UWM Holdings Corporation (UWMC) Q1 2021 Earnings Report, Transcript and Summary

Good morning. My name is Amy, and I will be your conference operator today. At this time, I would like to welcome everyone to the UWM Holdings Corporation First Quarter 2021 Earnings Conference Call. [Operator Instructions] Matt Roslin, you may begin your conference.

Good morning. I am Matt Roslin, EVP of Legal Affairs and Investor Relations. Thank you for joining us, and welcome to the First Quarter 2021 Earnings Call for UWM Holdings Corporation. Before we start, I'd 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 yesterday. Now I'd like to introduce UWM Holdings Corporation and United Wholesale Mortgage Chairman and CEO, Mat Ishbia.

Thanks, Matt. Appreciate it. Thank you all for joining today. We appreciate you. Definitely going to try to keep my remarks somewhat short so I can take a lot of questions, but we'll take as many questions as we possibly can. Want to make sure we answer everything about the business, about the industry, anything you would like to know about our company, and happy to answer every question you guys have. Now with that being said, Q1, pivotal quarter, outstanding quarter across the board for UWM. I can go into all the details. I'm going to go through the details here shortly. But obviously, we became a public company, fortified our balance sheet, expanded our products and strengthened our focus on growing the channel and the mortgage broker market share. We've done a lot of things in that. We have -- grew to almost 8,600 -- over 8,600 team members and continue to invest in our technology while differentiating our process and speed to close. And so we're talking about making the process faster, easier, cheaper. We had a great, great quarter across the board. We completed the state of our UWM Sports Complex and training center, going to do some great things in the community with that. But at the same time, we also have a big training center auditorium for our team and continue to make an impact in the community in a positive way. UWM is well positioned to not only being the #1 wholesale lender, which we have been for 6 consecutive years, but to be the #1 overall mortgage lender in America. And we're going to talk about that path here today. Now to look at the details. You already saw the release, so I'm not going to spend too much time going through every single detail. But $860 million in net income, 42x what we did last year in the first quarter, $49.1 billion of production, 219 basis points. It was fantastic across the board. Public equity deal we have is closed on, finished the quarter with $1.6 billion in cash. In April, we closed our second long-term, high-yield debt deal. We paid off all encumbered MSR financing. So we have a $2.3 billion MSR asset with a WAC, weighted average coupon, rate at around 3.00%. So now that it's actually after April, it's below that number in the 2.99% range, which is awesome, with no debt -- no encumbered debt to that. So it gives us a powerful, powerful position. As you saw in our release, the Board approved our quarterly dividend of $0.10 to consistently deliver money back to our shareholders for a record date on June 10 and payable July 6. The Board and I always explored increasing the dividend actually or looking at a special dividend or a share buyback program. As you guys have seen, we concluded share buyback was the best use of our capital to reward shareholders. We announced the authorization of $300 million share buyback over the next 24 months. And quite honestly, with where the share price is, it's a great opportunity for us to continue to buy that. But at the same time, we're conscientious of the float. So we're not deploying it all tomorrow, as you can imagine, or today. We're conscientious with the float, but we do have that authorization with the Board, which we do appreciate. Other ways of deploying capital, looking at acquiring. Three of the top 25 wholesale lenders were acquired or have been announced to be acquired here in the last 90 days or so, which is a really interesting way of trying to acquire market share. In wholesale, when you have the best technology, the best process, the best system and all the products, there's very little reason to acquire someone. We could spend $1 billion in cash and stock and acquire a competitor and pick up 3% to 4% market share. And we're not saying we won't look at that or continue to look at that. But the reality is with our platform, it'd be a very odd situation for that to make a lot of sense for us. It could, but to make a lot of sense for us because we are the leader. We generate a better return for our shareholders by just investing organically maybe in our pricing and going after certain brokers because we're really not acquiring anything besides, there's maybe a servicing book you might be acquiring. But actually, from an origination perspective, we're really not acquiring much in wholesale. And so we can acquire that by sharpening our pricing or expanding our products, which we are doing right now. Now let's look at the Q1 business strategy, understanding the business. So clearly, we're the market leader in wholesale, demonstrated a 34% market share in the wholesale channel in 2020. We are going towards 50% mortgage broker market share for UWM in the channel. So we are -- that's our goal, 2025, '26. We also want the mortgage brokers to be 1 in 3 mortgages. Right now, they're hovering around 20%, a little less than 20% of the overall market. We expect that to go to 1 in every 3 mortgages. And if we can get half of those, we're going to win as a team together. Now Q1, we focused on, and Q2 going forward, growing the share of wallet with our local mortgages. There are so many brokers that love our technology. They love our process. They love our systems. But they always said, "Hey, I just -- i want to do more of my business with you." So we did our -- we focused on rounding out the portfolio. As you guys probably heard, we rolled out the jumbo program, which has been a huge hit. We did over $1 billion in April, but we'll do over $2 billion most likely in the month of May with this new jumbo product that we rolled out, which -- and an interesting thing about that, which we'll talk a little bit about, purchase share, is almost half of the jumbo product is purchase, which is a lot different than our competition, as you all understand. But we also are rolling out programs -- rolling out ARMs recently. We expanded our government programs a little bit more, manufactured homes just rounding out. But we're not going to go down on the credit matrix. We're not going down below 620. That's not what we believe in at this point. We're not going to do non-QM or -- which other people say is non-QM is the focus. Certain non-QM loans are a lot more like subprime than what we're interested in doing. We're focused on the highest credit quality and getting a bigger wallet share from our current clients, and it's working. It's working. Purchase mix. A lot of people shy away from talking about the purchase mix. Quite honestly, we're not going to shy away from it because, quite honestly, we think we are the leaders here. And we have been a leader here for a long time. And so we're going to continue to grow. To give you a little bit of a view, people talk about purchase percentage, and that's not as important. Purchase percentage isn't actually volume of purchase because everyone's purchase percentage goes up when they do less refinance. As rates have picked up since the beginning of February all the way through the end of April, rates have ticked up. What does that mean for you? And what does that mean for us? April was what our best new registration month of all time, and we did about 43% of those new registrations were purchase. And so understanding that, that trend, compared to, I think, we're in the 20s last year in this time, and so realizing that, that's a big uptick of purchase while our volumes stayed high. So you'll see -- I think in the first quarter, I mentioned that in the third quarter, you'll see our biggest purchase volume, not percentage, purchase volume of all time in the third quarter. And quite honestly, you might even see it in the second quarter because things are going really, really well. We rolled out the FHA program in December. We rolled out the jumbo program in March, and we're seeing a massive adoption of our purchase program also with our technology. Now we announced the all-in initiative in March. So it really showed our commitment to the channel. The all-in initiative was on March 4. We basically gave an addendum to our clients and said, "Hey, guys, if you want to work with UWM, we're all in. We're going to continue to invest in technology, our ecosystem, give you the differentiation to help you succeed in your market. But if you're working with these 2 other mortgage companies, these 2 mortgage companies that are doing things to hurt the broker channel, if you work with them, you can't work with us." Now there's 70-plus lenders out there that people can work with. Most