Good morning. My name is Regina and I will be your conference operator today. At this time, I would like to welcome everyone to the UWM Holdings Corporation Fourth Quarter 2023 and Full Year 2023 Earnings Conference Call. [Operator Instructions] Thank you. Blake Kolo, you may begin your conference.

Good morning. This is Blake Kolo, Chief Business Officer and Head of Investor Relations. Thank you for joining us and welcome to the fourth quarter and full year 2023 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. I will now turn the call over to Mat Ishbia, Chairman and CEO of UWM Holdings Corporation and United Wholesale Mortgage.

Thanks, Blake and thank you everyone for joining us today. Let’s jump right into a couple of thoughts. First off, 2023 was one of the best years in UWM’s history. It wasn’t the year that standout from a financial perspective, but will stand out from a dominance perspective. We separated from our competitors significantly on market share, growth, operational earnings and strategic investments. It was our second year as the number one overall lender. It was our third consecutive year as the number one purchase lender and our ninth consecutive year as the number one wholesale lender. As you heard me say many times before, the best mortgage companies shine in high rate markets and that’s exactly what we have done consistently here at UWM. While there have been a lot of commentary about higher interest rates on the overall mortgage environment this year, UWM delivered our best purchase year of all time with almost $94 billion of purchase, about $20.7 billion of that being in the fourth quarter. We ended the year with over $108 billion of overall production and record market share across the board. In short, I am incredibly proud of our team’s performance throughout the year and believe this performance is also clear evidence of the strength of the broker channel. UWM and our broker partners have succeeded during times when many have failed. And now, we are uniquely positioned to take advantage of the lower rates and increased housing inventory and demand that I believe we will see over the next 6, 12 and 18 months. Before talking about the fourth quarter, I’d like to emphasize a few key messages. First and foremost, the broker channel is strong and continues to grow its overall share of the industry. Loan officers continue to join the broker…

Thank you, Mat. Amidst the doom and gloom that many others have espoused during 2023, we were pleased with our operational performance during Q4 and for the entire year. Purchase business continued to lead the way as our total 2023 purchase originations were higher than both 2022 and 2021 even with the higher interest rate environment for all of 2023 and the significant decrease in industry-wide origination volumes. While our fourth quarter and full year GAAP results were negatively impacted by the significant Q4 market rate declines and resulting impact to the estimated fair value of our MSRs, our operational income before considering changes in the fair value of MSRs increased significantly in Q4 and for the full year. Adjusted EBITDA for 2023 was $478.3 million as compared to $282.4 million in 2022. And for Q4, adjusted EBITDA was $99.6 million as compared to $60.4 million in Q4 of 2022. With respect to MSRs, unlike some of our competitors, we have not historically specifically hedged the MSR portfolio. Rather, we maintain our portfolio at levels such that we are confident that fair value impacts due to interest rate declines will over time be more than offset by an increase in origination income. We also hedge our MSR portfolio in what we believe to be the most efficient manner by regularly selling MSRs, which we continue to opportunistically do throughout the year. Notwithstanding the GAAP net loss for the fourth quarter and full year, our capital and leverage ratios remain within expected ranges in the current environment. Furthermore, our liquidity and access to liquidity, including cash and accessible borrowing capacity, approximated $2.2 billion as of the end of the year, which is a significant increase from the end of each of the last 2 years despite what many would agree were challenging market conditions for mortgage originators in those years. We believe that our current financial strength positions us well for different market cycles. Okay. I will now turn things back over to our Chairman, President and CEO, Mat Ishbia, for some closing remarks.

Thanks, Andrew. I’ll close with a few points before jumping into Q&A with all of you guys. We’ve been a public company for over 3 years now. In that time, we hope you see that we consistently deliver on what we say we are going to do. We made a lot of different comments through the years and you can go back and listen in and we’ve always hit those consistently. We believe in 2024 will be a better overall year for the housing and mortgage industry. But regardless of the market, we will remain the best mortgage lender in America and that recipe will not change. We will continue to build the best technology and provide the best service to the broker channel, take incredible care of our 7,000 plus team members by treating them like family, dominate purchase business and reward our shareholders with a consistent dividend. I’ll conclude by saying I’ve zeroed out that the broker channel’s fastest, easiest and cheapest way for consumers to get a mortgage and undoubtedly, the best part of the business for the loan officer to work. And we remain 100% committed to the success of this channel. We expect Q1 production to be between $22 billion and $28 billion. Also, I’ve always said the toughest mortgage environment that the lowest you’d ever see our margin would be 75 to 100 basis points, and I’ve been guiding towards those numbers for a while now. As I see the purchase market stabilizing and the refi market starting to come on, I believe that the margins will increase. So I’m going to take off our recent lows and move it to 80 to 105 basis points going forward. You can take that as new calling bottom or officially coming off the bottom with regard to our margins. I want to thank our amazing team members and our clients for a great year. And I look forward to growing in 2024 together. Now I’m going to turn it back over to the Q&A.

