UWM Holdings Corp Q3 FY2025 Earnings Call

Good morning. My name is Aaron, and I will be your conference operator for today. I would like to welcome everyone to the UWM Holdings Corporation Third Quarter 2025 Earnings Conference Call. Blake Kolo, you may begin your conference. Thank you.

Good morning. This is Blake Kolo, Chief Business Officer and Head of Investor Relations. Thank you for joining us, and welcome to the Third Quarter 2025 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. Our commentary today will also include non-GAAP financial measures. For information on our non-GAAP metrics and the reconciliation between the GAAP and non-GAAP metrics for the reported results, please refer to the earnings release issued earlier today as well as our filings with the SEC. I will now turn the call over to Mat Ishbia, Chairman, President and CEO of UWM Holdings Corporation and United Wholesale Mortgage.

Thanks, Blake, and thank you, everyone, for joining. Over the past 3-plus years, we've successfully navigated a higher-rate environment with a focus on taking market share, showcasing that we are uniquely capable of both dominating purchase business and investing for the future. While most other lenders scaled back, we invested in our people, our technology, and the broker channel, which are all operating at all-time high levels. We've been prepared for a rate reality for years. And the third quarter gave us a little bit of a glimpse of what it would look like, and we delivered on everything we said we would. To give you a more tangible example, showcasing our capabilities, one day in September, we had an all-time record lock day. We locked $4.8 billion, yes, $4.8 billion of locks in one day. We handled it all in one day along with submissions that followed seamlessly. Now that was only a 3-, 4-, 5-day window of opportunity, and we took advantage of it by handling all the volume all the way through our organization from setup to submission to underwriting to closing to client service priorities, and all went pretty close to flawless. We maintained turn times, SLAs, world-class Net Promoter Scores, and our submission to critical close times actually got even faster from 12 days to 11 days, which are record-breaking numbers. It was phenomenal to see across the board the execution because we have been preparing for years when you actually have to do it and execute. You never know how it's going to go, and it went amazing. The investments we have made in technology will continue to solidify our competitive advantage, and the gap between UWM and our competitors continues to widen. Back in May at UWM LIVE!, we made headlines introducing Mia, our most intelligent agent, a generative AI loan officer assistant. A lot of people were unsure of what this meant and how it would impact business, but we now have actual results. Mia has made over 400,000 calls on behalf of our mortgage brokers, helping them stay in touch with past clients. Remember, as I told you before, 97% of all borrowers love their experience with the broker and want to work with them in the future and have a great experience, but only 10% remember who their brokers are when they want to refinance again. Mia is built to solve that issue, and she's doing it. She made over 400,000 calls, starting business conversations with borrowers on behalf of the brokers. These were mostly the rate watch calls. And of these, over 14,000 have already closed. What's interesting is we forecasted a 10% to 15% answer rate, and we've actually seen over a 40% answer rate. Mia has been phenomenal. We've been saying from the beginning, our business is tied to AI based on three main issues: enhancing knowledge, which ChatUWM does along with a couple of other things we've done, creating efficiency, which Bolt has done, and then the hardest one to solve is growth, which Mia is doing by solving the issue for brokers missing business from their past clients. So having over 14,000 closings from this in the last couple of months is even higher than we expected when we rolled it out, by a wide margin. And that's why we are the biggest and best mortgage company in America. We have been for years, and now we are just accelerating and widening the gap. Separately, Mia also answered about 70,000 inbound calls. Once again, this is actual AI working in our business, not just talking in buzzwords like a lot of other people like to do. She's taking messages, making appointments, helping them succeed. I'd love to see how many of our clients are utilizing Mia and having success. Now let's talk about the third quarter performance. We closed $41.7 billion of production, obviously beating our guidance. It was our best quarter since 2021 back when rates were in the 2.5% to 3% range. We did $25.2 billion of purchase, which is on track, as we said, is consistently doing about $100 billion of purchase every year. We have been doing that consistently at UWM. And then $16.5 billion of refinancing, which is up significantly. Like I said, we were able to take advantage of a very small window, a couple of weeks of opportunity in there where we were able to execute and close loans fast. And we're excited to be able to prove that we are prepared, but we also executed. Our gain margin was 130 basis points, which is slightly above the gain margin that we provided in guidance. And part of that is market moves in our direction. We were able to take advantage of that for that couple of weeks window. Because of this window, you can see when rates drop, our volume goes up quickly, our margin goes up quickly, and we can really take advantage of it. And it's just a 3- to 4-week window, like I said, not dissimilar to what we saw last September, but we're even more prepared and we were able to take advantage of it in a bigger way this time. Last year, we had a similar 3- to 4-week window, and the 10-year went to about 3.75%, maybe 3.80%, and we had a great month. We did about $17 billion, but we didn't have the success we had this time because we have Mia. This time, the rates didn't even get that low. The rates got to about 4% in the 10-year, and it's about the same short window. Mia has helped us grow the business exponentially, and we're clearly prepared to handle that volume and more. Now from an income perspective, we did over $12 million of income. That's inclusive of a $160 million decline at fair values. But really, the number to focus on is over $211 million of adjusted EBITDA. Once again, a dominant performance from UWM. You heard me say this on every call, year after year, our playbook and recipe remain consistent. We will continue to invest in our people, our technology and dominate this industry with our service and by growing the broker channel. Our operating profile and relentless drive to deliver results provides a consistent message for the investment community. UWM is uniquely positioned to win in any market environment, and we are investing every day to further extend our lead for the benefit of independent mortgage brokers and their consumers. I'll now turn the call over to our CFO, Rami Hasani.