brokers work with 8, 9 wholesale lenders, tops. But either way, we aren't going to be in the same portfolio as those 2 other lenders because those 2 other lenders are actually trying to hurt the broker channel and focus on the retail channel. So we decided to do the right thing, and we made this decision. A lot of media, a lot of press around this, which is obviously -- the media is slanted based on who pays them the most, a lot of times, from a marketing perspective, and it's not going to be us. It might be one of those other 2 lenders. But the reality with the data is this: It's overwhelmingly positive, more positive than we even expected. Over 10,000 brokers said they're all in with UWM. About 600 or so said, "Hey, we're not. We're not going to sign the addendum." And they declined, and we wish them the best. And about 1,000 or so that don't -- that do an immaterial amount of business maybe haven't responded or haven't done their work. But all in, we've won on that, not because of the more volume. Of course, we got more volume, but that wasn't the point. The point was alignment with our brokers, sending the message that we are going to do whatever is right for the consumer, which is mortgage brokers, and for our broker partners. And that's what we did. And we did a quick, early read-out in February. Rates were low. And then in March, April, they kept rising. And so from February to April, it's not really apples-to-apples comparing the months because rates were much higher in April. But net of any brokers we lost and, at the same time, the brokers we gained, we did over 17,000 more submissions in the month of April than February, so massive, massive adoption positively. There was almost -- I don't -- I couldn't have imagined it going so well. And obviously, my competitors, they don't like the decision. But our business is not designed to make them like us. Our business is designed for our shareholders, for consumers, for our team members and for our clients. And we've done a great job with this. And that all-in announcement has really driven that home. As you guys know, we really do believe with all of our hearts, and actually the data, that the best way for a consumer to get a mortgage is through a loan officer, a loan officer who will navigate the process for them, and then the loan officer should not be captive to one lender. They should be -- have options. And that's why the brokers are the best. And that's why we're focused on the independent channel. And if they go to a broker, we are the elite mortgage lender in wholesale, period. We're really the elite mortgage lender across the board. But in wholesale, technology, service, product, pricing and so -- and then on top of that, we don't compete with them. And so understanding that, that differentiation has helped UWM and will continue to help UWM. And so the all-in announcement was really just sending a message that we are all in with brokers, high level of confidence that UWM is the right partner. And it's worked out extremely, extremely well. You won't see that data really into the second quarter, maybe not even in the third quarter because there's obviously a lag effect of loans closing at our competition. But the reality is that I want to give you a quick snippet of February to April, massive increase. In a worse market, we grew, and that's really tied to the all-in announcement, along with the loyalty that our brokers have appreciated UWM standing up for what the right thing to do is, which is standing up for the broker and the consumer. And that's what we did. Now to move forward a little bit on operations. We talk about speed, speed to close. We are elite at this point, 17 days, which is actually compared to 18 days in the fourth quarter. The industry is still running 50-plus days, and so massive differentiator there. We offer -- that's faster, right? We offer lower rates, right? 2.70% is the -- what UWM average note rate in the first quarter was versus 2.78% industry average. 756 FICO, we're top 2 or 3 of the top 2,500, so high quality. And that's shown in our forbearance rate of 1.48%, where the industry is 4.8%; our delinquency rate of 1.54%, where the industry is 4.3%. Our operations team does a great job. We're knocking loans out fast. My Chief Operating Officer, Melinda Wilner, along with -- my whole team of leaders are doing fantastic things, they're doing a great job. Now technology, where my Chief Technology Officer, Jason Bressler, and his team are doing great things. They have built us to scale at the level where we are in a position right now to do twice the volume from an architecture perspective than we are today. So we can really double our business. Our IT infrastructure rivals any organization. We leverage a mix of cloud infrastructure, API and our own proprietary technology. We've made major investments, and we're looking at all different things, whether -- from artificial intelligence, look, in ADR, OCR, we're making a lot of different investments and, at the same time, investigating and things that other people maybe aren't or maybe don't -- aren't as far ahead as we are. And we have some big tech announcements coming in the next quarter or 2, you'll see, that are going to really take it to the next level. And our client-facing technology is fantastic as well. We have a smart routing system that we built proprietary with our CR system, where we get 5,000 of these a day. And a smart router is the right purchase at the right time, along with our automatic closing process, which we built proprietary. UClose 2.0 is really differentiated, where brokers and originators and title companies and UWM can close automatically quickly, so consumers have an amazing experience. And at the same time, our Brand 360, which is just a marketing platform that we've built from scratch, proprietary, which is using different technologies that maybe other people aren't understanding or using, to really take it to the next level and help our clients compete at a different level. And so we continue to do different things to raise brand awareness and help the brokerage. And actually, I'll challenge you guys. You go to FindAMortgageBroker.com if you want to find out what UWM like -- the brand FindAMortgageBroker.com, but just find out what brokers think about UWM and what we've done. You go to that website, pick any loan officer on there, go to Page 5, Page 20, I don't care what you find. You'll find a broker that works with UWM and brokers that understand what we're doing for the broker channel and why we are the differentiator for them so they can compete in their markets. We did a nice Red Wings sponsorship where we're on their helmets. We did a Super Bowl commercial for our brokers. We actually had more media impressions in the first quarter than of all time, 21 -- over 21 billion, so -- to give you an idea. Our CMO, Sarah DeCiantis, has done a fantastic job, and we're continuing to grow. And so day after day, hour after hour, and they will continue to grow. Now quickly, before I turn it over to Tim, I'll talk about 2 things, people and community. First off, people. Our Chief Growth Officer, Desmond Smith, used to be at Fannie Mae as a top executive there. And also, he ran Citi and Chase's retail divisions. He decided to come over because he could really see the light of what the broker channel can do and what is the best for consumers and for loan officers. So he's really focused on helping us grow that channel with over 800 team members -- about 800 team members promoted in the quarter, which means we create opportunity internally. And at the same time, we were ranked the #1 training company in America by Training magazine. That's not in the mortgage business. This is in America, period. We're very proud of that. I came from Michigan State basketball. As you guys know, coaches are known as getting great players. But then training and coaching to be the best version themselves, that's what we do here at UWM. It gives a massive differentiation as we continue to grow. Training is a big differentiator, and we're proud of that. And in the community, we did some great things. There's still a pandemic going on out here. And obviously, we made a lot of money. We helped -- over 10,000 meals we served at homeless shelters through buying food at restaurants, to help the restaurants and help the homeless shelters, doing it right in the community. We talked about being dream makers here not only for consumers but for people in the community, and we're doing great things. And at the same time, for the vaccine, we have a UWM Sports Complex, state-of-the-art. We set this thing up, and we set it up for the county to have vaccines for people, not only for our team members, but for people in the community, making an impact, trying to put this pandemic behind all of us, so doing our part. And so a lot of great things are going on. I'm going to turn it over to Tim Forrester, Chief Financial Officer, to go through some different things about the quarter. And then I'm going to give you some quick guidance, and then we'll jump into some questions.

