot Financial’s Jennifer McGuinness looked through the bond docs & found it was actually 16 loans worth $8.9M & spread across six separate bonds  — four are 30-year bonds & two are 15-year bonds; all are multi-lender securitizations. 

The largest percentage of a single security tranche w/ VS4.0 was 0.49%, a rounding error for an investor. To boot, the VantageScore scores in the bonds are all over 720. Do investors get any insights w/ a test like this?

In my view, this was just a PR play. At the moment, very few lenders are doing any real volume of loans w/ VantageScore. UWM might actually be the only one…

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There’s no two ways about it: UWM is an originations monster. But questions about the battle for TWO & UWM’s broader servicing/capital markets strategy continue to cast a large shadow. 

Roughly 48 hours after yet another bid was rejected by Two Harbors’ board & 24 hours after CrossCountry Mortgage responded w/ what some interpreted as gravedancing 🪦, Mat Ishbia gave a pitch of sorts to TWO’s shareholders. He has just 13 days to convince them they should join UWM, so this was a big opportunity. 

Ishbia told analysts that when he struck the deal in December, UWM liked TWO for its “pristine” servicing book (a good chunk of which contains mortgages originated by UWM) & initially believed there to be synergies in the form of capital markets & finance expertise, as well as a servicing platform they could learn from.

“Where that stands now is we don't see as much value in their management,” he said. The value UWM sees is in TWO’s shareholders & the servicing book. 

Ishbia told analysts he “always planned on paying $12” & in fact would “rather pay cash” b/c he felt he’d be giving his stock away at a really low price. But TWO’s board never engaged & instead sought out another offer, finding a suitor in CCM. 

“It's very clear that their management team & their board — which has own issues in the past w/ lawsuits & stuff — is maybe playing some games, doing things b/c they realize that we don't see any value for them specifically,” Ishbia said. 

There are some in the LinkedIn Commentariat who argue that UWM could get “margin-called” if its stock continues to slip & question why the wholesale lender “is so desperate” to win TWO, even after having been left at the altar. 

Is there an existential threat if UWM doesn’t get the deal done? Let’s explore.