Thank you, Mat. Q3 was a strong quarter for us. We reported net income of $12.1 million and adjusted EBITDA of $211.1 million, up from both Q2 and Q1 of this year. Loan production volume of $41.7 billion, also up from Q2 and Q1, and gain margin of 130 basis points, again, up from Q2 and Q1. Operationally, our business continues to deliver. We also continue to maintain a healthy MSR portfolio with net servicing income of $135.1 million. As we've said before, to support our growth, we continue to invest in our people, processes, and innovative technologies to prepare us and our broker partners for long-term growth. We remain on strategy with our investments, including our investments to bring servicing in-house to be prepared for significant market opportunities for us and our broker partners going forward. We previously said that our business is positioned to handle twice the volume without interruptions or adding significant staffing or fixed costs. In Q3, we demonstrated that as there were several periods throughout the quarter where production more than doubled and it was seamless. From a liquidity perspective, we recently completed a successful offering of $1 billion in unsecured notes. With the proceeds received, we plan to pay off $800 million in unsecured notes maturing in mid-November, and we'll utilize the remainder to support our growth. We remain well capitalized with total equity of $1.5 billion and continue to be in a strong liquidity position with total available liquidity of $3 billion and $2.2 billion after paying off the bonds maturing in mid-November. While our liquidity and leverage ratios are slightly higher as of the end of Q3, it was the result of the timing of our bond issuance in September and our proactive liability management with the use of proceeds prior to mid-November maturity. Net of available cash, our leverage ratio as of the end of Q3 remained largely consistent with the prior quarter. Going forward, we expect to continue to maintain our capital, liquidity, and leverage ratios within what we believe to be acceptable ranges in the current market conditions. In summary, Q3 was a great quarter with strong production and even stronger gain margin performance, levels we haven't seen in a while. We continue to invest in our people and technologies to be the most prepared mortgage company in the country. We're also prepared from a capital and liquidity perspective and believe that we are well positioned for Q4, 2026, and beyond. I will now turn things back over to our Chairman, President and CEO, Mat Ishbia, for closing remarks.