Thank you, Mat. It has been an excellent quarter on many fronts. Our success in execution continues to lead the success in our financial statements. Our cash increased by over $350 million, and our investment in our servicing portfolio increased by over $500 million. So we invested more in MSR, while our liquidity increased. With our performance in Q1, our equity increased by just under $450 million. Subsequent to quarter end, we successfully executed our second unsecured debt issuance for an additional $700 million to continue supporting the balance in our capital structure. And a majority of the proceeds were used to satisfy existing secured debt facilities. Now only our mortgage loans are secured by debt facilities. Let's turn to the income statement. Our performance improved considerably over last year as margins were robust and volume was strong, leading to substantially higher loan production income. The increased size of our servicing portfolio continue to provide additional loan servicing income growth to further enhance our performance. As Mat mentioned, we continue to invest in our technology efforts, but we also continue to invest in our people through team member additions as well as training. The Training award recognition doesn't have a line item on the income statement, but it sure helps explain a key element of our success. We invest in our people so they can best serve our brokers. One item where we made a change was our ongoing accounting for mortgage servicing rights. We elected to adopt fair value accounting for all of our servicing rights effective January 1, 2021. We believe that this will assist in comparability between our performance as well as our peers. The adoption of the change was immaterial as the recorded balance in fair value were very close as of January 1. Our cost structure continues to perform well. While our cost per loan was higher in Q1, going from $1,473 per loan for all of 2020, it went to $1,662 per loan for the first quarter, which are significantly lower than our competition. This is also an investment in our people and our scale, and the first quarter traditionally carries a bit more of cost load. So overall, great performance. Our continued cost discipline and effective deployment of our team members allows us to remain profitable in various rate and margin environments, as we have demonstrated in the past. We're positioned to do so again and are prepared for various market conditions. Now I'm going to turn it back to Mat to close out our prepared remarks.

Yes. Thanks, Tim. I appreciate it. So briefly before we get into questions, we -- I talked about we did 40x plus our first quarter of 2020. We had a great quarter. We'll continue to grow technology, operations. We went through all this stuff. But the reality is this, so you guys get my perspective: I told the Board and I told our leadership team, I've never been so sure of our success from a perspective of feeling so good about where we're at, operations-wise, product and pricing, technology. The investments and things we're doing in technology are out of this world, and then I think you're going to see more and more capacity to handle business, capital liquidity. And now return to work, we're going to hopefully get our people back in the next 60 days or so to bring our team members all back in our building together, 9,000 people strong. And so I've never felt so good about where our business is right now, in a position to gain market share and show as the elite mortgage company in America. And so when we did our road show back in September, I wasn't telling a story about, "Oh, this is what we do. We're less cyclical, and this is what our business is." The reality is, I was telling you the reality. It's true. And now I don't think you get a chance to see it in 2021. But now with what happened in the market, you will actually see it. You will see that we are the elite mortgage company in America. And as our competitors all guide to do less volume in Q2, we're guiding to do more volume because we're going to take market share and grow. We win in a purchase environment. We win in these environments. Our cost to originate, our technology gives us a differentiator. So a lot of people are not excited. Our competitors are not excited about Q2. We are thrilled. We are excited about when rates go up a little bit. Because you know what happens? We will gain market share. We will prove ourselves that the thing that we talked about before wasn't a story. It was actually reality, and you're going to see it. And now we're going to demonstrate it in the second quarter. You don't have to believe me now. But you can see me in August 9, August 10, whenever the next call is, and you actually are going to hold me accountable. Q2 2020 to Q2 2021, who grew the most in the mortgage industry, UWM versus anybody? I'll take UWM. Q1 2021, the quarter we just finished, to Q2 2021, is everyone else growing? Or is everyone else going down? They're guiding down. They're going to do less business. UWM will do more business in the second quarter than we did in the first quarter. Other people cannot do that because their business is cyclical, a lot more cyclical than UWM's. And so UWM will win, just like we told that back at the road show. And so I understand you're going to see that. Will margins compress? Absolutely, they will compress. They usually go from all-time highs to all-time lows. That's what happens in the mortgage biz, and then they'll settle in, in normal numbers. We didn't expect them to go down to this point in this part of the 2021, but we're excited about it because we're going to still produce a lot of income where our competitors might not. And at the same time, we're going to take market share and show you that we are the elite mortgage company. So we're excited about the second quarter. I'm very excited. Hopefully, you can tell that from my perspective. We're going to guide to $51 billion to $55 billion of mortgage volume in the second quarter with a chance of it being our all-time highest mortgage volume in history and between 75 and 110 basis points in margin in the wholesale channel, which, once again, all-time highs, all-time lows, and it will settle back in. But we're excited about the second quarter. It's going to be a great, great quarter across the board, and we're excited for you guys to see the data and the numbers here soon. So with that being said, I'm going to turn it back to the operator. I'm happy to take all your questions, spend the time doing it together. And so turn over to operator and let's open it up for some questions and excited to chat with all of you guys. Thanks.

