UWM Holdings Corp Q1 FY2021 Earnings Call

Good morning. My name is Amy, and I will be your conference operator today. I would like to welcome everyone to the UWM Holdings Corporation First Quarter 2021 Earnings Conference Call. Matt Roslin, you may begin your conference.

Good morning. I am Matt Roslin, EVP of Legal Affairs and Investor Relations. Thank you for joining us, and welcome to the First Quarter 2021 Earnings Call for UWM Holdings Corporation. Before we start, I'd like to remind everyone that this conference call includes forward-looking statements. For more information about factors that may cause actual results to differ materially from forward-looking statements, please refer to the earnings release that we issued yesterday. Now I'd like to introduce UWM Holdings Corporation and United Wholesale Mortgage Chairman and CEO, Mat Ishbia.

Thanks for being here today. I'm glad you could join us. I will keep my comments brief to accommodate as many questions as possible. It's important to us to address everything regarding our business and industry, so feel free to ask anything. Q1 was a significant and outstanding quarter for UWM. We became a public company, strengthened our finances, broadened our product offerings, and focused on increasing our presence in the mortgage broker market. Our team has grown to over 8,600 employees, and we're continually investing in our technology to enhance our process and speed to close. We're committed to making the mortgage process faster, easier, and more affordable. Additionally, we completed our UWM Sports Complex and training center, which will allow us to positively impact our community. UWM is well positioned to remain the top wholesale lender, a title we've held for six consecutive years, and we aim to become the leading overall mortgage lender in the country. In terms of details, we reported $860 million in net income this quarter, which is 42 times our performance from last year. We had $49.1 billion in production, reflecting a fantastic performance. We concluded our public equity deal and ended the quarter with $1.6 billion in cash. In April, we closed our second long-term, high-yield debt deal and eliminated all encumbered MSR financing, giving us a powerful position with a $2.3 billion MSR asset. Our Board approved a quarterly dividend of $0.10 per share for shareholders, payable on July 6, with a record date of June 10. We are also exploring increasing our dividends and considering a share buyback program, which we authorized at $300 million over the next 24 months. We're being strategic with our capital deployment. In the past 90 days, three of the top 25 wholesale lenders were acquired, which highlights interesting opportunities for market share growth. Acquiring competitors may not make sense for us given our leading position and the better returns we can produce through organic investment. Moving forward, our goal is to achieve a 50% market share within the mortgage broker channel by 2025-2026. Currently, brokers are responsible for around 20% of mortgages, and we want that to increase significantly. We're focusing on growing our relationships with existing clients, which has proven effective. We've launched a new jumbo program that has seen success, and April's production was impressive. We're also expanding our government programs while maintaining a focus on high credit quality. We're not reducing our credit standards and intend to continue optimizing our product offerings. Looking at Q1, we maintained leadership in the purchase market, and we've seen a significant uptick in registrations, especially for purchases. Our initiatives, like the all-in strategy, have reinforced our commitment to brokers, resulting in over 10,000 brokers affirming their partnership with us. In terms of operations, we pride ourselves on our speed to close, now at 17 days, well below the industry average of over 50 days. We're also delivering lower rates than the competition while maintaining high-quality metrics. On the technology front, our team is preparing to scale significantly, potentially doubling our volume capacity. We're making investments to advance our technological capabilities and are poised to introduce exciting tech developments in the coming quarters. As for people and community, we are committed to training and developing our team, earning recognition as the number one training company in the country. We've also been actively helping the community by providing meals and facilitating vaccine distribution, bolstering our role as a responsible corporate citizen. I'll now pass it to Tim Forrester for further insights on the quarter and the guidance moving forward, after which we'll open the floor to questions.

