UWM Holdings Corporation, the parent of United Wholesale Mortgage (UWM), was another mortgage lender that returned to profitability in the second quarter of 2023, just like its primary competitor Rocket Companies and the origination segments of Mr. Cooper and Pennymac. 

UWM’s performance was boosted by an increase in the fair value of mortgage servicing rights (MSRs) and higher origination volumes, despite lower margins from April to June, per documents filed with the Securities and Exchange Commission (SEC) on Wednesday. 

The Pontiac, Michigan-based lender announced a non-GAAP adjusted net income of $175.9 million in the second quarter, compared to a $106.8 million net loss in the previous quarter. The company’s GAAP net income in Q2 was $228.8 million. 

“Unlike others that are more reactive to cyclical market conditions, we will continue to be aggressive in our technology and product investments. We are hiring right now, whereas the industry as a whole is continuing to cut back on capacity,” Mat Ishbia, chairman and CEO, said in a statement. 

UWM originated $31.8 billion in mortgage loans in the second quarter of 2023 “despite a historic decline in industry-wide origination volume during 2023,” according to Ishbia. The volume exceeds the expectation of a production between $23 billion and $30 billion in Q2. 

Originations in Q2 2023 came higher than the $22.3 billion in the previous quarter and $29.1 billion during the second quarter of 2022. To compare, Rocket Mortgage originated $22.3 billion from April to June.  

The wholesale lender originated $28 billion in purchase loans in the second quarter, an increase from $19.2 billion in the first quarter of 2023 and $22.4 billion in the second quarter of 2022. 

“Other management teams seem to have forgotten that during a mortgage boom, the majority of the opportunity is in the first six months. Companies that are not prepared for those events react late, hire late, train late and miss most of the opportunity,” Ishbia said.  

The company’s total gain-on-sale margins decreased to 88 basis points in Q2 2023, compared to 92 bps in Q1 2023 and 99 basis points in Q2 2022. 

UWM anticipates the third quarter production to be between $26 billion and $33 billion. Gain-on-sale margins are expected to be between 75 bps and 100 bps.  

Regarding its servicing business, second-quarter earnings were impacted by a $24.6 million increase in the fair value of MSRs. UWM had $294.9 billion in the unpaid principal balance of MSRs as of June 30, 2023, compared to $297.9 billion as of March 31, 2023.

UWM ended the second quarter with $900 million in cash and self-warehouse.