UWM = Countrywide Part II?!

It’s a day that ends in ‘y,’ which unfortunately means there is yet another development in the exhausting Two Harbors-UWM-CCM saga. The shareholder vote on May 19 can’t come soon enough. 

UWM on Monday morning offered $12.50 a share for TWO, which Mat Ishbia says is superior to CrossCountry Mortgage’s $12 a share offer. Expect a CCM counter shortly. 

And on that note, there’s a post about UWM that’s generating quite a bit of buzz: industry analyst Christopher Whalen compared UWM to Countrywide(!). Whalen said UWM “seems to need this deal very badly, but clearly cannot afford it.” He argued that the Up-C structure of UWM’s stock is unattractive to investors & the firm has pumped up the value of its MSRs.

“The willingness of UWMC to pay up for loans in order to gain market share has reportedly compressed gain-on-sale margins & profitability across the industry & saddled the company with excessive debt,” he wrote. “Like Countrywide, we worry that UWMC is clearly overextended because of its aggressive business model and that this fact is hurting all of the public comps across the entire mortgage entire sector.”

Let’s unpack this! Also in today’s edition: an IMB went after ex-LOs for talking to former clients & it didn’t go well for the IMB. Plus, Marty Preston lands at Rate following the Benchmark blowup & much more.

Whalen, who wrote a biography on Stan Middleman (whose company Freedom Mortgage is the unnamed third bidder for TWO, per my sources), argues that UWM marked up the value of its MSR book at over 5.5x annual cashflows, an adjustment that accounted for most of its GAAP earnings in Q1 '26. He says that according to major MSR brokers, the true value of MSRs in the market today is closer to 4.8x on conventional servicing assets & 3.8x on Ginnie MSRs. 

“If UWMC were forced to sell their MSR, that would imply a ~ 50 bps write-down (over $1B) and could wipe out two-thirds of the company’s equity. If UWMC had more rational pricing, the production volumes would fall but secondary market profitability would probably increase – both for UWMC and the entire industry. But remember that the Countrywide model is to use loss leader pricing for loans to drive out competition. As one issuer told The IRA last week, if UWMC disappeared tomorrow, gain on sale margins in the industry would at least double.”

A 5.5x servicing multiple might seem high, but it didn’t strike the capital markets/MSR brokers I spoke to as outrageous. Agency MSRs are commanding huge ⛰ interest, they said; many recent auctions have had more than a dozen bidders. The Ginnie MSR market has also been very hot. 

A quick peek at UWM’s earnings show a 5.9% weighted average coupon (WAC) in Q1. Whereas 3% WAC MSRs can trade at a 6.5 multiple, the more recent at-the-money deals at a 6.5 WAC are trading for around 5x, sources said. If UWM were a distressed MSR seller, yeah, that would be quite bad given that its cash position is much weaker than rivals. But at present I don’t see that happening.

Re the comment on pricing/margins: UWM can produce a loan more cheaply than just about anybody, has proprietary tech, its gain-on-sale margins have been pretty stable & UWM’s pricing has been on the high side for a while now. Rivals are not losing deals to UWM b/c of price, according to brokers.

At the end of the day, UWM doesn’t play nice in the mortgage sandbox, & thus, has a very large contingent of haters. That doesn’t make it Countrywide…

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A Virginia judge has dismantled the core of Intercoastal Mortgage's lawsuit against five ex-employees & new employer Primis Mortgage, ruling that the lender's overly broad non-solicitation provisions are unenforceable.

The case centers on the departures of husband-wife-son team of military veterans Jackie, William & James "Allen" Wampler. The Wamplers & two support staff left Intercoastal Mortgage for Primis, & per the opinion, "some customers followed them to Primis."

The TL;DR here is that Intercoastal sought to enforce 3 restrictive covenants in its agreement w/ LOs: a pipeline-loan provision, a post-closing customer non-solicit, & an employee non-solicit. The court found all three unenforceable.

The pipeline provision barred departing employees from "attempt[ing] to move any pipeline loan to any other person or entity." But Judge Manuel Capsalis found the agreement never defined either "attempt to move" or "pipeline loan," & that Intercoastal CEO Ed Dean offered shifting interpretations of both terms at a December hearing.

At one point, Dean described an "attempt to move" as indirect solicitation, like asking a builder to relay a message to a customer. Later, he took a much broader view: even if a former employee acted "in a passive manner" & simply responded to a customer's request, that would still violate the clause. Under that reading, the court ruled that a departing LO would be required to tell an incoming former-ICM customer, "Oh dang, so sorry but I can't work with you," & refer them back to Intercoastal, even when the customer expressly followed the LO to the new shop.

The court ruled it was unduly burdensome on the employees' ability to earn a living & was against public policy b/c it denied customers of their right to choose a lender.

Similarly, the customer non-solicit provision reached too far as it would have required LOs to know about every closing across the entire company, the judge said. Another section barred recruiting any current ICM employee, or anyone who had been an ICM employee within the past six months, for employment "with another person or entity" & w/ no limitation to competing roles or even to the mortgage industry.

As written, the judge noted, the provision would prevent a former LO from inviting a former ICM colleague to "open a restaurant" or "invest in a start-up." The judge squashed that too. 

Intercoastal's last-ditch argument that Primis's own employment agreements were at least as restrictive as ICM's also didn’t convince, though that’s legit funny.

I talked to a number of LOs who said their agreements look broadly similar to what was in the Wampler case. Seems clear to me that any restrictive covenants that rely on industry jargon will have to be spelled out to survive legal scrutiny. Also, customer non-solicits need meaningful geographic or relationship-based limits. Here’s a copy of the opinion 👇

Marty Preston, who’s engaged in a very spicy 🌶 legal battle w/ former employer Benchmark Mortgage, has landed at Rate. Preston claims he moved to Rate for its P&L platform after evaluating more than 20 lenders. 

When we last checked in w/ Preston, he had filed a counterclaim that alleged Benchmark’s brass added a ton of margin to branches & spent it on stuff like yachts, ranch excursions, personal chefs. Not a good look if true. FWIW, Preston negotiated to have Benchmark sponsor his son’s pro golf career to the tune of $300K 😆 …

Here’s a copy of that counterclaim for your reading enjoyment.

The market for buying and selling CRA-eligible mortgages – the land of phone calls & spreadsheets – got a digital marketplace on Monday.

CRA Marketplace and Black Lake Digital Markets launched GATHER, a platform that lets originators list CRA–qualifying loans & banks bid on them in competitive auctions. The pitch is to replace opaque, relationship-driven CRA trades w/ standardized pricing, standardized documentation, & a clean audit trail for the next exam cycle.

GATHER was built by Wayne Brown, a former Freddie Cash Desk vet. The underlying auction engine comes from Al Qureshi’s Black Lake Digital Markets, which already operates trading & settlement infrastructure across other parts of the mortgage lifecycle.

Per the companies, the platform handles the full transaction end-to-end, including eligibility scoring, buy-box matching, competitive auctions, standardized data rooms & automated settlement and servicer boarding.

(🙏 If you like what you’re reading, tell a fellow mortgage junkie to sign up here.)