While UWM Holdings Corp. had record mortgage production in the fourth quarter, those numbers might have been higher had it not been for a credit crunch earlier in the year.
"We chose less volume and less market share for quality in the fourth quarter as well, and that is what we will always focus on as we try to win over the long term," said President and CEO Mat Ishbia on the company's first conference call since going public 22nd of January.
The company posted profits of $ 1.37 billion in the fourth quarter, largely due to the record high of $ 54.7 billion. A profit of 305 basis points was achieved from the sales margin.
This corresponds to net income of $ 1.45 billion for the third quarter. UWM was producing $ 54.2 billion at the time with a profit margin of 310 basis points.For the fourth quarter of 2019, UWM earned $ 148.9 million. It came from $ 31.9 billion, but the profit on the sales margin was 110 basis points.
In particular, the company's purchasing volume – not just in the fourth quarter, but for the entire year 2020 – was lower than it could have been. That's because when the pandemic began, UWM stopped providing Federal Housing Administration loans and jumbo mortgage products. The former showed the potential for higher crime rates, while the future of the secondary market for jumbo mortgages seemed uncertain at the time.
"I am okay to do less business because I will make sure that we can safely navigate this ship in the long term," said Ishbia.
UWM brought back FHA products in December and plans to put Jumbo back on the menu in March. Both steps should increase the purchase volume in 2021.
For the full year 2020, UWM allocated $ 182.5 billion, of which only $ 42.9 billion was purchased. In 2019, the company had sales of $ 107.8 billion, of which $ 49.8 billion came from acquisitions.
UWM expects closed loan volume between $ 52 billion and $ 57 billion in the first quarter. In the first quarter of 2020 it was $ 42.4 billion.
However, sales margin gains are expected to be between 200 and 235 basis points, which would be 23% to 34% lower quarter over quarter. However, compared to the first quarter of 2020, that would be an increase between 111% and 142%.
Ishbia aims to increase UWM's market share in the wholesale channel by 35% to 50% by 2025 or 2026. At the same time, he expects the wholesale share of the original cake to increase from the current 25% to 33%.
"I think that proportion … is actually going to come from some of the top players in wholesale, the top 10. There's a huge gap in technology, in delivery, in the pace at which we're winning, and many others must do this. " Cut their margins significantly to get closer to the volume they want to compete with us, "replied Ishbia when asked.
The IPO improved UWM's liquidity profile, Ishbia said, and the company expects to generate excess cash on its books.
"We're not going to leave it here and waste it," he said. "We're either using it to grow the business or delivering it back to shareholders."