United Wholesale Mortgage (UWM), the nation’s largest wholesale lender, wants to beat rival lenders by offering competitive pricing to brokers, a move designed to navigate a shrinking mortgage market with compressed margins.
UWM dropped rates by 50 to 100 basis points across all loan types, the company said in a release. The new program follows UWM’s two-month price-match trial that ended Wednesday. In May, the firm said it will match competitors’ 30-, 45-, or 60-lock pricing by 1 basis point to a maximum of 40 basis points.
UWM’s price-matching guarantee included competitors such as Amerisave, Amwest Funding, NewRez/Caliber Home Loans, Cardinal Financial, Carrington Mortgage Services, Citizen Bank/Franklin American, CMG, Equity Prime Mortgage, Finance of America Mortgage, Flagstar Bank, Freedom Mortgage Corp., Homebridge Financial Services, Home Point Financial, Kind Lending, LoanDepot, Nations Direct Mortgage, Paramount Residential Mortgage Group, PennyMac Financial, Plaza Home Mortgage and Union Home Mortgage Corporation.
“This strategic pricing move is two-fold; it takes the guesswork out of where a broker should place a loan and accelerates retail loan officers joining the wholesale channel as it further extends independent mortgage brokers’ advantage over retail,” said Mat Ishbia, president and CEO at UWM.
UWM has aggressively put pressure on competitors. In June 2021, UWM announced a price-match up to 30 bps with 15 competitors on any conventional loan for a primary residence, after it told brokers they could not work with Rocket Pro TPO and Fairway Independent Mortgage if they wanted to work with UWM.
The move likely contributed to lower margins in the short term but in the first quarter of this year UWM saw gain-on-sale margins rise to 0.99%, compared to 0.80% in the fourth quarter of 2021.
In the first three months of this year, UWM reported a profit of $453.2 million, up 89% from the $239.8 million in the last quarter of 2021. While loan originations dropped 29.7% from the previous quarter to $38.8 billion in the first quarter of 2022, purchase loans grew to consist of 49% of the total origination volume to $19.1 billion.
Moody’s projects intense competition among lenders over the next 24 months in which gain-on-sale margins will drop even further. In March, Moody’s analysts wrote profitability may resemble the market in 2018 when about one-third of nonbank lenders reported a loss.
“Companies with above-average capitalization, strong market positions, and scale will be better able to navigate the challenging operating environment,” the Moody’s analysts said.