Good morning. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to the UWM Holdings Corporation First Quarter 2024 Earnings Conference Call.

Good morning. This is Blake Kolo, Chief Business Officer and Head of Investor Relations. Thank you for joining us, and welcome to the First Quarter 2024 UWM Holdings Corporation's Earnings Call. Before we start, I would 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 this morning. I will now turn the call over to Mat Ishbia, Chairman and CEO of UWM Holdings Corporation and United Wholesale Mortgage.

Thanks, Blake, and thank you, everyone, for joining us today. I'm really excited about this earnings call. A lot of great things to talk about. We're extremely busy here at UWM. We're hiring hundreds of new team members, preparing for the future and the opportunity. And there's a great buzz around our campus that I wish all of you could feel. On our last call, I said we expected 2024 to be a better year for the housing and mortgage industry, and the first quarter supports what I expected. We are in the weeds of our business and have done a nice job executing on our game plan. With that said, I want to touch on a couple of main themes before getting into the quarterly numbers. First, the broker channel is the best place for a consumer to get a loan and is the best place for a loan officer to work. Knowing this, it's great to see how much the broker channel is growing in both share and people over the last few years. More and more loan officers, consumers, and real estate agents are seeing what we have already known for a long time: that the mortgage broker is the best place to get a mortgage. Consumers and real estate agents are seeing it as well. It's very exciting. Second, and I want everyone to remember what I'm about to say next, it's something that I've been saying for years since becoming public. When rates are high, the brokers in UWM will always dominate, and that is exactly what has happened over the last two and a half years or so. Now I'm telling you this: when rates go down, every mortgage company in America, including UWM, will look great. But remember, we are different because UWM was built to perform in both purchase and refinancing markets, and that's something I'm very proud of. Overall, it's been a tremendous start to the year, and we're excited about the momentum in our business. Now let's jump into the first quarter. We closed $27.6 billion in production for the quarter at the higher end of our guidance, with over $22 billion of this coming from purchase. I'd like to point out that we grew 13% from the fourth quarter, and more impressively, 24% compared to last year's first quarter. I don't think there's a lot of lenders that can say they've grown that much year-over-year. We've been guiding to 75 to 100 basis points for a long time, and I bumped it to 80 to 105 for the first quarter. We exceeded that guidance with a gain margin of 108 basis points. It was a very profitable quarter with $180.5 million in net income, and that includes a $15 million write-down on fair value. As these results demonstrate, we continue to deliver on our expectations by remaining focused on being the best mortgage lender in the country. That means continuing to invest in our people, in our technology, in our service no matter what others in the industry are doing. We know what we are good at and we know what we're great at. We don't try to be all things to all people and we win because of it. As you will hear from Andrew shortly, our financial business position is very strong, and we fully intend to keep rewarding our shareholders with a great dividend, as I've been saying quarter in and quarter out. We remain confident that the volumes and margin will remain strong in 2024, as we've been saying for the last couple of quarters, and we are uniquely positioned to capitalize on the next refinancing boom, whether it comes next month, six months, or in twelve months. We are prepared. I'll now turn things over to Andrew, our CFO.

Thank you, Mat. 2024 is off to a great start, even during the quarter that is traditionally slower from a seasonal standpoint. We reported positive net income for the quarter and remain profitable operationally before considering the change in the fair value of MSRs and on an adjusted EBITDA basis. We were pleased with our first quarter operational performance as we continue to invest and prepare for the next market cycle. We've discussed before our plans to opportunistically sell MSRs as a means of generating cash flows to support our ongoing operational, capital, and financing cash needs. This continued in the first quarter. Our first quarter sales were accomplished at what we believe to be favorable prices and have allowed us to significantly derisk our MSR portfolio and deleverage our balance sheet while also supporting our ability to originate substantial new loan volume. As of the end of the quarter, our capital and leverage ratios remain within expected ranges in the current environment and generally consistent with or improved from the end of last year. Furthermore, our liquidity and access to liquidity, including cash and accessible borrowing capacity, increased by over $600 million from the end of 2023, bringing our total available liquidity to just under $2.9 billion. We believe that we continue to be well positioned operationally and financially for different market cycles.