Thank you, Mat. It has been an excellent quarter on many fronts. Our success in execution continues to lead the success in our financial statements. Our cash increased by over $350 million, and our investment in our servicing portfolio increased by over $500 million. So we invested more in MSR, while our liquidity increased. With our performance in Q1, our equity increased by just under $450 million. Subsequent to quarter end, we successfully executed our second unsecured debt issuance for an additional $700 million to continue supporting the balance in our capital structure. And a majority of the proceeds were used to satisfy existing secured debt facilities. Now let's turn to the income statement. Our performance improved considerably over last year as margins were robust and volume was strong, leading to substantially higher loan production income. The increased size of our servicing portfolio continues to provide additional loan servicing income growth to further enhance our performance. As Mat mentioned, we continue to invest in our technology efforts, but we also continue to invest in our people through team member additions as well as training. The Training award recognition doesn't have a line item on the income statement, but it sure helps explain a key element of our success. We invest in our people so they can best serve our brokers. One item where we made a change was our ongoing accounting for mortgage servicing rights. We elected to adopt fair value accounting for all of our servicing rights effective January 1, 2021. We believe that this will assist in comparability between our performance as well as our peers. The adoption of the change was immaterial as the recorded balance in fair value was very close as of January 1. Our cost structure continues to perform well. While our cost per loan was higher in Q1, going from $1,473 per loan for all of 2020, it went to $1,662 per loan for the first quarter, which are significantly lower than our competition. This is also an investment in our people and our scale, and the first quarter traditionally carries a bit more of a cost load. So overall, great performance. Our continued cost discipline and effective deployment of our team members allow us to remain profitable in various rate and margin environments, as we have demonstrated in the past. We're positioned to do so again and are prepared for various market conditions. Now I'm going to turn it back to Mat to close out our prepared remarks.

Yes. Thanks, Tim. I appreciate it. So briefly before we get into questions, I talked about we did over 40 times our first quarter of 2020. We had a great quarter. We'll continue to grow technology, operations. We went through all this stuff. But the reality is this, so you guys get my perspective: I told the Board and I told our leadership team, I've never been so sure of our success from a perspective of feeling so good about where we're at, operations-wise, product and pricing, technology. The investments and things we're doing in technology are out of this world, and then I think you're going to see more and more capacity to handle business, capital liquidity. And now return to work, we're going to hopefully get our people back in the next 60 days or so to bring our team members all back in our building together, 9,000 people strong. And so I've never felt so good about where our business is right now, in a position to gain market share and show as the elite mortgage company in America. And so when we did our road show back in September, I wasn't telling a story about, 'Oh, this is what we do. We're less cyclical, and this is what our business is.' The reality is, I was telling you the reality. It's true. And now I don't think you get a chance to see it in 2021. But now with what happened in the market, you will actually see it. You will see that we are the elite mortgage company in America. And as our competitors all guide to do less volume in Q2, we're guiding to do more volume because we're going to take market share and grow. We win in a purchase environment. We win in these environments. Our cost to originate, our technology gives us a differentiator. So a lot of people are not excited. Our competitors are not excited about Q2. We are thrilled. We are excited about when rates go up a little bit. Because you know what happens? We will gain market share. We will prove ourselves that the thing that we talked about before wasn't a story. It was actually reality, and you're going to see it. And now we're going to demonstrate it in the second quarter. You don't have to believe me now. But you can see me in August 9, August 10, whenever the next call is, and you actually are going to hold me accountable. Q2 2020 to Q2 2021, who grew the most in the mortgage industry, UWM versus anybody? I'll take UWM. Q1 2021, the quarter we just finished, to Q2 2021, is everyone else growing? Or is everyone else going down? They're guiding down. They're going to do less business. UWM will do more business in the second quarter than we did in the first quarter. Other people cannot do that because their business is cyclical, a lot more cyclical than UWM's. And so UWM will win, just like we told that back at the road show. And so I understand you're going to see that. Will margins compress? Absolutely, they will compress. They usually go from all-time highs to all-time lows. That's what happens in the mortgage business, and then they'll settle in, in normal numbers. We didn't expect them to go down to this point in this part of 2021, but we're excited about it because we're going to still produce a lot of income where our competitors might not. And at the same time, we're going to take market share and show you that we are the elite mortgage company. So we're excited about the second quarter. I'm very excited. Hopefully, you can tell that from my perspective. We're going to guide to $51 billion to $55 billion of mortgage volume in the second quarter with a chance of it being our all-time highest mortgage volume in history and between 75 and 110 basis points in margin in the wholesale channel, which, once again, all-time highs, all-time lows, and it will settle back in. But we're excited about the second quarter. It's going to be a great, great quarter across the board, and we're excited for you guys to see the data and the numbers here soon. So with that being said, I'm going to turn it back to the operator. I'm happy to take all your questions, spend the time doing it together. And so turn over to operator and let's open it up for some questions and excited to chat with all of you guys. Thanks.

