United Wholesale Mortgage hopes to go public through the merger with Gores Holdings IV and level the playing field with its competitors, said President and CEO Mat Ishbia.
"Our company has grown at this rapid pace for so many years," he said during a call for investors. "Now, however, we believe that the additional resources and the ability to level up with many of our competitors will take us to a whole different level."
This competition includes Rocket Cos., Its local rival. UWM is headquartered in Pontiac, Michigan, a suburb of Detroit where Rocket is located. Rocket went public in early August.
In the IPO, UWM sees an opportunity to grow as it borrows from mortgage brokers who themselves tend to be purchase transaction-oriented and less prone to cyclical trends, Ishbia said.
UWM's announcement also follows Rocket's announcement to give Rocken Pro TPO a new brand of Quicken Loans Mortgage Services that provides advanced tools and an expanded referral network for mortgage brokers, banks and others in the field.
UWM's merger with Gores Holdings IV, a special-purpose acquisition company, valued the mortgage lender at $ 16.1 billion. The deal is expected to close in the fourth quarter. The company is then run under the name UWM and the ticker symbol is UWMC.
Rocket Cos. IPO on August 6 to raise $ 1.8 billion. However, Dan Gilbert still owns or controls 79% of the company's equity. More recently, LoanDepot has reportedly taken steps towards yet another attempt at an IPO that could be valued at between $ 12 billion and $ 15 billion. This follows a failed attempt made a few hours before pricing in 2015.
Regarding UWM's rivalry with Rocket, Ishbia said of the call, "What Dan Gilbert built there is fantastic. These guys are winners and have been very successful and have been for a long time.
“We have a lot of similarities. We're both great creators, both very successful, both headquartered in the Detroit area, and both doing great things in the community.
"We both believe in the wholesale channel," he said, noting that the main driver of growth since 2016 for Rocket, whose brand was Quicken Loans, has been wholesale.
He added that Rocket does a fantastic job marketing their company, while UWM doesn't have a big public brand.
"We believe that going public will actually help our brand," he said. "From our point of view, we don't want to be at the forefront. The brokers are at the fore. But if we can tell the story about the brokers and the people start." I know there is a big company out there that supports brokers called UWM and it can give me a cheaper, faster, and easier mortgage. It's going to be great, "said Ishbia.
While Rocket does an excellent job retaining its existing service customers, Ishbia at UWM added that the perspective is to help mortgage brokers grow. "We want them to keep their customers even if [the credit] doesn't come back to UWM."
As part of the UWM merger, Gores Holdings IV will raise approximately $ 425 million in cash in an escrow account for the merger with UVM. Additional investors have committed to participate in a $ 500 million private placement to aid the company's capitalization.
Gores Holdings IV is led by Alec Gores, Chairman and CEO of the Gores Group. The grouping includes large nameless institutional investors.
This is Gore's fourth transaction with its publicly traded SPACs, but the first one that a financial firm is involved in. The others are with Hostess, Verra Mobility and PAE. A fifth contract with Luminar Technologies has not yet been signed.
Upon completion of the transaction, UWM's current owners, mainly Ishbia, will retain an approximately 94% interest in the combined company.
UWM expects to end the year with a total of $ 200 billion. Last year, it produced 108 billion US dollars, up from 42 billion US dollars in 2018 and 30 billion US dollars in 2017. The company forecasts sales of 4.6 billion US dollars this year after 1.3 Billion US dollars in 2019.
Wholesale is a cheaper distribution channel. UWM's statistics showed that taking out a personal loan cost $ 8,872 in 2019, compared to $ 8,402 in wholesale. The company said it was $ 7,282 per loan at UWM during that period, and it's currently even lower at $ 6,625.
UWM's adjusted net income for the twelve months ended August 20 is $ 1.3 billion, compared to $ 318 million for full year 2019. For full year 2020, pre-tax income is estimated to be approximately US $ 2.9 billion Estimated dollars and adjusted net income of $ 2.1 billion.
The sales profit margin is expected to be 209 basis points for this year. With rates potentially rising in the next year, the company expects them to decrease to 188 basis points in the next year and to 160 basis points in 2022. UWM predicts a volume of 210 billion US dollars in 2021, 240 billion US dollars in 2022.
On the service side, UWM ended 2019 with a portfolio of $ 70 billion. It is expected to end at $ 208 billion this year. The service rights portfolio is expected to reach $ 355 billion by December 31, 2021 and $ 501 billion the following year.