Thanks, Andrew. I'll close with a few points before the Q&A. I said on our last call that I believe that 2024 will be a better overall year for housing and the mortgage industry than in 2023. Everything you're seeing now confirms that, definitely at UWM. But as I always say, in regard to the market, we remain the best mortgage lender in America. Our focus will remain on providing elite service, technology, pricing, and partnership to our mortgage broker partners. Lastly, I'm very excited for next week. We welcome about 5,000 mortgage industry professionals to our campus here in Pontiac, Michigan for UWM LIVE!, which has become the biggest annual mortgage event in America. I know many of you on this call have joined us in the past, and I look forward to seeing many of you here again next week. Now looking forward to the second quarter, we expect production to be between $28 billion and $35 billion. And consistent with what I said before about margins, things continue to show signs of improvement. In the second quarter, we expect our gain margin will be between 85 and 110 basis points. As always, I really want to thank our team members, our clients, and our shareholders. We've got a great team here at UWM. We're really proud of what we're doing, and we're excited to continue to dominate together. Now let's turn it over to Q&A.

Congrats on a great quarter. Mat, I just want to get your perspective. You guys have been seeing some good growth in non-agency volume. Is that primarily on the jumbo side? Or what are the drivers there?

Yes, I appreciate the question. A significant portion of our growth has been in jumbo loans. Our brokers are actively competing for jumbo loans against banks and credit unions, which traditionally excel in this area. We're improving in this aspect, and our brokers are achieving great results. A large part of our focus has indeed been on jumbo loans, and these loans are often accompanied by referrals from non-jumbo loans. While we do engage in some non-agency lending, the majority of our activity has been in the jumbo market.

Got it. Yes. And then just moving over to servicing. I think we talked in the past about kind of a $300 billion range. But is that mostly just a function of the market and where you're seeing opportunities, like you said, to derisk and get attractive pricing and you guys don't really have a target there and it's going to be more market driven? Is that fair to assume?

Yes. We're always opportunistic, looking at the opportunities out there on MSRs. We're one of the few out there originating a lot of business. So a lot of MSR buyers are coming to us and looking for volume, and we're the ones providing it because of the amount of originations we do on a quarterly basis. So we look at it opportunistically. We can hold the rest of the year, we can sell some more. We have all different things that we look at. It just depends on what the market conditions are.

Just looking at the guidance for the margin in the second quarter, I'm trying to understand how the margin in April compared to that guidance, especially considering the mortgage rates. This will help us benchmark our expectations for the entire quarter. Looking further ahead, how stable do you think that margin will be, even if rates increase slightly or decrease? How do you view the stability of that margin moving forward?

Yes, thank you for the question. Overall, I felt confident enough to raise the margin from a range of 85 to 110. My role is to provide guidance and aim to be accurate in the middle of that range. Based on my observations of margins last quarter and how I expect them to trend this quarter, I believed it was appropriate to increase the range. As I've mentioned over the past few years, 75 to 100 represents the lower end of the wholesale margins, and it's now been adjusted to 85 to 110. I anticipate that this level will be maintained and could rise further when rates decrease. While some believe that higher rates will persist for a long time, I do not share that view. However, if rates were to remain higher for an extended period, I would still feel comfortable with this margin range. When rates eventually drop further, that's typically when margins tend to rise slightly.

Yes. That's really helpful. Looking at the strength in the stock, I mean, the momentum you seem to have here on the origination side, I mean one thing we've talked about is getting more participation in the stock, right? Raising the float, having an opportunity to support growth with maybe some fresh capital. I mean, how should investors maybe start to think about that opportunity, just given the way you guys are trading and the outlook for the rest of the year?

Yes. No, it's a good question. I appreciate it. I guess my take is we have a great base of investors right now, and I know a lot of them would like to be able to add more in right now. However, float is a concern. So we always look at it. We're opportunistic and look at those opportunities and see if there's something we can do. But we want to look at what our shareholders need and want, and the float is definitely something we talk about and are concerned about and consider all things.

Mat, can you just talk about kind of what you're seeing in the spring selling season, kind of both on the demand side and the supply side in terms of new purchases?

Yes, definitely. While it may not be highlighted in mainstream media, we've observed a robust purchasing year so far, not only within our mortgage company but across the market as well. Inventory levels have increased, although this positive news tends to be overlooked. Housing values are strong, and there are many first-time homebuyers actively participating in the market. Fannie Mae and Freddie Mac have also made commendable efforts to attract more first-time homebuyers and expand homeownership opportunities. Overall, I would categorize it as a solid purchasing market. While I wouldn’t describe it as the strongest market we’ve ever experienced, it is certainly more robust compared to last year, contributing to volume increases. In fact, we've seen a 24% rise in overall volume year-over-year in the first quarter. I believe purchases will continue to remain strong through the second and third quarters.

Great. And then, Mat, Freddie Mac has talked about possibly getting into second liens. Kind of what are your thoughts around that product? And how large could that opportunity be?