Thanks, Rami. I'll close with a few points before our Q&A. Our work to bring servicing in-house is on track for the first quarter of 2026. This will have a positive financial impact on our business, and we're excited to bring our world-class approach to the servicing world. This will no doubt strengthen the consumer loyalty to their brokers. It was great to share more details on our partnership with a company that will deliver the best service experience in the history of mortgage, plus a tremendous amount of exclusive benefits for our brokers, including 400,000 to 500,000 leads Bilt renters that convert to purchase every single year exclusively to our mortgage brokers. We're also excited about the mortgage matchup center sponsorship out in Phoenix. We've seen a significant spike in both traffic and success through the website since launching this. So very excited about all those things. Now I don't normally do this because I know you guys are going to ask me a bunch of questions. But before I move to guidance, I'll ask you a question. When rates drop, what mortgage company do you believe is most prepared to handle it with AI, with operational capacity, not with buzzwords, but with actual technology, process and preparation that's already been proven. The 10-year dipped to 4%, and you saw what we did. I've been saying this for years, when the 10-year dips to 3.75%, we're going to double our business. No other lender can do that. Even if they could, were they going to go from $4 billion to $8 billion? Like we're going to go from $30 billion to $40 billion a quarter to $60 billion to $80 billion in a quarter, right, with margin expansion. That's how UWM works. I hope you feel good about what lies ahead for UWM because I do. All right. Now turning to guidance. I expect the fourth quarter production to be between $43 billion and $50 billion of production. And we're going to raise our levels on the gain margin to 105% to 130%, moving it up one level. And honestly, if we get another dip like we just saw, those numbers could be even higher. But overall, excited about what UWM is doing. We're going to continue to dominate. Thank you for your time today. Let's flip it over to the Q&A.

Our first question for today comes from Terry Ma with Barclays.

I just wanted to follow up on the effort to bring servicing in-house and specifically with the partnership. Maybe just talk about what you're seeking to accomplish with that partnership, how widespread the adoption could be? And then like ultimately, like who's going to fund the rewards issued from the card?

Yes. Thanks for the question. So it's got nothing to do with the rewards card. So it's every mortgage payment that goes through UWM. We are letting them be the front-end servicing app, if you think of it that way, the technology on the front end. The real benefit for us at UWM is, one, we're going to be better than every other servicer out there because we're better than everyone at everything we do, and servicing is a joke in our industry. And so we're going to make it really great for the client. So when people call, we're going to actually answer the phone, not 43-minute waiting periods like everybody else does. So we'll be great on servicing from a service perspective for the consumers, so consumers will love it, and then they'll get rewards for making their mortgage payment, which is something that's never been done before. And then obviously, the front-end technology to your point about built will be fantastic. On top of that, as I mentioned, built has 5 million people making their rental payments, and about 10% go out and buy houses every year. Right now, they just leave and go buy a house. Now they're going to have a way to make a mortgage payment through built by working with a mortgage broker. So those turn into great leads and opportunities exclusive to our mortgage brokers. And so it's a win-win-win. Built is a great company. They do good things, but UWM and our servicing process is going to be the best-in-class. That's how we do things. And so we're excited about that.

Got it. Just to follow up on the rewards piece. Like will that show up on expenses anywhere on your P&L?

No. That's a silly question, but no, it's not funded by UWM. There's no expense for it at all. This is all upside.

Okay. Great. And then maybe just a follow-up on Mia. I appreciate the stats. I think you mentioned 14,000 loans off 400,000 outbound calls. Like any room for improvement as we kind of go forward and you continue to kind of use it?

Everything we do has room for improvement. So yes, Mia has been fantastic. It's been better than we expected. The answer rates are higher. The response has been better. But every day that goes by, she gets better. And every day that goes by, our brokers get more and more comfortable, consumers get more and more comfortable with the AI agents reaching out, and it's not a human. Like every day, it's getting better and better, and it's only going to be more and more loans. And so 14,000 was a really big number, surprisingly big number for us, but that's also the market we had that little couple of week blip where the market got really good, and we took advantage of that. But no, Mia has been fantastic. And we spend all of our time and investments internally on AI and investments around AI. Once again, it's not a buzzword for us. It's actually producing business. And so Mia has been great. And so I appreciate that question because she's been better than we expected.

