UWM Holdings Corporation Class A

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Good morning. I am Matt Roslin, EVP of legal affairs and investor relations. Thank you for joining us and welcome to the third quarter 2021 earnings call for UWM Holdings Corporation. Before we start, I'd like to remind everyone that the 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. Please also note that along with the earnings release, we posted on our investor website and filed a slide deck that will be referenced in our prepared remarks. I'll now turn the call over to Matt Eshbia, Chairman and CEO of UWM Holdings Corporation and United Wholesale Mortgage.

Thanks, Matt. Appreciate it. And thank you, everyone, for joining the call today. You know, it's great to be here after, you know, another outstanding quarter here at UWM. You know, before we get into the details, I want to thank everyone at UWM for everything they do together here. You know, our team, our broker clients, growing their business, everyone's working hard together, and we appreciate our clients' loyalty along with our team members' continued efforts. We have another record-breaking quarter. You know, we're on our way to our seventh consecutive year of origination growth. I don't think there's another lender in America that can say that. Since 2014, every single year, we've grown here at UWM, along with our second consecutive record-breaking quarter, along with our biggest purchase quarter of all time. Last quarter, I explained why purchase production is such an important measure of lenders' health. especially in a rising rate environment, not the percentage, the actual volume, which we're going to go deeper into that in a minute. But let me go through third quarter first. First, we delivered another record quarter, $63 billion in production, beating our guidance at 57 to 62, and up 6.4% from the $59.2 billion prior quarter, which was a record as well. $26.5 billion of that was purchased, another record, and up 10% compared to the prior quarter. Both those quarters were records. Very, very proud of our purchase production. We're very proud to share it because we are the number one purchase mortgage company in America by standards of origination. Our gain margin, gain on sale, was 94 basis points, up from 81 in the second quarter. And the higher end of our range of 75 to 100 from the guy that we guided last quarter. That's a 16% growth on our margin compared to prior quarter. As I've said before, and others indicated in their earnings call, UWM is not a victim of margin compression. As the number one wholesale lender in the country, we control the margins, and other lenders have to react to us based on what we do. We are 100% wholesale, and while our margins are in the mid-90s, Other lenders will continuously be lower than ours to remain competitive because of our amazing service levels, technology, and speed to close loans. We make the process faster, easier, and cheaper for mortgage brokers, and thus, we are winning in this wholesale channel. We've seen a cycle where margins went from all-time highs to significant lows, and now we're seeing some normalizations sooner than most people expected. Realize that these margins are part of strategy. You plainly can see retail mortgage margins are 350 to 500. which is thousands and thousands of dollars more out of the consumer's pocket on most loans. So it's more expensive to go to a retail lender. But by keeping wholesale margins very low, it's long-term business development play to help the wholesale channel. Brokers offer consumers lower-cost loans and keep the pressure on retail lenders. We expect the channel to continue to grow because of this, as loan officers will continue to leave the retail channel and join the broker channel, which is good for consumers, It's good for brokers, and it's really good for UWM. Once again, it's all part of a strategy to help brokers compete and at the same time grow the channel, which is a winning play for UWM. Our margins are more than just the number you see. It's a part of a strategy that's been working very well for years here at UWM. Now, let's speak about net income. We delivered $329.9 million of net income, you know, which is a great number compared to the previous quarter of 139 million. Now, last quarter I talked about as a CEO, I view... Our core business, I focus on things that I can control. I can't control whether rates go up or rates go down and how the MSR values go. However, we had $170.4 million decline in fair values of MSR. So when I take that out and add that back into our $329 million, it puts us right around $500 million of core earnings. Once again, that's the way I look at it. That's different than GAAP. That's how I run this business, knowing that we're very successful and profitable going forward. The quarter also looks great year over year, up 16% in overall production and 119% in purchase production. More telling is when you look at our performance relative to our peers from Q1 of this year through Q3. You know, the first and fourth quarters are typically down in the mortgage business because of cyclical industry, and usually purchases are slower in the first and fourth quarter, as you can understand with winter and school being in session. But in good quarters, our second and third quarter, you expect everyone to go up. But everyone else went down in those quarters except for UWM. So taking a look at our numbers from first quarter to second quarter to third quarter is really an amazing thing to see us continue to grow and the rest of the market not. As you can see in earnings last three and four, we went up almost 30% from Q1 to Q3. And most big banks were flat, while the rest of the largest lenders were down between 10% and 25%. Once again, rates just ticked up. So it's because rates ticked up just a bit. You know, if rates continue to rise, we will see them, you know, and with the tapering set to begin, you know, all these things happen, we're going to see, you know, who really is the strongest mortgage company in America, and that's where we want to position ourselves as not only the biggest, but the best mortgage company in America, and we're proud of that. As you've seen, we're guiding our production down based on the sequentially for the fourth quarter, but it will still be larger than the first quarter, which is a really important thing to note. I don't think there's going to be anyone in America that will do more business in the fourth quarter like we will at UWM than the first