Your first question comes from the line of Doug Harter with Credit Suisse.

Mat, as you were discussing, it seems we are coming off the lows and starting to stabilize in terms of margin. I have two questions. First, what are you observing in the monthly data regarding stabilization in margins? Second, how do you assess what the normalized margins might be?

Yes, thank you, Doug. I appreciate your question. Regarding normalized margins, we discussed this during the road show and throughout last quarter. We believe it's more likely to normalize in the mid-100 range. We expected this year to fall more in the mid to high 100s, as we mentioned. However, with the ten-year yield increasing and the market changing rapidly, we naturally experience fluctuations from all-time highs to all-time lows. For this quarter, we anticipate margins in the range of 75 to 110. This is partly related to the acquisition strategy we discussed, where we could either spend money to acquire another company or lower our prices slightly to attract their clients and brokers. We foresee margins around 75 to 110 for several quarters possibly. We'll see how that develops. I think they could rise again, depending on the ten-year yield. Once we establish a new norm and reach the lows, we expect margins to return to the mid-100 range, whether that means 115, 125, or even more like 150, 160. It really depends on the market and how quickly it rebounds to normalized figures.

Great. And then just in terms of capital return, you mentioned sort of the float. I guess just how are you thinking about kind of how much of the float you'd be willing to take out and pacing around share repurchase?

Yes, Doug. So I'm learning these rules as we go because at this stock price, I'm a buyer, right? And so we'll buy shares as soon as tomorrow, I think, as our legal teams say we're allowed to do. And so I don't know how many I can buy and what I can do, but I'm very conscientious of the float. If the float was not a concern, we'd be more aggressive. However, we have authorization from the Board to buy up to $300 million, and I'm going to take advantage of that opportunity while being conscientious of our partners in the float.

Your next question comes from the line of Henry Coffey with Wedbush.

First, a housekeeping item. In the mark against your MSR, can you break down for us the portion that was amortization or realization of cash flows and the part that was fair value?

Sure. Henry, thanks for the question. The capitalization, there's a couple of pieces that create the differences. We capitalized just under $600 million of new servicing. And so that $59 million that you're looking at in the income statement is broken down between about $198 million of fair value pickup with the remaining $257 million or so, $257 million being the amortization and paid in full combination. So that's the primary difference is that the $198 million is the fair value pickup over the quarter, and the $257 million or so is the paid in full and effectively the decay.

Great. To address Doug's question, I believe this is what everyone is concerned about. United is a market leader, and maintaining and expanding that position is crucial for the company. However, it seems there is a significant cost associated with it. As a market leader, what ability do you have to influence pricing and possibly expedite a return to a gain on sale of around 125 to 150? Additionally, as we look towards April, are we at 75 basis points or 100 basis points? I assume that this figure includes both the gain on sale and your origination fees.