Yes. I mean it's interesting, and Freddie Mac and Fannie Mae both do a good job of trying to innovate and come up with ways to help consumers and grow the mortgage pie in a positive way. It's a good program potentially. I think it's still months and months out if it came out, and that product is really already served in the market today through home equity lines of credit and other products that are already out there; can Freddie Mac do them better potentially, a little cheaper potentially? Yes. But it's not material in any way, shape, or form.

Mat, can you give us your thoughts on some of the potential changes that could happen in the title insurance industry? And can you remind us what you guys have done in terms of reducing title costs from some of your programs?

Yes. Thanks for the question. You're obviously in the weeds of the business; I understand that. The title insurance business is one of those parts of the industry that are ripe for disruption, right? Charging consumers a lot of money for a product that doesn't require a lot of cost. And so realistically, that's going to get disrupted at some point. We're doing some things to help lower the cost for consumers on title. And it's been extremely successful so far, and we're going to continue to lean in on that. And title insurance companies, which we work great with, we work with a lot of title companies and many of them do a lot of great things, and we're great to be partners with them. But we're always looking at ways to make things better for consumers and help brokers grow and succeed. So title insurance isn't going to go anywhere. They're going to be part of the industry, and they do great things. But there is going to be some disruption and some movement because there's a better way to do things for consumers; a lot of people look at it, and we're one of those people that look at it.

Okay. Great. That's helpful. And then just one on the MSR. So the sale, MSR sales, can you just talk about the sale price relative to the carrying value since it looks like some of that went through the fair value mark on the MSR?

Yes. I mean, interesting is depending on the time of the month and where rates are at that moment, the prices are right in line with what our carrying value is. And so sometimes you pick up a little, sometimes you lose a little bit. In general, it's been not a material negative or positive, to be honest with you. So it's good because we're actually one of the few out there that sell enough MSRs to know that we're carrying it at the right values, where some others maybe carry out values that we think are unattainable in the sale market.

Just going back to the origination guidance, can you just give us a sense of the scenario that would bring it to the low end of the range and what scenarios that would bring it to the high end of that range? And then just are you seeing any different industry trends during this year's spring selling season?

Yes, I believe my role is to provide guidance, and I've given a range where I expect us to perform in the middle. Factors that could influence an upward or downward shift include interest rates; a decrease in rates might help us reach the higher end of the range, although I don't anticipate exceeding it. Conversely, a significant increase in rates could potentially push us below the range. I consider the range of $28 billion to $35 billion to be solid. Last year, we achieved about $31 billion in the second quarter. Surpassing that would be a substantial success. We already exceeded the previous year's number in the first quarter, but the second quarter last year was particularly strong based on the numbers. I'm optimistic about our margins and volumes, and I believe we're well-equipped to manage the situation. Importantly, we're prepared for any drop in rates, whether it happens tomorrow, in six months, or in a year. We're positioned to take advantage of opportunities as they arise, which has been a significant part of our hiring strategy. You should be able to see this reflected in our growth. We're ready for a significant increase in volume and, at the same time, we are achieving strong profitability and success within the current margins and volumes, so I feel confident in the projections I've mentioned.

And then just a follow-up. In terms of the pricing initiatives you have for the brokers, how has that driven increased volume? And do you expect to roll out further initiatives going forward?

Yes. I mean, we always are looking at everything. How do we make things better for brokers? How do we help the brokers win more loans? How do we help the brokers grow? And so price initiatives is just one of those many tools. We have other things that we look at. How do we roll out new technology? We've done some things on whether it's tied to AI, whether it's tied to innovation that people don't even speak about or understand, but our brokers understand. And so there are things we're always trying to roll out to help them grow. Price is just one of those minor categories that you can use to drive volume and help them win more business. But in a purchase market, price is less relevant. It's more about can you take care of the client, make it fast, easy, simple, get them in the house on time, and then obviously, be affordable. And so those are all the things that we're working on. And so I feel really good about the technology and the innovation we're providing to brokers to help them grow their business, and we're going to continue to do that. And whether a price initiative or something else comes out, at some point, we always look at that stuff, but I don't foresee that right now; I foresee more other ways to help them grow.

We currently have no questions in our queue at this time. I will now turn the call back over to management for closing remarks.

Yes. Well, thank you, guys. Thanks for the questions. We're really proud of the quarter, and we're excited about this quarter that we're in right now too, and we're going to keep doing great things. So we appreciate you being on the call. Thank you for the questions and supporting UWM. Have a great day.

This concludes today's conference call. Thank you for your participation, and you may now disconnect.