United Wholesale Mortgage Holdings Corp. on Tuesday said net income dropped 47% year-over-year in the first three months of 2022 as interest rates increased and housing inventory remains constrained.
The Pontiac-based lender that originates mortgages only through independent brokers posted a net income of $453.3 million on $38.8 billion in loan origination volume for the quarter. That was down 21% year-over-year, though the company posted a record in closed purchased volume, sending shares up more than 12% to $3.91 in pre-market trading.
Production was in the middle of UWM's $33 billion to $42 billion forecast. It's gain-on-sale margin of 0.99% — down from 2.19% a year ago — surpassed the 0.85% top end of its guidance.
"This quarter, we demonstrated that our business can continue to be profitable in significantly different market conditions than what we've seen over the past two years," UWM CEO Mat Ishbia said in a statement. "We are seeing independent mortgage brokers grow in both their share of market and loan officer population. Our scale and agility coupled with the momentum in the broker channel is driving our ability to separate even further from the pack."
Although investors responded positively to the results, the company's stock price is still down from $6.14 at the start of 2022. Since the end of the first quarter in March, interest rates have continued to increase. After a hike by the Federal Reserve of 0.5% — the largest amount in more than 20 years earlier this month — it could do so several more times before the end of the year to curb inflation. The average 30-year fixed mortgage rate was 5.54% on Monday, according to Bankrate.
That's expected to hit the second quarter with UWM forecasting origination volume of between $26 billion and $33 billion and a 0.75% to 0.9% gain margin. The company last week announced a competitive pricing program through the end of June where it will match and beat the lock pricing of 20 of the top wholesale lenders by 0.01% up to 0.4%.
The shifting market has led companies such as Ann Arbor's Home Point Capital Inc. and Troy's Flagstar Bancorp Inc. to lay off workers. Rocket Mortgage and title insurer affiliate Amrock LLC recently offered buyouts to 8% of their workforce. UWM CEO Mat Ishbia has pledged not to lay off workers. The company employs more than 8,000 people, a spokeswoman confirmed.
In an increasing rate environment, the purchase market becomes of greater importance to lenders without as many homeowners refinancing. Loans for home purchases jumped to represent 49% of UWM's mix for the quarter to $19.1 billion. The rest of the $19.7 billion came from refinances, a 47% decrease from the same quarter a year ago.
Companies that also retain the servicing rights of especially low-interest mortgages that are unlikely to refinance can count on that for a stream of income. UWM's mortgage servicing rights of $3.514 billion at the end of March was up 53% year-over-year.
In the first quarter, UWM's revenue fell 31% year-over-year to $821.8 million. Expenses increased 15% to $364.5 million. The time it took to close a loan on average was 18 days. The company is looking to decrease that to 12 with its technology.
The company's more than 60-day delinquency rate was at 0.75%, and its forbearance rate was 0.54%. The company ended March with $901.2 million in cash and cash equivalents, a 43% decrease from a year ago.
Rocket Companies Inc., which includes Rocket Mortgage, Amrock, automotive retail marketplace Rocket Auto and more, is set to report earnings after the closing bell on Tuesday.