Our next question is from the line of Eric Hagen with BTIG.

Good quarter. On the guidance for the gain on sale margin, is that a function of lower rates? Or is there another variable or condition in the market, which is supporting that? And how do you feel like the margin compares on refis versus purchased loans at this point?

Yes. The margin on purchases and refinances is the same; there's no distinction. The opportunity lies in the potential for rates to drop slightly. When rates decrease, more volume enters the market. Any competent mortgage loan officer understands that rates don't solely drive business. If they did, retail businesses would not exist, as they typically charge a significant premium, leading to consumer exploitation. In reality, with 70% of the market operating through retail, rates are not the primary factor. Margins have been up significantly, in the range of 105% to 130%. Historically, we were at the lower end, around 75 to 100, and I've strategically navigated this, and I'm the one in control. This will continue within that range this month. As mentioned, our volume and margin guidance remains accurate as before. However, if there's a short-term spike, we may not capitalize on it immediately, which could lead to increased margins and volume, similar to our performance this past quarter, which was quite strong.

Yes, we recognize it was a good one. Good color from you as always. I mean the origination numbers look really strong, but what was the driver of the conventional purchase loans being down a little bit quarter-over-quarter? And how much upside do you think there is to the purchase numbers if rates fall? I think you mentioned 3.75% on the 10-year. I mean if that's the level, what is the upside to the purchase segment?

The purchase business is a key strength for us, and as you know, we consistently lead in this area. We generate between $22 billion and $27 billion each quarter, totaling around $95 billion to $105 billion in purchases annually. If rates drop to 4%, for example, we could see a 20% to 30% increase in purchases. However, the significant difference is in refinancing. Our purchase numbers remain steady and reliable, which sets us apart from our competitors who have struggled over the last four years while we've maintained our purchasing consistency. The real opportunity lies in the refinancing business, which can see volumes double or triple very quickly. While the purchase business will be stable and consistent, we expect the majority of the purchasing activity to occur in the second and third quarters, especially during the summer when people tend to move. Although we may see an increase of around 25% to 40% in purchase volume due to lower rates and improved affordability, the focus remains on our ability to dominate the purchase market regardless of market fluctuations, with significant upside in refinancing.

Our next question is from the line of Bose George with KBW.

Can you talk about the volume and margin trends that you've seen so far in October, is that kind of at the midpoint of the guidance range?

I provided guidance for a reason. October was an excellent month, and both volume and margins are in sync. November, however, only has 19 business days, and when you account for the Wednesday and Friday around Thanksgiving, it effectively becomes a 17 business day month. This makes it a short period for the quarter as we approach year-end. Regardless, I am confident that we will achieve the best quarter we've seen in four years. I hope you all recognize that we are excelling in this space. The projected figures of $43 billion to $50 billion are impressive and have not been achieved in four years at UWM. The margins are forecasted to remain consistent as well, ensuring we will meet our guidance, which has consistently been the case for as long as I've been in this role.

Okay, great. And then actually, on the servicing side, you noted that you'll be bringing it in-house early '26. Does that happen? And is it staggered? Does it come in over time? Or how is that going to work?

Yes. All new loans closing in 2026 will remain here, meaning we won't subservice them. Additionally, the loans currently subserviced at Cenlar will be transitioned here throughout the year. By the end of 2026, the only loans outside our internal handling will be default loans and others that require specific decisions. Generally, everything will be managed internally, whether I move a substantial portion in March or April, and another portion in September or October. All new originations will come in 2026, and by the end of that year, 100% of our servicing book will be internal, except for loans I have decided not to bring in-house.

Our next question is from the line of Doug Harter with UBS.