[Operator Instructions] Our first question will come from the line of Kyle Joseph with Jefferies. Please go ahead.

Hey, good morning Mat and Andrew. Thanks for taking my questions. Just want to get a sense for kind of activity quarter-to-date. Obviously, you guys have your guidance, but give us a sense for the cadence of originations kind of pre and post CPI print and how that – and potential implications for the more active spring season?

Yes. Thanks for the question, Kyle. Appreciate it. So overall, I think we are – I can’t go into all the details, but I think we are off to a great, great start this year. I think the interest rates as we saw such a massive decline in the fourth quarter, which hit the MSRs as you know, a lot of it has come back up. So you obviously kept some of that income back on the first quarter. But we have not seen a decline from a perspective of business. That’s why I guided actually higher on production and guided to higher margins in the fourth quarter. And if you compare that to the first quarter of 2023, I think you’ll see it very favorable based on my guidance and hopefully, the execution of that. So I think this quarter will be a great quarter. And I think, like I said in the call, 2024 should be a great year. It’s kind of like everyone kind of feels not only rates will drop a little bit, but also inventory will open up a little bit. The purchase season usually starts March, April. We feel like it didn’t even stop, and January and February were pretty good from a purchase perspective. And so we’re feeling excited about what this year looks like.

Got it. And then just one follow-up there. You mentioned kind of the refi channel is opening up a little bit with rate movements in December. But just based on the forward curve right now, how do you expect the mix of originations in ‘24 to compare to ‘23? And are there any sort of implications there in terms of margins? Are you guys kind of agnostic to channel?

Well, yes, I mean, usually, when rates go down, margins will go up, and that’s because there’s more action, more volume. A lot of our competitors have taken capacity out of the industry. Therefore, they’re not able to handle the volume. So when you get out of volume when refis come and rates drop, they slow it down by adding margin. And so I think margins usually go up in a refi environment, and I think we’ve seen that in the past as well. And so I do think that the purchase refi mix, I think you saw last year, we’re 85% to 88% in that range of purchase and having record numbers. That will change where it’ll be more refis in 2024 will be – we’ll go down to 70% purchase or 80% or 50%, I don’t know. That depends on when rates drop and how much they drop. But we’re still going to continue to focus on doing a lot of purchase business because that’s what the best mortgage companies do, and that’s what we’ve been able to do even in this higher rate environment.

Got it. Thanks for taking my questions. I can hop back in the queue.

Thank you.

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

Hey, good morning. Mat, from your commentary on the broker share, it sounds like the broker share now is up to around 25% of the market. Is that right? And where do you see that going in the next couple of years?

Yes. So thanks for the question, Bose. I appreciate it. No, I don’t think it’s at 25%. I think it’s almost there. I think it’s getting there. I think one of the last means I saw was 22.84%. And I’ve always been saying 2 out of 10 loans, and now it’s like getting closer to 2.5, I don’t [indiscernible]. And I haven’t seen the fourth quarter numbers, but I expect it to be right around that 23% number 20 – so it’s definitely going. But my point was really is we’re competing for 2 or 2.5 loans out of 10. And we’re still in a dominant position as the broker channel continues to grow and get to 3 out of 10 or 4 out of 10 loans that we can compete for, UWM is going to grow as well. And so we feel like we have the upside of the market from a rate perspective, but the upside of the broker channel as well that none of our competitors really have at least in other public competitors.

Okay. Great. Thanks. And I wanted to ask also about the Ginnie Mae percentage. That trended up a little more. Are they doing more on the purchase side? Is there – is it streamlined refis and is a mix of everything or just any commentary that would be great?

Yes. No, it’s mostly purchase. The great majority of our business in the fourth quarter was still purchased and so streamlined refinances aren’t really relevant, although they will become very relevant when rates drop a little bit. Right now, they are still not relevant. There is still a little bit of ways out. There is different rules and requirements around FAG streamlines and VA rules [ph], which are both from the government bucket, which you have to have a – show enough savings to a consumer. I don’t think the market has dictated that yet. But when rates get down to the low 6s or high 5s, I think you’ll see a frenzy of activity. And so I wouldn’t say it’s tied to that. I think it’s still majority purchase, but that will start to come here soon.