Yes, thanks, Henry. We are undoubtedly the leader in the market. Competitors will adjust their prices based on our position. For them to gain business, they must be considerably better priced than us. Our technology, service, and partnerships are top-notch, and our clients recognize that. Competitors can only succeed by offering significantly better prices. We are not close to the 75 basis point mark for the first month where my competitors need to be. I’m not sure what the next couple of months will bring, but I'm guiding towards a range of 75 to 110, and I feel confident about that. I also believe we will continue to increase our market share. If we choose to reduce margins, others will likely follow suit, allowing us to keep succeeding and growing. We have the option to acquire companies with cash or stock, or to grow through margin compression, and we are considering this in the first quarter, as well as in the third and fourth quarters. We make daily decisions based on market conditions and what is best for our shareholders, team members, clients, and consumers. We feel very good about our current position. We can also lead margins upward. Our cost to originate is significantly lower than that of our competitors, which gives us a significant competitive edge. I feel optimistic about our standings in this quarter and the upcoming ones, with ample opportunities for growth at UWM. Once we are as large as we are and start to take on more margin, profits will follow, as demonstrated in the third and fourth quarters and even in the first quarter.

When we look at your operating cost in the first quarter, and we don't think about it on a per-loan basis, as you all do, but when we look at your operating cost and we subtract out servicing expense, it looks like your remaining overhead was about 50 basis points of origination. Can you break that out? How much of that is corporate and fixed? And how much of that is really the direct segment expense?

Yes. Just real quickly on the fixed portion of that is that usually about 2/3 of that will be fixed cost. We don't break out necessarily corporate. We just allocate the costs. Regardless of where the costs sit, everything is attributed to the origination or servicing side. But most of that is going to be sitting in the origination. So when you think about our cost structure, usually, it sits about 2/3 to 1/3. When I look at first quarter results, 53 basis points is what we calculate as our expense all in. 33 basis points was fixed. 20 was variable. So that's how we look at it. Again, we don't look at it as a corporate allocation. Every cost has a home, and it's attributed to the business.

Your next question comes from the line of Steve Delaney with JMP Securities.

Mat, you mentioned that with your all-in program, you said goodbye to about 600 partners. Could you estimate what your total number of signed up and active partners would be at the end of March or currently, either way?

Yes, thanks, Steve, for the question. We currently have well over 11,000 partners, and the 600 mentioned is part of that total. Although we had nearly 12,000 at one point, after removing those 600, that's where we stand. As I mentioned, there are still some partners who are undecided, many of whom are smaller companies that may not apply for loans regularly, which is why we haven't engaged with them or they haven't responded. Overall, we have a substantial number of active clients, and that number is growing. The clients we are currently working with are increasing the proportion of their business with us. Therefore, we continue to see growth in same-store sales with UWM since the announcement and the expansion of our product offerings, including the jumbo product I mentioned earlier.

You're correct. The media coverage was extensive. However, from our perspective, it appears to have calmed down. Is that an accurate assessment? It was significant, with many articles published. But within the industry and among brokers and the wholesale channel, have things relaxed and normalized?

They were always relaxed, Steve. The truth is I don't control the marketing strategy that my competitor uses and what they prefer to do. The fact is, I visited a few locations with hundreds of brokers during COVID, and everyone was wearing masks. So there's no need to worry; we're safe. They actually gave me a standing ovation for walking in and expressing gratitude for doing the right thing for brokers. It was never a problem. People understand that someone had to advocate for the right cause, and we did just that. It didn't harm our business; it only benefited us. Even if we consider it neutral, which it wasn't, it was actually very positive. The support, loyalty, and structure we established has been a significant win. My competitor can present it however they want. They and another competitor aren’t pleased with me, but I don’t believe they are shareholders. If they are, they’re likely satisfied as shareholders.

Great. As long as you and the insiders feel like you've succeeded, that's a significant advantage. I have a quick follow-up for Tim. Everyone is trying to determine what the normal margins will be, which we will know soon. But Tim, let's consider an extreme scenario where you determine that 100 basis points is all you can rely on for the next 18 to 24 months. Can you be profitable at that level? And could you provide a rough idea of the return on equity that 100 basis points of margin would generate?