[Operator Instructions] Your first question comes from the line of Doug Harter with Credit Suisse.

Mat, as -- you were just talking coming kind of off the lows and ultimately stabilizing in terms of margin. So I guess 2 questions. One, are you seeing any sign -- I guess what are you seeing in kind of the monthly data as far as stabilization in margins? And how do you view what kind of normalized margins would be?

Yes. Thanks, Doug. Appreciate the question. So normalized margins, we talked about during the road show and during the process of the last quarter, we think its mid-100 range is more likely to normalize. We expected this year to be more mid- to high 100s, as we talked about. But it's -- obviously, with the tenure going up and the market shifting quickly, it naturally goes from all-time highs to all-time lows. And so we think 75 to 110 this quarter -- part of that is even tied to some of the acquisition concept that we discussed or I talked about, which was understanding that we could acquire someone and spend money or we can organically do it by lowering price a little bit and acquiring their clients, their brokers. And so we see 75 to 110. We see that for a couple of quarters, potentially. We'll see when that happens. I think it could go back up. I have to see what the tenure does. Once it gets to a new norm and the lows are hit, and then it goes back to kind of the mid-100 range, whether it's 115, 125 or more like 150, 160, that's kind of how we look at these things. And it just depends on the market and how quickly the rest of the market comes back to normalized numbers.

Great. And then just in terms of capital return, you mentioned sort of the float. I guess just how are you thinking about kind of how much of the float you'd be willing to take out and pacing around share repurchase?

Yes, Doug. So I'm learning these rules as we go because at this stock price, I'm a buyer, right? And so we'll buy shares as soon as tomorrow, I think, as our legal teams say we're allowed to do. And so I don't know how many I can buy and what I can do, but I'm very conscientious of the float. If the float was not a concern, we'd be more aggressive. However, we have authorization from the Board to buy up to $300 million, and I'm going to take advantage of that opportunity while being conscientious of our partners in the float.

Your next question comes from the line of Henry Coffey with Wedbush.

First, a housekeeping item. In the mark against your MSR, can you break down for us the portion that was amortization or realization of cash flows and the part that was fair value?

Sure. Henry, thanks for the question. The capitalization, there's a couple of pieces that go -- that create the differences. We capitalized just under $600 million of new servicing. And so that $59 million that you're looking at in the income statement is broken down between about $198 million of fair value pickup with the remaining $257 million or so, $257 million being the amortization and paid in full combination. So that's the primary difference is that the $198 million is the fair value pickup over the quarter, and the $257 million or so is the paid in full and effectively the decay.

Great. On -- look, going back to Doug's question, I think it's what everybody is asking about. United is a market leader. And obviously, holding that position and growing that position is extremely important to the company. But there appears to be a pretty painful cost to it. As a market leader, what capacity do you have to impact pricing and maybe accelerate the return to something, like you said, 125 to 150 gain on sale? And related to that, as you're looking at April, are we at 75 basis points or 100 basis points? And I assume that, that number is both gain on sale plus your origination fees.

Yes. Thanks, Henry. So a couple of things. Yes, we are the leader, without question. People will follow us up or down the price ladder, if you think of it that way. As you understand and we talked about before that in order for our competitors to get business, they have to be substantially better priced than UWM. Our technology, our service, our partnership is elite, and our clients know that. And so the way our competitors can get business is by being significantly better priced. We were not near the 75 number for the first quarter -- or first month where my competitors have to be. I'm not saying that we will -- we'll see how the next couple of months come out. But my point is 75 to 110 is what I'm guiding towards, and I feel confident about that number. And I also feel confident that we're going to grow our market share. And if we decide to ease off on the margins, everyone else will as well, and we will continue to succeed and grow. We can acquire companies with cash and stock, or we can acquire companies and acquire business with margin compression. And we have that decision in the first quarter. And in the fourth and third quarter, we have that decision as well. And we make the decision on a daily basis on where we think the market is and what we think the best thing for our shareholders, our team members, our clients and consumers at the end of the day. And so we feel really good about where we're at right now. And yes, we can lead margins on the way back up. But remember, our cost to originate is substantially lower than everybody else's, and it gives us a major competitive advantage. And as I said earlier, I feel really good about where we sit right now in this quarter, third quarter, fourth quarter and a lot of opportunity to grow at UWM. And then when we're as large as we are and we take the time to take more margin, then the profits come flowing through, as you saw in the third, fourth quarter and even in the first quarter.