Okay, great. Thank you.

Your next question comes from the line of Steve Delaney with Citizens JMP. Please go ahead.

Thanks, good morning, Mat. You’re not rebuilt around refis. We’ve been hung up here around 7% and haven’t seen a refi market for what, 3, 4 years. How low does it – do you think a 30-year rate has to go to really spur any kind of a material refi event in the industry?

Yes. Thanks for the question. So I think it’s got to make sense for consumers. And I think it’s got to be – it depends on where they did their last loans. So usually, it ties to, can you save the consumer a 0.5 point in rate is usually how you think about it. And so borrowers that in October of this past year that were doing rates at 7.75, right, and then rates dropped. So we’re doing a 6.75, it goes – different borrowers will have different times they’ll refinance. But generally speaking, when rates get to 5.75 to 6.25, you’re going to see a lot of refi activity because it’s been a couple of years now when people have been doing loans at 6.5, 7, 7.5, maybe that’s why our MSR book – we’ve been doing – we’re doing the most loans for everyone. So I know where the loans are being done. They’re being done at 6.5, 7, 7.5. So when rates get to 6.25, I’d call it 5.99, I think that will create enough of a benefit for a consumer to refinance. But beyond that, Steve, is the number one purchase lender, you’re going to see when rates get to 5.99, [indiscernible] on those purchases will start to pick up even more, too. And so we think purchase will open up, inventory will open up and rates will drop refis. I think it’s going to be a very, very positive environment. Whether it happens tomorrow or in 3 months or 6 months or 9 months, it’s going to happen, we just don’t know when. And that also will then dictate margins will go up, which is why I guided off the bottom.

Yes, that’s great color about – I hadn’t thought about the purchase, the purchase benefit in addition because that’s a lot of people are going to qualify now that may not have. So when this – when the shift comes and it comes, will UWM continue to work back to borrowers through your brokers? You seem to be resolute on that, that you work with the broker to get to the customer as opposed to creating your own call center like so many have tried to do over the years to capture the borrower? Thanks.

Yes. 100%, we’re going to go through our brokers. It’s the right thing to do. It’s inappropriate what some of my competitors do and how they attack the brokers business. It’s just they’re downright wrong, and they run poor companies, sorry to tell you that. It’s just not the right thing to do. And so to attack your client, your client send you a loan and you refinance that client, it’s just the wrong thing to do. And obviously, we know Rocket and some of these other guys have done that for years, and they’re just doing the wrong thing to brokers, and that’s why the brokers know that. But we will never – and you can mark my words, never do that. We always give them back to the broker. We’ll help the brokers. We’ll show them how to refinance. We’ll do trainings. We’ll coach them. We’ll show them which clients like how to call and how to sell it. We do all the things, but it’s the broker’s client, not ours, and that’s the right way to run a business. And that’s why we’ve been so dominant in the broker channel and this industry for years.

Thanks for the comments, Mat.

Thank you.

Your next question comes from the line of Doug Harter with UBS. Please go ahead.

Thanks. Mat, I’m hoping as you’re seeing gain margins come off the lows, how to think about what are the different types of environments that would cause you to kind of be low, middle, high end of your new range?

Yes. So the 75 to 100, I think I said probably I don’t know how many quarters I guided towards it, but probably five, six, seven quarters is my guess, I don’t remember exactly. But the reality is, in the toughest mortgage market, UWM will – we are kind of the bellwether for what happens in the margins and how the business goes. And we’ve said, hey, 75 to 100, where it’s going to be. Now as the market starts to get better, I’m basically calling bottom. It’s not going to get worse than it was. We’re going to move it to 80 to 105. And then whether it stay like that for a couple of quarters or maybe I go to 85 to 110. And maybe I guess it’s going to continue to go eventually gets back to more normalized numbers when it’s a refi environment or a more normalized market. Right now, we’re not there. But what I’m trying to signal to you and everybody else is it’s on the way. It’s on the way. We’re off the 75 to 100. It will be 80 to 105. Will I go to 85 to 110 next quarter? I don’t know. Maybe I go 80 to 105 for the next couple of quarters or maybe I’d go to 90 to 115, like it’s on the way up. It’s not going back. And you see we’ve been consistently at the middle to high range of the margin – of the range. And now I can move the range up, and I expect that, that will continue to move the range up, whether it’s next quarter or the quarter after or sometime in the near future.