Yes. Thanks. I'll jump in real quick, and Tim can obviously round out my comments on it. But I don't know if those would be the numbers for the next 18 to 24 months. Remember, like I said, they go off highs, and they come to all-time lows because everyone has built up a lot of capacity. And everyone wants to get competitive and try to play the game. But I'd be very surprised if numbers were in the lows for as long as you discussed. And we are the ones that can play the game longer than anyone if they want to play with us based on our scale and our cost to originate and our proprietary technology. And so we have a huge advantage there. So we're willing to play as long as people want to play, but the reality is they're not going to play that long with us. And we think margins will go back up off the all-time lows sooner than what you described.

Yes, the challenge in achieving the return on equity is related to managing a fluctuating margin. We haven't witnessed the business maintain such low margins at 70 or even at 75, which represents the lower end of the range. The return to normal margins is just a matter of time. However, based on our models, we remain profitable even at the lower end of that spectrum, and potentially even lower.

And if we were back to 150 basis points, you feel you could still deliver a very strong return on common equity for investors at that level.

That's correct.

Your next question comes from the line of Ryan Nash with Goldman Sachs.

Mat, I’m interested in your perspective on the pricing differences between various markets currently, specifically wholesale compared to retail. I understand you're not involved in the retail sector, but the pricing disparity seems unusual. How do we assess the risk of this affecting other markets? Additionally, looking back at the last major price competition in 2019, could you clarify what caused the market to rebound at that time? Was it solely due to rates? How long did it take for capacity to return to normal? Are there other factors we should consider that influenced the normalization of margins?

Thank you, Ryan. I appreciate it. Regarding the difference between retail and wholesale, it’s a significant issue. There is a huge disparity in price for consumers. Some of our wholesale competitors offer both retail and wholesale options, but it’s inappropriate to provide a consumer going directly to retail with worse rates and fees than those offered through brokers. As the market evolves, we anticipate a shift where the margins in retail are much higher, which results in less benefit for consumers. It’s puzzling that only 20% of the market is captured by brokers when the broker channel provides cheaper, faster, and easier options for consumers. Many consumers are simply not informed about this. We aim to educate them, as realtors and loan officers typically understand it better. Large retail organizations require higher margins to survive due to their extensive infrastructure, elevated executive pay, and significant spending on marketing and commercials, which prevent them from being profitable at lower rates. With the advancement of technology, we expect natural margin compression, which will challenge those with higher operational costs. This presents an opportunity, as there are over 400,000 loan officers in the retail space who will likely transition to the broker channel as their pipelines diminish, leading us to believe the broker channel could capture a 33% market share. When that occurs, UWM will be well-positioned to lead the mortgage lending space and positively impact consumers nationwide through brokers. The difference between retail and wholesale is substantial, and it’s a story often overlooked by the media, which typically does not support brokers as they don’t pay for exposure. But the reality is there is a significant difference.

That's helpful information. I wanted to follow up on your positive outlook regarding volumes, specifically the forecast of $51 to $55 billion in the second quarter. Could you discuss your intermediate perspective on the market share you might capture within the wholesale channel? While we acknowledge the impact of pricing pressures, where do you see volume potentially going? Also, you mentioned $2 billion in jumbo volume in May and the expansion of government programs. How significant could these programs become? Are there additional areas of volume that you may have reduced during COVID that could return and help drive extra volume?

Yes, that's a great question, and you're spot on. We've been working on various strategies, including reintroducing jumbo loans, making FHA options more significant, and introducing ARMs. While there's no single solution to the challenges we face, generating $2 billion a month in jumbo loans is a substantial figure. Brokers have always wanted to work with UWM, and we have addressed the reasons why they were hesitant. I firmly believe that UWM can achieve 50% market share in the wholesale sector, though we won't reach that in the second quarter. However, we have a clear path to get there within the next five years. We are steadily growing as brokers choose us as their true partner. We don’t compete against them; instead, we provide consistent, strong products and pricing, along with the best technology and service in the industry. This is not just my perspective; brokers will confirm this if you ask them. You don’t have to choose a broker that works with us; any broker listed will share their honest opinion. Therefore, if I were a mortgage investor or any investor, UWM would be my choice for a mortgage company. We are going to succeed. Our Net Promoter Score puts us at an elite level, likely in the top 1% among Fortune 1000 companies. Our exceptional service and technology set us apart. Looking at market share, aiming for 50% feels very achievable, and that’s our target for the next five years, particularly as we continue to grow within the broker channel. The expansion of our product offerings will greatly benefit UWM. Our guidance has increased to between $51 billion and $55 billion, compared to the first quarter. As I mentioned earlier, no other companies are likely to see increases in the first or second quarter. When comparing the second quarter of 2020 to 2021, you can truly appreciate the strength of UWM and the broker channel. When interest rates are low, many companies look strong, and we did too. However, as rates begin to rise, the weaknesses in other companies become apparent. Companies heavily reliant on refinancing may see reduced volumes going forward. We are excited about the opportunity to prove ourselves as the premier mortgage partner in America, and this will be evident to our investors.