Mat, as we consider your capacity to increase volumes, you've mentioned the scale of the business. How should we assess the additional costs associated with supporting that new volume and how to view the operational leverage present in the business?

The operating leverage in the business is currently significant. You often analyze costs, many of which are investments. We look at how to invest in technology and the broker channel among other aspects. At this moment, I don't need to increase costs to double my business, as I've mentioned previously. You can consider costs in terms of volume; as we do more business, more commissions are paid out and other variable costs are incurred. However, from a fixed cost standpoint, I feel confident about our current position and anticipate it will remain stable or fluctuate within a range of plus or minus 10%, likely leaning toward the lower end due to our AI initiatives. If the opportunity arises to invest in enhancing our business and gaining market share, we will pursue that decisively. The investments we are making will persist, and regarding fixed costs, we do not need additional resources to achieve the volumes I've outlined. We have sufficient capacity as it stands.

And then speaking of investment, can you just remind us on the bringing the servicing in-house? I guess, have those investments already started? So like are those costs kind of already in your cost base? And just how to think about kind of the cost side as servicing comes in-house?

Yes. I'm facing a double challenge because I'm paying subservicers while also building up my own servicing portfolio and hiring staff to implement the way I envision it. I mentioned earlier that the cost would be between $40 million and $100 million, likely closer to the high end of that range. To bring servicing in-house, those figures are accurate. However, the full financial impact won't be evident until 2027, as this year is particularly challenging due to the dual expenses of hiring and subservicing. Next year will be a mix of both, but by 2027, I expect to have all the savings integrated into our operations, along with increased leads, growth, success, and better retention, which all come from this strategy. So yes, those costs are accounted for, as are the current technology investments aimed at enhancing our servicing through AI, positioning us to be the best in the country, without emulating others in the industry.

Our next question is from the line of Jeff Adelson with Morgan Stanley.

Mat, just maybe a quick reminder of the hedging. I think this quarter, the hedge gain against the MSR loss was a little bit smaller than we saw last quarter. Just maybe give us a quick update on the hedging strategy. I know you've been a little bit more opportunistic there.

Yes. No, I appreciate it. We don't hedge our MSRs as you're hopefully aware of. I do look at opportunities and look at interest rates and make decisions. Sometimes we do more of it, sometimes we do less of it. This quarter, we focused less on it because we focused on just dominating the business. Obviously, the 10-year goes up and down, MBS rates go up and down and how it finishes, depending on how it started, it ties to an MSR loss. Anyone, and I know it's you guys because I love all of you guys, but anyone that focuses on MSRs and the fair value just doesn't understand mortgages, doesn't understand this business. It's got zero to do with what I'm doing, the operating of the business. The 10-year can literally be at 3.75% for this whole quarter. Let's say if it drops to 3.75% today, I'm going to crush it, just crush it across the board. I'll call you next quarter. I'll say, $60 billion, $70 billion, 135 basis points of margin, we'll crush it. But on December 31, if the 10-year goes back up to 4.40%, just to use some crazy number, and I'll have an MSR write-up of another $400 million also. That has zero to do with my business. And the inverse is accurate too. So the MSR value stuff means nothing. I don't focus on it. I don't care about it. I'm not going to care about it because it's like why would I focus on since I have zero control over it. I don't care about the MSR values. If you guys write about the MSR values, you don't understand my business. It just doesn't matter. It matters zero. So just like, by the way, and you can go back and listen to the record I told you the same stuff when I got an MSR write-up of $500 million. I'm like, don't give me credit for that. I didn't do anything for that. That means zero. Watch my core business. Watch what I do with my production, my gain on sale, my expenses, and how we dominate in there. And our adjusted EBITDA of $200-plus million, like that's how you run a business. That's all we focus on. I don't focus on other stuff. I know other people like to talk about it because they just don't understand our business.