Appreciate that, Mat. And then as you’re thinking about the landscape as kind of all the realtor lawsuits and changes going on there, I guess, how do you think that impacts – or does that impact the broker and what challenges or opportunities does that create?

Usually, real estate agents and brokers are really tied at hip. So mortgage brokers and real estate agents do a lot of the same things. They’re great for consumers. They’re on the ground talking to people. So obviously, when impacts happen to comp or potentially happen, they haven’t happened in the – I don’t know if they will for years, to be honest with you. But when impacts potentially happen, that creates opportunity for the best real estate agents, the best brokers to take advantage of it and create a new opportunity to grow their business. Just like years ago, all comp changed in the mortgage market, brokers were supposedly going to lose comp and all this stuff happens, and brokers actually thrived because of it. And so I look at these things as opportunities, how in the weeds are you in that business and real estate professionals are resilient, just like mortgage brokers are resilient. And so I’m not really concerned about them – that impact in the business. Broker and real estate agents are tied at the hip. They will help each other grow, help each other succeed. And hey, maybe what I have to do is they’ll do more business and they do more business, that helps them and helps loan officers and helps UWM and helps consumers. And so we will see how it all shakes out. I think it’s too early to really get a read on what will happen. But I do think that usually people that are very involved in the business, very in the weeds of the business like UWM is and like brokers are and real estate agents usually capitalize on change more than get hurt by change.

Appreciate those insights. Thanks Mat.

Thank you.

Your next question comes from the line of James Faucette with Morgan Stanley. Please go ahead.

Yes. Hi. Good morning. This is actually Jeff Adelson on for James Faucette. Good morning. Just wanted to circle back on some of the pricing initiatives you guys have talked about. I know about a month ago, you launched this Refi 100 initiative. Just curious what the uptake on that has been like with your brokers and volumes? Like how meaningful that’s been to your volume so far this quarter, and just maybe your appetite for additional pricing initiatives going forward?

Yes. So, first off, talking about pricing initiatives and different things we have done through the years, and I think it’s good because I think a lot of you guys have been following us for years and seeing from – we said Game On, what was that 15 months ago, and what we would do with that as a pricing initiative and how is that working? And obviously, if you look at the fourth quarter of 2022 versus the fourth quarter of ‘23, we had Game On in the fourth quarter of ‘22, which means half the margins. And we did – and it was a lower interest rate environment. In this year in the fourth quarter ‘23, we have much bigger margins, higher interest rate environment, and we still do more business. So, I think it talks to some of these initiatives that create stickiness. What we know is this for facts. UWM is the best mortgage company in America. We were without question the best wholesale lender of the country. The game for us is we want to get loan officer to leave the retail channel and join the broker channel, which they are happening all the time. I talk to them all the time. It’s happening right now. And on top of that, we want brokers that are in the broker channel to try UWM. When they use UWM, they become sticky because UWM is the best. We help them grow their business. We help train them. We help them partner with real estate agents. We help them market like we do all this stuff. And so it’s all about getting them in. So, pricing incentives and different initiatives are always focused on long-term. I am never focused on the short-term impact. I will focus on what…

Okay. Great. Thanks for that color. And just on the MSR, I don’t think I have heard anything so far. But it seems like from the disclosures, you didn’t do any MSR sales this quarter, is that right? And why was that? And maybe what’s your appetite looking like going forward there?

Yes, we did one excess trade in the fourth quarter. So – and we have done some trades already this year. Like Andrew said is hedging MSRs like we had a bigger MSR markdown, I think $600-plus million in the fourth quarter, which is obviously just paper moving, it means nothing. And you will see some of that come back this quarter. But once again, don’t give me credit for that, then just like I hope you don’t give me, like it doesn’t matter. But the truth is we have a bigger write-down or write-up than other people because we are actually the only one actually originating loans at these rates. So, we have – if you look at our book, we have more higher rate of our book because we actually did loans in the third quarter and fourth quarter when everyone else didn’t. And so those loans actually took a bigger write-down, which is why we had a bigger write-off than most people in the fourth quarter. And then coincidentally, you all see that or conversely, you will see that in the first quarter, our write-up of those because rates have gone back up since January 1st. Obviously, we will see what happens in March. I can’t control that stuff. But that’s irrelevant. But we are selling MSRs, and we will continue to sell MSRs and getting good prizes for bringing in cash and continue to build the business when we see an opportunity to do so.

Okay. Great. Thanks for taking my question, Mat.

Thank you.

Your next question comes from the line of Mark DeVries with Deutsche Bank. Please go ahead.