Your next question comes from the line of Sameer Kalucha with Deutsche Bank.

What I wanted to touch upon is, a number of key players in your space are getting more attention for their technology and how they're modernizing the mortgage process. So I was wondering, with the great technical prowess you have and the scale of the infrastructure you put in place, are there any adjacencies you can go after, aside from the core wholesale lending business?

Thank you for your question. I want to make sure I understand exactly what you're asking. Are you inquiring if I could consider acquiring technology companies or something related? I just want to clarify before I respond.

You could buy, you could partner and just to embed yourself more in the process so that you can expand your total addressable market from the lending business to the whole homeownership business. Because you have such a great tech infrastructure already in place.

Great. I got it. Yes. So trying to understand the process all the way through. And so we've looked at partnering with different companies, tying our brokers in because our brokers generally have not had the partnerships, whether it's with builders or insurance agencies or even technology companies at the level that a lot of retail competitors do. That's how a lot of retail competitors get their business and are able to still maintain their margins because they kind of have a captive partnership in a lot of respects. And so we have looked at a lot of different ways we can help break through that for our mortgage brokers. But the reality is with education and with time, people are realizing that the difference between wholesale and retail is a major difference. And people are going to want to work with mortgage brokers. Brokers are not a fad. Brokers were the elite partners prior to the crisis in '08. They were 56% of the market. Everyone understood that brokers offered a lower rate. Now brokers offer all things. I mean, brokers still offer a lower rate, but now they have a faster and easier process because UWM has enabled them. We've empowered them with the technology we've built proprietary. Can I partner with companies that have great technology? Yes. Can I build it ourselves? Most likely. Have we looked at acquisitions? Absolutely. And we have a lot of cash on balance sheet. As you saw, we're going to look at repurchasing shares. We've obviously paid a dividend now quarterly, which has been very positive. And at the same time, we still have a lot of cash sitting here. And our MSR book is growing immensely. And the value of the MSR book will only continue to grow if rates go up, and we're very, very proud of that. So we are in a very, very strong position. Like in my remarks, I said I don't know if you've ever been in a stronger position at UWM, and I'm excited for you guys. I didn't think the investor community would see it as in the market share growth and a lot of things that we talked about during our road show and our process until 2022 or '23. And I think if rates start ticking up a little bit or stay ticking up a little bit, you're going to start to really see the power of UWM and why our earnings, our value, our market share and quite honestly our stock price will follow. And you'll see that as it goes up and we continue to succeed.

Your next question comes from the line of Bose George with KBW.

I wanted to follow up on the discussion about the growth in the broker channel. If loan officers transition from retail to the broker channel, can they earn more money? I'm curious about the factors driving the growth in this channel, especially since consumers may not fully understand the benefits they receive from it.