When we look at your operating cost in the first quarter, and we don't think about it on a per-loan basis, as you all do, but when we look at your operating cost and we subtract out servicing expense, it looks like your -- the remaining overhead was about 50 basis points of origination. Can you break that out? How much of that is corporate and fixed? And how much of that is really the direct segment expense?

Yes. Just real quickly on the fixed portion of that is that usually, about 2/3 of that will be fixed cost. We don't break out necessarily corporate. We just allocate the costs. Regardless of where the costs sit, everything is attributed to the origination or servicing side or -- but most of that is going to be sitting in the origination. So when you think about our cost structure, usually, it sits about 2/3 to 1/3. When I look at first quarter results, 53 basis points is what we calculate as our expense all in. 33 basis points was fixed. 20 was variable. So that's how we look at it. Again, we don't look at it as a corporate allocation. Every cost has a home, and it's attributed to the business.

Your next question comes from the line of Steve Delaney with JMP Securities.

Mat, you mentioned that you -- with your all-in program that you said goodbye to about 600 partners. Could you estimate for us what your total signed up and active partner count would be, say, at the end of March or currently, either way?

Yes. Thanks, Steve. Appreciate the question. Yes, we have well over 10,500. Actually, I think we have over 11,000 partners. So the 600 is out of that. It was at almost 12,000, take 600 out. And that's kind of what I look at the numbers at. There's still, I said -- as I described, some that are undecided. And a lot of those are small companies that maybe just don't even do that -- do a loan every month, thus haven't responded or we haven't connected with or we never really did business with them anyways. But in general, we have a lot of active clients, and it's growing. And the clients that we're doing business with are actually doing a bigger percentage of their business with us. So think same-store sales is growing with UWM ever since this announcement and since we rounded out our product, including the jumbo product that I described earlier.

Well, you're right. The press got all over it. But it seems -- from where we sit, it seems to have settled down. Is that the right observation? I mean -- okay, it was a big deal, a lot of articles. But is it back within the industry, within the broker and the wholesale channel? Have things chilled out a little bit, calmer now, and it just is what it is?

They were always chilled out, Steve. The reality is I don't control the marketing machine that my competitor is and what they like to do. The reality is brokers -- I walked into a couple of places with hundreds of brokers there during COVID, and everyone was wearing masks. So don't worry, we're safe. But they literally standing ovation for me walking in and thanking us for doing the right thing for brokers. And so it never was an issue. It's never been an issue. People know that someone had to stand up for the right thing, and we did it. And it didn't hurt our business. It only helped our business. But let's just say it was neutral, which it wasn't. It was very positive. Let's consider it neutral. The alignment and the loyalty and the structure has been a 10x win. And so my competitor can spend it all they want. The two of them are not happy with me. But once again, I don't think they're shareholders. But if they are, they're probably happy as a shareholder.

Great. Well, as long as you and the insiders feel like you won the game, then that's a big plus right there. A quick follow-up, if I could, for Tim. So everybody is trying to figure out what's normal on margins, and we'll see that soon enough. But Tim, let's just take an extreme case, and let's just say that 100 basis points is -- you guys sit down and figure out, that's all you can count on for the next 18 to 24 months. I mean, is that something that you can be -- is that a level you can be profitable? And some rough idea of what kind of return on equity 100 basis point of margin would result in?

Yes. Thanks. I'll jump in real quick, and Tim can obviously round out my comments on it. But I don't know if those would be the numbers for the next 18 to 24 months. Remember, like I said, they go off highs, and they come to all-time lows because everyone has built up a lot of capacity. And everyone wants to get competitive and try to play the game. But I'd be very surprised if numbers were in the lows for as long as you discussed. And we are the ones that can play the game longer than anyone if they want to play with us based on our scale and our cost to originate and our proprietary technology. And so we have a huge advantage there. So we're willing to play as long as people want to play, but the reality is they're not going to play that long with us. And we think margins will go back up off the all-time lows sooner than what you described.

Yes. I think the hard part about getting to the ROE is that you are dealing, exactly as Mat said, with a volatile amount of margin. So can it sustain a 70? We've never seen the business sustain at such a low amount or 75 or whatever the low end of the range is. So the normalcy is a matter of time of when does the -- when do the margins get back out. But we're still -- how we model it out, we're still profitable at a very low end of that spectrum and even lower than that.

And if we were back to 150 basis points, you feel you could still deliver a very strong return on common equity for investors at that level.

That's correct.

Stable long term.

Your next question comes from the line of Ryan Nash with Goldman Sachs.

So Mat, I'm curious for your view about the differential pricing that exists between different markets right now, wholesale versus retail. I know -- fully understand that you're not a player in the retail market. It just seems strange to me that there's such a different price. And how do we think about the risk of it spilling over into other markets? And then when you look back on the last time we had significant price competition, which I think was 2019, can you maybe just help us understand what drove the market back up last time? Was it just rates? How long did it take for capacity to normalize? And is there anything else we should be thinking about that impacted margins normalizing?