Yes. Thanks. Just had a follow-up question on the origination guidance for the first quarter. It’s a pretty wide range just given we are almost two-thirds of the way through the quarter. Can you just give us a better sense as to why that is? Kind of what scenario brings you to the low end of that range and what scenario brings you to the high end?

Yes. Actually, I think I closed the range down. I usually give a $7 billion range. I think gave a $6 billion one. So, I actually gave a smaller range this time. But the truth is that trying to be consistent, $6 billion or $7 billion range. Obviously, I have a good feeling of where we are going to be, and that’s why I guided to that range. And I think we will be in the range like I am always in the range of my guidance from margins and volume perspective. And so you have got to realize that compared to last year’s first quarter and even the fourth quarter, I am basically guiding that we are going to do more business in a much higher rate environment in the tough mortgage industry. January, February, March are usually the slowest months. Usually – actually November, December, January, February, the toughest months. Specifically January and February, especially when you are a purchase lender, when you are refi, it doesn’t matter when you are doing it. But your purchases, it’s slower in January and February. People aren’t moving while they are in school. It’s cold in the northern part of the country. There is a lot of reasons that purchases slowed down. So, I think 22 to 28 is a good guidance. I think 80 to 105 is a good guidance. And as I have done every single quarter, we always hit those guidances. And consistently, we will do that. I plan on doing that for the first quarter as well.

Okay. That’s helpful. Thanks.

[Operator Instructions] Your next question will come from the line of Eric Hagen with BTIG. Please go ahead.

Hi. Thanks. Good morning. I hope you guys are well. A couple of more follow-ups on the MSR, I mean are you still targeting an MSR portfolio around, call it, $300 billion of UPB? And can you also remind us does your MSR fair value mark include an estimate for recapture? Thank you.

Yes. So, good question. Obviously, in the weeds, you know the game. No, we do not put an estimate for recapture in there. So, therefore, that’s what all of my other competitors do to beef up their numbers, which is a false way of doing it, but you get that and understand the business well enough to ask the question. So, you know that. On the other side of it, MSR is $300 billion, like we look at it what’s the right range. There is not an exact range. But I think it’s important if you got an MSR book that you can originate, I think at least half of your origination book, if not a little bit more. So, I think like we look at, can we do more than $150 billion, yes, we can. So, I wouldn’t want to go much higher than $350 billion or $400 billion on the book, but I probably won’t go below $200 billion in that. So, I think $250 billion to $350 billion is the right range. That’s kind of where we will see it. We are doing a lot of business right now. We will sell some here and there. But $250 billion to $350 billion is the right range. If you want me to tighten up, I would probably say $275 billion to $325 billion, but I think du are saying $300 billion, so plus or minus, that’s right.

Love it. Great. Thank you. Thank you very much for that. We know that there is a lot of competition between broker and retail, a lot of migration, loans going back and forth between the channels sometimes. But how aggressive or how much market share do you feel like you could take out of the correspondent channel this year?

Well, so honestly, the correspondent channel is not really a channel. I know some of our competitors like to say that they originate loans in the correspondent channel. But if you don’t underwrite the loan or don’t originate the loan, you didn’t the loan, right. You can’t do the loan twice. And so I don’t really look at any volume in the correspondent channel. I know some places report correspondent volume. But honestly, there is retail, and there is wholesale. That’s all the originations because correspondent is some retail lenders do the loan and then they sell it to a Chase or a Wells. And then Wells and Chase report that as their volume. And then so does the retail guys, so it’s really double counting. So, I really don’t look at correspondent as an opportunity to grow the business. I look at it, it’s actually just people reporting numbers incorrectly. But on the flip side, there is lot of banks that are getting out of the market because of different capital rules, different things, but also in pure lines, like to play the capital rules and the banks will tell you, oh, the capitals are harder to originate mortgage, mortgage doesn’t make sense. But the truth is, it’s really hard to compete. Like all we do is mortgage. We live, eat, sleep mortgage. And banks and other places do a lot of business, a lot of different things. And by the way, they are great partners and a lot of do – a lot of great things for all of America, but it’s hard to be great at 28 things. It’s really hard to be great at one thing also. We are not only great, we are the best at one thing in mortgage. And so what we are…

Great stuff. Thank you so much.

Eric, thanks for the question. Appreciate you. Is that all the questions I think. Moderator all the questions, so we are good. So, all of those, well, thank you guys for the time. I appreciate all of you guys and gals for jumping on the call. Hopefully, it is valuable, and we will talk to you after the first quarter for the next quarterly call. Have a great day.

This concludes today’s conference call and you may now disconnect.