Yes, that's a great question, Bose. The loan officer will indeed earn more money, while consumers benefit from better rates. When you combine these two elements, you might wonder how the originating loan officer can make more and still offer a better deal to consumers. This is highlighted by the difference between the typical margins seen in the industry, which usually range from 300 to 350 basis points, compared to the 100 to 150 basis points margin often found in wholesale. Therefore, loan officers will come out ahead. Moreover, a W-2 loan officer at any level or within a special rate can establish their own company, issue mortgages, or start a small brokerage, which offers advantages like tax write-offs and more. The potential in this scenario is significant. We expect to see some of the largest loan officers in the country transitioning from retail companies to brokers this year, allowing them to earn more while offering better deals to consumers. This shift is inevitable; it's just a matter of when it will occur. We believe it will happen later this year or early next. The early signs are already visible; as rates rise, loan officers charged with higher rates are questioning their earnings and realizing that they can pursue this on their own. They recognize that brokers are currently succeeding in the market. Given UWM's stability and strength, which is well understood, more loan officers will feel comfortable moving to the broker channel. We're already observing this trend, and we anticipate it will grow as the year continues and into next year.

Okay, that makes sense. Can you discuss how large the jumbo channel could potentially be? It's certainly substantial, but there are also risks involved, particularly regarding the best execution. Is there a way to significantly expand that channel while addressing the execution challenges we faced last year due to the market shutdown?

We need to understand the market well, and we excel at identifying the right timing for our involvement. The market is currently more stable, and we have numerous outlets and partners, along with the capability to directly handle private label securities. We are at a scale that allows us to pursue this, and we are exploring various methods to do so. You will likely see developments in this area during the current quarter. Looking at potential growth, it is feasible for us to reach $6 billion or $7 billion per quarter. Surprisingly, we found that nearly half of the purchase volume came in during the initial phase, which exceeded our expectations and highlights a significant opportunity. Brokers thrive in the purchase market, and during my recent client visits, many expressed that they often had to refer clients to larger banks or competitors because they lacked a jumbo product. Now that UWM offers this, brokers can compete effectively. When a broker successfully closes a jumbo loan quickly, it enhances their reputation, brings referrals from realtors, and ultimately leads to more business. This has unlocked new market opportunities for brokers, allowing them to tap into familiar markets they previously couldn't engage. It's been a substantial success, with an estimated $2 billion in May, and there is potential for growth. My high-level estimate suggests the market could range from $4 billion to $10 billion per quarter. However, the second quarter may not reflect this fully since the jumbo product launched on March 17, resulting in a slower April despite exceeding $1 billion in volume. We anticipate that May will be a more typical month, and we will provide updates on the May and June figures during the next quarterly call.

Your next question comes from the line of Michael Kaye with Wells Fargo.

I think I heard you mention you're doing more same-store business with your broker customers now with that sharper pricing changes. But historically, when you ease back on those pricing incentives after a competitive period, how much of that market share do you end up keeping?

We retain a significant portion of our market share. Our technology is very user-friendly, and once clients become accustomed to our systems, they find it difficult to switch to other options. This creates a comfort level that encourages partnerships with us. In the past, we've noticed that market stability can be affected by refinancing activities, particularly with brokers who focus solely on refinancing. These brokers tend to be less committed than those who are fully invested in working with us. Interestingly, some brokers who committed to UWM while continuing to work with Fairway and Rocket turned out to be refi-focused shops that have seen a decline in business due to their narrow offerings. Brokers who only sell on price are unlikely to thrive in any mortgage market. Success requires selling value, which for us includes technology, service, and partnership. Competitive pricing is also part of our value proposition, and our brokers understand this. As long as we maintain consistent pricing and excel in service and technology without competing directly with our brokers, we will continue to grow, and that's been evident in our recent performance.

Okay. That's helpful. It seems that you expect a quarter-on-quarter increase in loan originations for Q2. However, you experienced weaker growth in Q1 compared to your wholesale peers, and the Q1 volume was below your previous guidance. Could you provide more insight into this situation and the apparent market share loss in Q1?