Yes. Thanks, Ryan. Appreciate it. So a couple of things. Retail versus wholesale, yes, it's an interesting anomaly right there. It's not an anomaly, though, right? And so the difference between retail and wholesale is there's a massive difference in price to the consumer. And so there are some of our competitors or companies in wholesale that offer retail and wholesale. And to offer a consumer that goes directly to you in retail a worse rate and worse fees by a substantial amount than one that goes through a broker and comes through your same channel to a wholesale channel is, in my opinion, inappropriate, is the nice way of saying it. But that's the way it is right now. And so you'll see us shying on that as the market continues to evolve that the retail -- the margins in retail are substantially higher. Therefore, the benefit to the consumer is not as good. And that's why it's silly that the broker channel is only 20% of the market. If it's cheaper for the consumer, faster for the consumer and easier for the consumer, why do consumers still go to those retail lenders and pay more fees? It's because they just have not been educated. And that's one of the things we're going to be working on is educating consumers. Realtors and LOs understand it mostly, but consumers definitely don't understand. And those large retail organizations, they need those higher margins or they can't compete because they have massive infrastructures with bloated executive comp, along with massive amounts of money in marketing and TV commercials. They spend a lot of money on things that make it so they can't be profitable at 100 basis points. So with technology, I want you to think of this, Ryan, in any industry, don't even think of mortgage, as technology enters an industry -- and in mortgage, we've always been lagging. But it's coming hard, and we're hopefully a leader in that, and we've shown that. As technology enters the industry, what happens is margins compress. That's just natural, right? But who can sustain that and who can win -- the people with the biggest bloated costs are the ones that will lose first. And that's an opportunity. And that's why there's over 400,000 loan officers in America that are in the retail channel, that are seeing their broker competitors with only 50,000 loan officers offering lower rates to consumers. That's going to change once their pipelines dry up a little bit, and they will migrate to the broker channel. And that's why we're very steadfast on our belief that the broker channel will become 1 in 3, a 33% market share. When that 33% market share happens, UWM will be in prime position not only to be the #1 overall mortgage lender but for brokers to continue to make an impact on consumers throughout America in a very positive way. So we're very excited about that, and there is a massive difference between retail and wholesale. And the media does not want to talk about that story because, once again, the media doesn't play well necessarily with the brokers because brokers aren't paying for the commercials. But the reality is the difference between retail and wholesale is substantial. Go ahead.

And that's helpful color. And I was going to ask a follow-up question on, you sounded pretty positive on the outlook for volumes, the 50 to -- $51 billion to $55 billion in the second quarter. And I was just hoping, maybe can you talk about -- obviously, we all understand what's going on in the pricing side. But can you maybe just talk about maybe an intermediate view on how much share within the wholesale channel you could take? So on one side, price is compressing. But could we -- where could we see volumes go? And then -- and I guess related to that, you talked about $2 billion of jumbo volume in May, also expanding the government program. Like how big can some of these programs be? And are there any other pockets of volume that maybe you pulled back during COVID that we see -- that we could see be -- coming back on that could also drive incremental volume?

Yes. Great question, and you're exactly right. So there's a lot of things -- as we rounded out our products, bringing back jumbo, offering FHA in a more meaningful way, even rolling out ARMs and just like -- once again, nothing that's a silver bullet. I mean, a jumbo, you can consider $2 billion a month is a pretty sizable number. But the reality is rounding out our products, brokers want to use UWM. They've been -- they've wanted to use UWM. There's a different -- there's reasons that they have not. We've basically closed the gap on those reasons. Can UWM get to 50% market share in wholesale? Absolutely. Will we get there in the second quarter? No. But we can get there, and we will get there over the next 5 years. And we continue to grow because we are the choice for the brokers. We are their true partner. We don't compete with them. We offer a very consistent, strong product and pricing. And we have the best technology and service in the industry. And that's not an opinion. Like I said, you can go to FindAMortgageBroker.com and ask brokers, they'll tell you. Once again, you don't have to pick a broker that works with us. You can just pick anyone on there. They'll tell you what they really think. And that's why if I'm a mortgage investor or an investor in general, if I'm picking a mortgage company, it's UWM. UWM will win. UWM, our Net Promoter Score is an elite level. Think of the top Fortune 1000 companies, we're probably a top 1%, if not even better than that. And so our service, our technology wins. Now how big can we get from a market share perspective? Like I said, I think 50% is very realistic, and that's what we're targeting over the next 5 years. And that's even within the broker channel growing. And so these products rounding out will be a substantial benefit for UWM. We guided up $51 billion to $55 billion, up from the first quarter. Like I said in my remarks, nobody else is going to be going up first quarter or second quarter, right? They're just not going to. And if you want to really compare second quarter of 2020 to second quarter 2021, you'll truly understand the power of our business and the strength of the UWM company and the broker channel. When rates are low, everyone looks great. We looked great, too. When rates start to tick up, you start to see people's blemishes. They start to come out. When you're 90% refi, you start to think, "Oh, I might do a little less volume in the second quarter and going forward." So we're excited about the opportunity to show that we are the elite mortgage partner in America, and you guys will see that as investors of ours.

Your next question comes from the line of Sameer Kalucha with Deutsche Bank.

What I wanted to touch upon is, a number of key players in your space are getting more attention for their technology and how they're modernizing the mortgage process. So I was wondering, with the great technical prowess you have and the scale of the infrastructure you put in place, are there any adjacencies you can go after, aside from the core wholesale lending business?

So thanks for the question. So just to -- I'm trying to understand exactly what you're asking. Are there companies -- are you asking if I could buy technology companies or look at that? Is that what you're asking? I'm trying to just make sure I understand it before I answer.

You could buy, you could partner and just to embed yourself more in the process so that you can expand your TAM from the lending business to the whole homeownership business. Because you have such a great tech infrastructure already in place.

Great. I got it.

And what are the key metrics you could look at? Yes.