quarter of 2021. So we will be the only one that will show the strength of our business here at UWM. That being said, we're extremely excited for 2022 because when you combine rising rates, the power of brokers embedded in their communities, and UWM's low cost and power of our speed, service, and technology, it's a recipe for mortgage brokers and UWM to win together. That will happen in 2022. We're going to finish our all-time best year in 2021, and we're excited to continue to gain a massive amount of market share in 2022, especially as it ties to purchase. Let's dive deeper into purchase, because when rates are low, there's plenty of refis to go around. But when rates rise, refis slow down or even disappear in some situations, and purchase production is essentially a lender's viability. On July 1st, the 30-year fixed rate was, you know, still in the high twos. Now, at Friday, I believe it was like 3.09, 3.10. It's rising. Now, it's still very low in the overall context. But watch what happens if rates go to 3.3, 3.5, 3.7. And with the Fed confirming their tapering, you know, that's what a lot of people are projecting. This plays into our strength as the number one purchase lender in America. We have a strong record of sustained growth over the last four years, and we're continuing to grow on the purchase side. Now, let's talk about the purchase volume, not the purchase percentage, because purchase percentage just means I did less refis is what a lot of people will tell you. We're actually talking about purchase volume, the pure number. We delivered over $50 billion in the last two quarters of purchase. And we're not shy about sharing those numbers because it's really showing the health of any mortgage company, not just UWM. Can you originate purchase business? History shows that we perform great in a rising rate environment. Purchase-oriented, again, in 2018, rates went up. We're one of the few lenders that grew and made money while the rest of the industry really struggled. On the origination side, not just, hey, we make money because the servicing book goes up. We make money on the origination side. My point earlier about how we're the only mortgage company that's grown every year since 2014, I think this will be the seventh consecutive year of growing mortgage originations, that's because in a rising rate or reducing rate environment, UWM is going to win. Unmatched speed, great rates and low cost, and outstanding service. Combine that with the local community focus of mortgage brokers, it's really a powerful combination. You guys know we talk about speed a lot. 15 consecutive quarters, less than 20 days application to close. Most lenders are 40, 45, 50. We've even seen it higher to 50 to 60 days for a long time over the last couple years. The speed and service are referral catalysts for brokers. We hear anecdotes every day from where borrowers or realtors alike appreciate how quickly we close loans and help them get in homes and get paid faster. This helps consumers. brokers, loan officers at the broker shops, real estate agents, and the overall wholesale channel. Our client service continues to be world-class with our year-to-date net promoter score of plus 87.1, which is off the charts for anyone that really follows net promoter scores. Now, let's talk a little bit about technology. Technology is a huge catalyst of our success, and it will continue going forward. Historically, We've leveled the playing field for mortgage brokers by providing tech that has previously only been available to loan officers at banks or mega retail lenders. Things like Blink Plus, U-Close, Brand 360, among others, have given brokers access to world-class point-of-sales, CRM, loan origination systems that help them not only compete but win when going head-to-head with retail loan officers. In the third quarter, we took it to a new level and unveiled multiple game-changing technologies and process technologies that will change the game for UWM and the brokers. The big one was called Bolts. Another one was called a Brazel Direct, which I'll talk about. But Bolt, I'm telling you right now, is a massive, massive change in the mortgage landscape. And it will be talked about for years and years to come. And I don't believe anyone will be able to match it for two, three, four, five years at the earliest, probably more between five and 10 years. It's that good a technology. Proprietary built using OCR, ADR, proprietary technology to help give broker clients certainly an answer on a loan within 15, 20 minutes. Our underwriters already lapped the competition in speed without sacrificing quality, and now Bolt takes it to a whole other level where we can review the documents, review the work faster and easier. So think about the process. It's a double down on the speed advantage, basically. The early signs indicate that, you know, we'll be able to maybe double underwriting productivity in the next year or two. So think about it. You know, our underwriters already underwrite more loans in our competition. You can see that in our cost per closings. But at the same time, You can also see that if we double that, we're going to exponentially expand it. That helps us win in the rising rate environment again. Huge thing. Bolt is going to be the future 2022, 2023, and beyond. And it's a huge, huge leg up on the competition. And I also want to talk for a second, like I said, about appraisal direct. It's really a technology, but really a process change. This has been the biggest pain point in the mortgage space for the last year, but even beyond that. And so what we're doing is trying to help. with great technology and putting the UWM process in place to make process better for appraisers paying appraisers top dollar we're not taking a fee on these things like a lot of other companies we don't take a fee we want to make it so the process is faster and easier it plays right into our brokers are better mindset helping the brokers win across the board and so it's a big thing bull appraisal jack We also have a thing called The Source. There's a lot of big technology we came out with in the third quarter, and that stuff took a year plus to build, a lot of this development. And so it's really big stuff, and we're very excited about what's happening. You'll hear much more about Bolt for years and years to come, as it's really a game-changing technology that no one will be able to match for years and years to come. Now I'm going to turn it over to our CFO, Tim Forrester, for more details about our financials.