And then just in terms of Mia, it was good to hear the color on the success so far there. Just as I sort of think about that 14,000 transactions closed, do you think about that as mostly refi at this point? And some really rough math, if I sort of think about an average loan size here, would suggest there was somewhere in the ballpark of maybe like 10% of your originations this quarter. And if most of it was refi, that would be quite a bit of refi as well. So is that right? Or how should we be thinking about those numbers and the path from here?

Yes, to clarify, the 14,000 likely includes loans that closed at the beginning of October because I gathered the data about two weeks ago. So it may reflect some runoff, and it doesn't all belong to the third quarter. Additionally, some of it likely occurred in the second quarter. However, we did see a significant increase in September, with a lot of those transactions closing then and transitioning into October. I suspect that nearly all of them are refinancing; around 95% are refi. While some people have expressed interest in purchasing a home or a second home, the bulk of the 400,000-plus inquiries were related to rate watch calls, indicating that clients should consider refinancing. If you're interested, you could contact our Investor Relations team to hear actual calls where potential clients express interest, which often leads to loans being processed and closed. While I acknowledge that 95% refi in the 14,000 figure, I can't fully attribute that to the third quarter since it occurred across both third and some fourth quarters, with more anticipated in the fourth. We already have some additional data since I collected that information.

I have a general question about the impact of technology on the industry, particularly regarding refinancing. There has been considerable discussion about the traditional 75 basis point incentive for refinances significantly decreasing to much lower levels, possibly as low as 25 or 30. Can you elaborate on this and discuss how technology, especially AI, is influencing this trend?

Yes. Just to clarify your question, so I understand so I can give you the right answer. You're saying that people are more likely to refinance because it's easier these days. They used to think you have to save more money. Now they're willing to do it quicker. Is that what you're asking?

Correct. Yes. Given that sort of the human element has always been the choke point in the refinance experience and technology just collapsing that into a faster process.

Yes, I understand your point. You’re asking if the reduction in costs and friction will lead to an increase in refinances. I believe there are opportunities for that, but it’s worth noting that not all lenders are adept at this, and many may not have the necessary technology. There is still considerable friction in the process. For example, my own experience was an 11-day turnaround from the initial submission to closing, which is faster than average, yet the industry standard remains around 40 days. Many borrowers still have to go through cumbersome tasks like printing bank statements and obtaining pay stubs and tax returns, which makes the whole process quite frustrating. Just because we’re excelling in leveraging technology and a few other companies are also focusing on AI, that doesn’t mean everyone is performing well. Much of the AI talk is more about hype than reality at this point. We are moving forward quickly, so it would be beneficial to check the data to see who is really minimizing friction. You’re right that, when it becomes faster, easier, and cheaper, people are more inclined to refinance. I’ve personally found it worthwhile to refinance for smaller savings than before. In the past, you’d want significant savings to justify the effort. However, many lenders are still operating traditionally, so I wouldn't expect a significant shift just yet; although we may see our process speed up, the overall market change will take time. In the future, significant changes are likely, as the technology we have is much more advanced than that of many competitors. While I do expect an increase in refinances, our in-house servicing and streamlined processes mean that we can offer lower costs, which will drive more refinances. That’s why we had strong results in September and October and expect the same in the fourth quarter. Having ownership of servicing books was once crucial for obtaining refinances, but that’s no longer the case. Many are still investing heavily in servicing books, which gives a slight advantage, yet it’s not essential for generating refinances. As I mentioned previously, we own only a small percentage of the servicing book but have achieved a much larger share of the refinances. The key now is removing friction through technology, which is why I am committed to continuous investment to ensure we maintain our leading position, just as we did in the third quarter and plan to do in the fourth quarter and beyond.

Ladies and gentlemen, that will conclude our Q&A portion for today. I would like to turn the call back over to Mat Ishbia for any closing comments.

Yes. Thanks for the time today, guys. Appreciate you guys. Have a good day.

Thank you. And ladies and gentlemen, that will conclude today's conference. Thanks for attending. We'll see you next time.