Yes. So trying to understand the process all the way through. And so we've looked at partnering with different companies, tying our brokers in because our brokers generally have not had the partnerships, whether it's with builders or insurance agencies or even technology companies at the level that a lot of retail competitors do. That's how a lot of retail competitors get their business and are able to still maintain their margins because they kind of have a captive partnership in a lot of respects. And so we have looked at a lot of different ways we can help break through that for our mortgage brokers. But the reality is with education and with time, people are realizing that the difference between wholesale and retail is a major difference. And people are going to want to work with mortgage brokers. Brokers are not a fad. Brokers were the elite partners prior to the crisis in '08. They were 56% of the market. Everyone understood that brokers offered a lower rate. Now brokers offer all things. I mean, brokers still offer a lower rate, but now they have a faster and easier process because UWM has enabled them. We've empowered them with the technology we've built proprietary. Can I partner with companies that have great technology? Yes. Can I build it ourselves? Most likely. Have we looked at acquisitions? Absolutely. And we have a lot of cash on balance sheet. As you saw, we're going to look at repurchasing shares. We've obviously paid a dividend now quarterly, which has been very positive. And at the same time, we still have a lot of cash sitting here. And our MSR book is growing immensely. And the value of the MSR book will only continue to grow if rates go up, and we're very, very proud of that. So we are in a very, very strong position. Like in my remarks, I said I don't know if you've ever been in a stronger position at UWM, and I'm excited for you guys. I didn't think the investor community would see it as in the market share growth and a lot of things that we talked about during our road show and our process until 2022 or '23. And I think if rates start ticking up a little bit or stay ticking up a little bit, you're going to start to really see the power of UWM and why our earnings, our value, our market share and quite honestly our stock price will follow. And you'll see that as it goes up and we continue to succeed.

Your next question comes from the line of Bose George with KBW.

So I just wanted to follow up on the question -- the discussion about the growth in the broker channel. As loan officers, if they move from retail to the broker channel, can they make more money? I'm just curious how -- the shift that sort of drives the growth in the channel, as long as the consumer seems to not be aware of sort of the full benefit they're getting in that channel.

Yes. Great question, Bose. So here, yes, the loan officer will make more money. And yes, at the same time, the consumer will get a better rate. So put those 2 things together and say, "Hey, how can the loan officer who's originating it make more and the consumer get a better deal?" That's the difference between that 300 basis point -- 350 basis point margin that everyone else has and 100 basis point, 125, 150 basis point margin in wholesale, major difference. And so the LO will win. And that's not even taking into account the benefit of a W-2 loan officer at whatever caliber or guaranteed rate, can start his own company, issue a mortgage, a little broker shop. And now he's self-employed, and he gets the benefits of writing taxes off and doing different things and doing -- there's a lot of benefits. And so the opportunity is huge. You will see that happen this year where some of the biggest loan officers in America leave their retail companies and go to brokers, make more money, give better deals to consumers, and it will make this shift. This shift will happen. It's not an if. It's just a whether or when. And we think it's going to happen later in this year or early next year. But it's starting to happen a little sooner because as rates go up, those loan officers that are charging borrowers higher rates, they say, "I'm charging my cousin a higher rate. I'm not making that much money, and I don't have to make loans in pipeline. Like, why don't I just go do this myself? And I know that the brokers are out there winning and competing right now." And so as long as they know that UWM is stable and strong, which everyone knows that, then they feel more comfortable joining the broker channel. And we're going to see -- and we're seeing that every day, but we're going to see more of that as this year progresses and into next year.

Okay. That makes sense. And then actually just switching to the jumbo channel. The -- I mean, can you just talk about how large it could be there? I mean, certainly, it's a large channel, but there's also the risk initiative, like the best execution there. So is there a way to be much larger in that while sort of balancing the execution issues that we kind of saw last year with that market shutdown?

Yes. So we have to understand the market, and we're very good at understanding when the right time to be in this market is. Now the market is a lot more stable, and we also have a lot of outlets and partners, along with our ability to go direct with the private label securities ourselves. We are at the size and scale that we can do that, and we're investigating different ways to do that right now actually. And we'll -- you'll see that happen in this quarter most likely and how we handle that. And so I guess I would say is -- how big can it get? It can get bigger than it is now. Can we do $6 billion, $7 billion a quarter? Yes, absolutely. The interesting part about it, which is, I would say, a little surprising, although I knew it would be big on purchase, but seeing almost half of it being purchase at the initial read was higher than we expected. And so that's a big opportunity. Brokers really win in the purchase market. And so many brokers -- and I was on the road in this last month talking to some clients, and they said, "You don't understand, man, how many clients a month I would throw, as in refer, to a large bank or another competitor, a friend of mine that works for us because I just couldn't handle it because we didn't have a jumbo product." Now UWM has it. Now they're competing. Now they're offering their services. And what happens is if that broker does that jumbo loan for the borrower and close it efficiently in 15, 20 days, like we do at UWM all the time, what that does is that gives them that referral from that realtor, that listing agent, buying agent. All of a sudden, they're like, "Woah, that brokered it." And they get more business. It basically has opened up the brokers to a different market, and then they can get even more of the regular market that they've always been in because they just didn't have that connection. And so it's really been a huge success. Like I said, I think about $2 billion in May is a rough estimate that we will do. And could it grow from there? Yes. So I'll say it could be as little as $4 billion, as much as $10 billion in a quarter. That would be my high-level estimate. But I think the first quarter -- or the second quarter is not going to be a great indicator because that didn't roll out until March 17. So April was a slower month of it, even though we did over $1 billion of it. But we expect May to be a more normalized month. And we'll give you that number, May and June numbers for you, on the next quarterly call.

Your next question comes from the line of Michael Kaye with Wells Fargo.

I think I heard you mention you're doing more same-store business with your broker customers now with that sharper pricing changes. But historically, when you ease back on those pricing incentives after a competitive period, how much of that market share do you end up keeping?

Yes. So we keep a great, great percentage of it. So the ones that we don't win in the past -- so our process, our technology is quite sticky, right? People love working in our systems. And once they see it and they get used to it, it's hard to go elsewhere. And so it creates price elasticity where people are comfortable partnering with us. Now in the past, the reason that stuff doesn't stick as long is when it's a refi market, where people are always focused on -- companies that are refi-centric, brokers of ours that we have, of course, that all they do is refinance, that -- they're less price -- they're less sticky than the partners that we really are all in with from a broker perspective. And so quite honestly, a couple of the brokers that did go all in with UWM that stayed with Fairway and Rocket were interestingly the refi shops that are -- have very low comp, very low refis. Their business has fallen off consistently because that's all they sell. People that only sell rate will not win in any mortgage market, whether you're a retail, wholesale, anybody. You have to sell value, and our value is technology. Our value is service. Our value is partnership. And yes, our value is having a competitive price, and our brokers know that. And as long as we stay consistent with price and dominate on service and technology and they know we are not competing with them, we will continue to grow, and that's what's been going on.

