United Wholesale Mortgage Holdings Corp. is setting a public deadline for when it says it will surpass Rocket Companies Inc. to become the largest US mortgage lender: 2024.
The three-year goal is ambitious, experts say. That heats up the Pontiac-based lender’s years-old rivalry with Detroit rival Rocket Mortgage, who currently holds the title. UWM is number 4 behind PennyMac Financial Services Inc. of California and Wells Fargo & Co. of Iowa, according to trade publication Inside Mortgage Finance. Being number 1 has been a longstanding ambition of UWM CEO Mat Ishbia.
“We’re not like all other mortgage companies,” Ishbia told The Detroit News. “We are much less dependent on refinancing and we are less cyclical. We are more scalable in technology.”
UWM is already No. 1 in a channel – the wholesale market, where it works exclusively with mortgage brokers, the intermediary workers who look to lenders to find homeowners the best rates and products for them. Rocket is second in wholesale lending, but it also directly serves homeowners in the retail segment.
To beat the competition and do what no wholesale lenders have done before, more homeowners need to do business with brokers, Ishbia and experts said. And the refinancing market, where the Rocket is particularly strong, has to shrink.
“If volumes continue to increase, it favors Rocket over UWMC, but if we get higher rates, it favors the brokerage market on the origination side,” said Kevin Heal, senior analyst at Argus Research Co. an ambitious goal. There is potential, yes, but you’re counting on the broker market to maintain your independence.”
A Rocket spokesperson referred the comment to Guy Cecala, CEO and editor of Inside Mortgage Finance.
The market “strongly favors Rocket,” said Cecala. “Just because they’re bigger, they’re in retail and wholesale and frankly, they’re basically doing everything right now when it comes to maximizing originations. They’re expanding their business into the home buying market.”
Still, Cecala said: “United Wholesale has registered quite remarkable growth in recent years. I don’t think anything will exclude them.”
Ishbia says homeowners save $3,700 in the first five years if they use a broker. Lenders tend to earn less from wholesale channel loans because of competition.
“We need to continue to educate that the cheapest and fastest way to get a loan is through a mortgage broker,” said Ishbia. “They shouldn’t go to the main retail lender.”
The wholesale channel represents about 20% of originations, according to UWM. Ishbia wants to see that 33% growth through 2025 and save homeowners $23 billion over the next three years. It reached that level before the real estate bubble burst, when many brokers left the business.
UWM has increased its efforts to promote itself in recent years. Ishbia has made television appearances, UWM has purchased regional Super Bowl ads promoting brokers, and more recently announced that its logo is replacing Troy’s Flagstar Bank on Detroit Pistons T-shirts.
The target also comes as experts predict that interest rates will rise, which discourages refinancing. Experts consider the strongest brokers in the buying market. If interest rates rise soon, Ishbia said the UWM could reach its target before 2024. But at some point, there won’t be many people left to refinance.
“Rocket Mortgage has grown continuously since 2008 or so through a refinance market, home buying market,” said Cecala. “They showed a lot of resilience and the ability to grow in a variety of conditions.”
Rocket originated $320.2 billion in mortgages in 2020. UWM made $182.5 billion.
If the UWM overtakes the Rocket, the volume will likely not be as high as its 2020 record, Ishbia said: “These past two years have been an anomaly in terms of high volumes and high margins. and more reasonable in a buying market. “
If the UWM overtakes the Rocket and conditions return to a refinancing market, Ishbia goes on to say that the UWM will look to stay ahead: “I’m not interested in being number 1 in the quarter and going back. the gap and not the other way around.”
Competition may have some negative effects on margins, however, which declined in the sector year-on-year in the first quarter as interest rates rose slightly.
Rates have become similar across the industry, said Argus ‘Heal. UWM and Rocket have employed technology that allows them to close loans faster than their competitors, allowing them to source more volume, albeit at a cheaper price. Intensified competition can put pressure on margins.
“We’re not worried about that,” said Ishbia, noting that the second quarter should be a record quarter. “We hope to go from all-time highs to all-time lows. We’ve done it every time. It’s nothing new for us. We’re a very profitable company, even with low margins at all times.”
UWM shares fell 25% year-to-date. It went public through a special-purpose acquisition company on January 22, a transaction announced in September. Rockets fell 4% year to date.
Ishbia also shared two other company goals over the next three years. He wants his net promoter score, which measures customers’ feelings about the service, to be the highest of a Fortune 1,000 companies. It’s about 87 currently, which Ishbia says is fifth.
The company also wants a 92% rate of its employees saying they want to stay with the company for the next two years. It is currently at 90%.
Workers will return to their Pontiac offices starting June 24, and all 9,300 will be back by the end of July. Unlike Rocket, UWM is not adopting a hybrid model that allows remote work.
“We are better together,” said Ishbia. “Our people know that. Our people are excited to come to the office. If it’s not right for them, that’s fine. We have clarity about team, family, hard work, collaboration, teamwork – all of those things. same building.”
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