Yes, there wasn't really any loss in market share during Q1. It's important to note that UWM closes loans in 17 days, while my competitors take 45 to over 50 days. Many of the competitors you looked at for Q1 showed no impact from the rate increase in the first couple of weeks of February. When rates went up in February, right after my last earnings call, we experienced a tougher March and even a tougher February because of our quicker loan closures, whereas my competitors were still processing loans from the previous months. You already saw our decline in performance as rates began to rise, while others were still benefiting from their Q4 results. The speed at which we close loans is illustrated by this situation, and you'll see it in Q2 as well. That's why we are confident that we will experience growth in Q2 when others may not, as they will now be faced with the true market conditions. Even if it takes them 40 or 50 days to close, they cannot avoid the impact of the rate increases experienced in February, March, and April.

Your next question comes from the line of Mark DeVries with Barclays.

I have a question about the purchase mix and how it is developing. Can you provide insight into the trends for your rate locks in April and May? What is your share of purchases in the broker channel compared to your refinancing share? Additionally, do you have any information regarding the efficiency and loan fulfillment you mentioned, specifically for purchase loans versus refinances? Lastly, are you observing any differences in margins between purchased and refinanced loans?

Great question. To quickly address it, there are no differences in margins between purchases and refinances at UWM. The figures are consistent across the board. The efficiency is similar as well. Closing a purchase transaction is inherently more complex, which is why many direct-to-consumer companies and those refinancing their servicing do less in the purchase sector. The process involves more players—there’s the lender, the borrower, two real estate agents, and often a seller, in addition to possibly needing an appraisal. That adds a layer of complexity. Our efficiencies are within a day or two, so the difference isn't significant. We can estimate around 17 days for refinancing and 18 days for purchases. Materially, there is no difference for UWM between purchases and refinances. You might see slight variances in efficiency depending on the product, like FHA or jumbo loans potentially taking longer than conventional ones, but again, we’re talking about just a few days. We still anticipate our time frames will be in the 17-to-18-day range based on our current mixture. Now concerning the purchase versus refinance mix, in April, I mentioned that new registrations were 43% purchases. This percentage is meaningful because it was one of our best months for registrations ever. With high volumes and a 43% purchase mix, I previously indicated that in the third quarter, we would see the highest purchase volume in UWM's history, and we are poised to maintain our leadership. You may even notice an increase in our purchase volume in the second quarter. Overall, our volumes will surpass those of the first quarter, and our purchase volume will also increase. We are outperforming across the board, which means businesses need to adjust to the purchase market as opposed to the refinance market. Many of our competitors, particularly in the wholesale and retail channels, are not equipped for this shift. If a company operates as a direct-to-consumer business without a local presence, they will struggle in the purchase market, and we will likely see this reflected in second-quarter numbers related to purchases.

Okay. Just one follow-up on that. You mentioned a purchase, it's a little more complicated, and it takes a couple more days. Does your relative efficiency actually widen out relative to the competitors, remain about the same or tighten when you factor in that extra time?

Absolutely. You're exactly right. We're seeing people's time to close and their efficiencies related to refinancing an existing servicing loan, where they already have all the necessary data and just need the application process with one-on-one contact with the lender. This is significantly different when it comes to purchase transactions. This is part of the reason why many public and private companies are not able to handle the volume and scale of purchase business like we can at UWM, which enhances our competitive advantage. As I mentioned earlier, I'll reiterate that in Q1 to Q2, we expect growth in purchases and overall market share, as well as volume growth; UWM will prevail. We are not lowering our expectations by 10%, 15%, or 20%. We anticipate doing more business because others are somewhat concerned about the current situation, not only regarding margins. Everyone is aware of the highs and lows and is starting to stabilize. This isn't new to the mortgage industry. However, adapting to purchase transactions after relying on refinancing for the past 12 to 18 months is crucial. We'll see how that pans out for everyone. I believe that covers all the questions. Thank you for your time. We are always available; Matt Roslin from Investor Relations, Tim Forrester, our CFO, and myself are here for you. We look forward to maintaining a strong relationship with all of you. We're pleased to have answered all your questions and are excited to speak again in early August to review the second quarter numbers. Please hold us accountable to what I've shared today. We are eager about the opportunities ahead. Thank you for your time and questions. Have a wonderful day.

And this concludes today's conference call. Thank you for your participation. You may now disconnect.