United Wholesale Mortgage Holdings Corp. sets a public deadline for which it announces it will overtake Rocket Companies Inc. to become the largest mortgage lender in the United States: 2024.
The three-year goal is ambitious, according to experts. It heats up the Pontiac-based lender’s long-running feud with Detroit-based rival Rocket Mortgage, who currently holds the title. UWM is # 4 behind PennyMac Financial Services Inc. in California and Wells Fargo & Co. in Iowa, according to trade publication Inside Mortgage Finance. Being # 1 has been a long-standing ambition of UWM CEO Mat Ishbia.
“We’re not like all the other mortgage companies,” Ishbia told the Detroit News. “We rely a lot less on refinances and we are less cyclical. We are more scalable on technology.”
UWM is already # 1 in one channel – the wholesale marketplace where it works exclusively with mortgage brokers, the middleman workers who go around lenders to find homeowners the best rates and products for them. Rocket is # 2 in wholesale loans, but he also works directly with homeowners in the retail segment.
To outperform the competition and do what no wholesale lender has done before, more homeowners need to do business with brokers, Ishbia and experts said. And the refinancing market, where Rocket is particularly strong, must contract.
“If the volumes continue to rise, it favors Rocket more than UWMC, but if we get higher rates, it favors the broker market on the origination side,” said Kevin Heal, senior analyst at Argus Research. Co. “That’s an ambitious goal. There is potential, yes, but you are relying on maintaining the independence of the broker market.”
A Rocket spokesperson referred the comment to Guy Cecala, CEO and publisher of Inside Mortgage Finance.
The market “strongly favors Rocket,” said Cecala. “Just because they’re bigger, they’re both in the retail and wholesale space, and frankly they’re doing pretty much everything right now to maximize mounts. They’re growing their business in the market. buying houses. “
Still, Cecala said: “United Wholesale has seen some pretty remarkable growth over the past few years. I don’t think anything can rule them out.”
Ishbia says homeowners save $ 3,700 in the first five years if they hire a broker. Lenders tend to give less loans in the wholesale channel due to competition.
“We have to continue to make it clear that the cheapest and fastest way to get a loan is through a mortgage broker,” Ishbia said. “They shouldn’t go to the biggest retail lender.”
The wholesale channel accounts for about 20% of fixtures, according to UWM. Ishbia wants to see that figure rise to 33% by 2025 and save homeowners $ 23 billion over the next three years. It reached this level before the real estate bubble burst when many brokers left the company.
UWM has stepped up efforts to promote itself in recent years. Ishbia has made television appearances, UWM has purchased regional Super Bowl commercials promoting brokers and recently announced that its logo will replace Troy-based Flagstar Bank on the Detroit Pistons jerseys.
The target also comes as experts predict rising interest rates, discouraging refinancing. Experts consider brokers to be stronger in the buying market. If interest rates rise soon, Ishbia said UWM could hit its target before 2024. But at some point there won’t be many people left to refinance.
“Rocket Mortgage has grown steadily since about 2008 through a refinancing market, a home buying market,” Cecala said. “They have shown a lot of resilience and the ability to thrive in a variety of conditions.”
Rocket issued $ 320.2 billion in mortgages in 2020. UWM made $ 182.5 billion.
If UWM overtakes Rocket, the volume is unlikely to be as high as its 2020 record, Ishbia said: “The past two years have been an anomaly in terms of high volumes and high margins. When it gets back to normal, that could take a smaller, more reasonable number in a buying market. “
If UWM overtakes Rocket and conditions return to a refinancing market, Ishbia still says UWM would look to stay ahead: “I’m not interested in being # 1 for the quarter and backing down. We’ll be there and we’ll be there. We will grow there and we will widen the gap and not the other way around. “
Competition could, however, have negative effects on margins, which declined in the industry year over year in the first quarter as interest rates edged up.
Rates have become similar across the industry, Argus’ Heal said. UWM and Rocket have used the technology to enable them to close loans faster than their competitors, allowing them to generate more volume, but at a lower price. Intensifying competition could put pressure on margins.
“We’re not at all concerned about this,” Ishbia said, noting that the second quarter is expected to be a record quarter. “We expect to go from all-time highs to all-time lows. We have done it every time. It is nothing new to us. We are a very profitable company, even with historically low margins.”
UWM stock is down 25% year-to-date. It went public through a special purpose acquisition company on January 22, a transaction announced in September. Rocket is down 4% year-to-date.
Ishbia also shared two other company goals over the next three years. He wants his Net Promoter Score, which measures customers’ feelings about service, to be the highest of any Fortune 1,000 company. It’s around 87 right now, which Ishbia says is fifth.
The company also wants a 92% rate of its employees saying they want to stay with the company for the next two years. It is currently at 90%.
Workers will return to their Pontiac offices as of June 24 and the 9,300 will be back by the end of July. Unlike Rocket, UWM does not adopt a hybrid model allowing remote working.
“We’re better together,” Ishbia said. “Our employees know that. Our employees are happy to come to the office. If it doesn’t suit them, that’s okay. We are clear about the team, the family, the hard work, the collaboration, the work team – all of those things. We do it best when we’re in the same building. “