Okay. That's helpful. And it seems like in your accounting, the quarter-on-quarter increase in loan originations you expect in Q2. But it seems like you had a weaker quarter-on-quarter growth in Q1 versus your wholesale peers. And I believe the Q1 volume was below the guided -- the prior guidance you gave. I was just wondering if you could provide some more color here on that dynamic, what looks like some market share loss in Q1.

Yes. There's no market share loss really in Q1. So one thing you got to realize is UWM close loans in 17 days. My competitors close them in 45, 50-plus days. A lot of the people that you looked at, Q1, the numbers, they had 0 impact from rates going up in the first, second week of February. When rates went up first, second week of February, just after my last earnings call, we actually had a worse March because of that and even a worse February because we actually closed loans that fast, where all my competitors were still closing loans from December and January and February and March. And so we already -- you already saw our downward trend based on rates ticking up. You have not seen everyone else as they were still living off of Q4. And so the speed that we close loan is shown in that example, and you'll see it in Q2. And that's why we're quite confident that we will grow in Q2 while others will not because this is -- now they're actually going to live with the real numbers of what the market is. And even if it takes them 40 or 50 days to close, they can't escape from the March -- February, March and April rise of rates.

[Operator Instructions] Your next question comes from the line of Mark DeVries with Barclays.

Yes. I had a question about the purchase mix and how that's shaping up. Can you give us a sense, if you just look at your rate locks in April and May, where that's trending? What's your share of purchase is in the broker channel relative to your share of refi? And also, do you have a sense for how your -- kind of the relative efficiency and loan fulfillment that you highlighted, is it any different for purchased loans versus refinance? And then finally, any difference in margins you're seeing on purchased versus refinanced?

Great. Great question. So first of all, I'll just answer real quickly. There's no difference in margins on purchase versus refi with UWM. So the numbers you're seeing are the numbers that they are across the board. Efficiency, same thing. To close a purchase transaction is more complex, period. That's why a lot of the direct-to-consumer companies, a lot of people that are refinancing their servicing book, they don't do much purchase because it's more complex. It's not a one-to-one lender to borrower. It's lender to borrower and then 2 real estate agents, right, and then a seller, right? And then you always need -- not always, but you most likely will need an appraisal. It gets a little more complex. Our efficiencies are within a day or 2. So it's not a big difference. So let's call it, 17 days, 16 days on a refi, 18 days on a purchase. There is no difference material-wise for UWM on purchase or a refi. You see a little more of a difference on some of those efficiencies on product. Could FHA or jumbo take a little longer than conventional? Yes. But once again, with us, we're talking 2 or 3 days. It's not immaterial. Once again, we still expect our time frame to be in that 17-day, 18-day range that we talked with our mixture right now. Now the big question is purchase/refi mix. And so April, I gave a little bit of an indicator for you guys is that on the new registrations, which means when someone puts a loan into our system for the first time, April was 43% purchase. And 43%, like I said earlier, doesn't matter. The percentage doesn't matter because if I just did less refis, then it wouldn't be exciting. The difference is it was one of our best registration months of all time. And so with high volumes and 43% purchase, that's why I said last quarter, I said it to you and I'll say it again, that in the third quarter, you'll see the biggest all-time purchase volume out of UWM. And we will continue to be the leader. You might actually see that in the second quarter, our purchase volume. And so our volumes are going to be up over Q1. Our purchase volume will be up over Q1. And across the board, we're winning on that size. And so people have to move their business and readapt or adapt to the purchase market compared to the refi market. And a lot of these competitors of ours or companies in the wholesale and retail channel are not built for that, right? Think about it. If you're a direct-to-consumer business, right, and you don't have any local presence, you will not succeed in the purchase market. And you're going to see that coming forward in the second quarter numbers on the purchase side.

Okay. Just one follow-up on that. You mentioned a purchase, it's a little more complicated, and it takes a couple more days. Does your relative efficiency actually widen out relative to the competitors, remain about the same or tighten when you factor in that extra time?

Absolutely. You got it exactly. So we're -- you're seeing people's time to close and their efficiencies tied to refinancing a current servicing loan of theirs, that they already have all the data, all the information and just send them the application process, one-on-one contact lender. That's a lot different when you get purchases involved. And that's part of the reason a lot of these companies that are out there in public and also in private are not capable of doing the purchase business at the volume and scale at UWM. So our competitive advantage increases. And that's why I said earlier, I'll say it again, Q1 to Q2, purchase growth and overall market share growth, volume growth, UWM will win. We are not guiding down 10%, 15%, 20%. We will do more business because everyone else is kind of a little concerned with what's going on, not just for margins. Everyone understands that. Everyone knows the all-time highs, the all-time lows and then settle in. That's nothing new to mortgages. But having to figure out how to do purchases after been living off a refi for the last 12 to 18 months, it's game on. We're going to see how that goes for everybody. All right. I think that was all the questions. And so thank you all for the time. We're always available. My Investor Relations, Matt Roslin, is available; Tim Forrester, our CFO; and myself, I'm always available. We look forward to talking and continuing to build a great relationship with all of you guys. We're glad we were able to take all your questions, and we're excited to talk to you again early August to discuss the second quarter numbers. And you guys hold us accountable to what I said today. And we're excited about the opportunity. So thanks for the time. Thanks for the questions. Have a fantastic day.

And this concludes today's conference call. Thank you for your participation. You may now disconnect.