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What changed in UWM Holdings Corp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of UWM Holdings Corp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+386 added−493 removedSource: 10-K (2024-02-28) vs 10-K (2023-03-01)

Top changes in UWM Holdings Corp's 2023 10-K

386 paragraphs added · 493 removed · 334 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

60 edited+2 added−73 removed46 unchanged
Biggest changeWith a culture of continuous innovation of technology, enhanced client experience, and market responsive pricing and profitability enhancements, our main goal has been to ensure the Independent Mortgage Broker community, and therefore UWM, is set up to win. 3 Table of Contents Founded in 1986 and headquartered in Pontiac, Michigan, we have built a client-focused, team-oriented culture that strives to bring superior customer service, efficiency and operational stability to our clients, the Independent Mortgage Brokers.
Biggest changeFounded in 1986 and headquartered in Pontiac, Michigan, we have built a client-focused, team-oriented culture that strives to bring superior customer service, efficiency and operational stability to our clients, the Independent Mortgage Brokers. UWM completed its business combination with Gores Holdings IV, Inc. (“Gores IV”) on January 21, 2021, pursuant to which UWM became an indirect subsidiary of Gores IV.
Once a pre-approval has been received, an Independent Mortgage Broker is able to seamlessly import the borrower’s information and documentation into our EASE TM LOS without the need for extra data entry. One of our senior underwriters then reviews the file and, based on the loan product and the financial and other information provided, makes an underwriting decision.
Once a pre-approval has been received, an Independent Mortgage Broker is able to seamlessly import the borrower’s information and documentation into our EASE TM LOS without the need for extra data entry. One of our underwriters then reviews the file and, based on the loan product and the financial and other information provided, makes an underwriting decision.
We believe that our technologies, automated workflow and experienced capital markets team allow us to quickly aggregate and sell the pools of loans in order to make efficient use of our capital and warehouse facilities. Our focus on agency deliverable originations and speed to sale reduces our exposure to market volatility, liquidity risk and credit risk.
We believe that our technologies, automated workflow and experienced capital markets team allow us to quickly aggregate and sell pools of loans in order to make efficient use of our capital and warehouse facilities. Our focus on agency deliverable originations and speed to sale reduces our exposure to market volatility, liquidity risk and credit risk.
The CFPB’s enforcement jurisdiction is broad, and it has the ability to initiate investigations and enforcement actions against mortgage lenders and servicers for violations of applicable consumer financial services laws, including, but not limited to, the Dodd-Frank Act’s prohibitions on unfair, deceptive or abusive acts and practices.
The CFPB’s enforcement jurisdiction is broad, and it has the ability to initiate or refer investigations and enforcement actions against mortgage lenders and servicers for violations of applicable consumer financial services laws, including, but not limited to, the Dodd-Frank Act’s prohibitions on unfair, deceptive or abusive acts and practices.
We use advanced technologies and workflow systems to assist all underwriting and operations team members in prioritizing which loans require their immediate attention and to monitor each team’s progress so workload-balancing decisions can be made among the operation teams in real time and avoid bottlenecks.
We use advanced technologies and workflow systems to assist underwriting and operations team members in prioritizing which loans require their immediate attention and to monitor each team’s progress so workload-balancing decisions can be made among the operation teams in real time and avoid bottlenecks.
We celebrate our team members and all of their accomplishments through various events throughout the year. From our annual company-wide family fair with thousands of smiling faces to afternoon dance parties, we believe that it is important to focus on the health and happiness of our team members and their families.
We celebrate our team members and all of the ir accomplishments through various events throughout the year. From our annual company-wide family fair with thousands of smiling faces to afternoon dance parties, we believe that it is important to focus on the health and happiness of our team members and their families.
Our servicing, quality control, internal audit, vendor relations, and legal and compliance teams perform various reviews of our servicing oversight program and operations. Our servicing team addresses any deficiencies with sub-servicers to ensure corrective action and controls are implemented.
Our servicing, quality control, internal audit, vendor relations, and legal and compliance teams perform various reviews of our servicing oversight program and operations. Our servicing team addresses deficiencies with sub-servicers to ensure corrective action and controls are implemented.
We believe in providing our team members the opportunity to do a lot of good and support the causes they care about. Team members receive paid-time off that they can use to volunteer.
We believe in providing our team members the opportunity to do a lot of good and support the causes they care about. Team members receive paid-time off that they can use to specifically volunteer.
Loan closing speeds are also positively impacted for clients who select our innovative Title Review and Closing ("TRAC") program, which provides an alternative to utilizing a traditional lender title policy.
Loan closing speeds are also positively impacted for clients who select our innovative Title Review and Closing ("TRAC") program, which provides an efficient alternative to utilizing a traditional lender title policy.
In addition, we have internally developed enterprise level systems that: • provide automated work queue prioritization, operational visibility and relevant metrics which allow us to readily detect and address bottlenecks and inefficiencies in the loan origination process, • use custom electronic interfaces with vendors and transaction partners, which allow us to quickly obtain and import data into our systems in a form which does not require re-keying of information; and • deliver desktop computer based training to efficiently and effectively train clients and internal operations teams on new programs and changes in guidelines.
In addition, we have internally developed enterprise level systems that: 7 Table of Contents • provide automated work queue prioritization, operational visibility and relevant metrics which allow us to readily detect and address bottlenecks and inefficiencies in the loan origination process, • use custom electronic interfaces with vendors and transaction partners, which allow us to quickly obtain and import data into our systems in a form which does not require re-keying of information; and • deliver desktop computer based training to efficiently and effectively train clients and internal operations teams on new programs and changes in guidelines.
Item 1. Business Unless otherwise indicated or the context otherwise requires, when used in this Annual Report, the term “UWMC” means UWM Holdings Corporation, “UWM” means United Wholesale Mortgage, LLC and "the Company," “we,” “our” and “us” refer to UWM Holdings Corporation and our subsidiaries. Overview We are the publicly traded indirect parent of United Wholesale Mortgage, LLC (“UWM”).
Item 1. Business Unless otherwise indicated or the context otherwise requires, when used in this Annual Report, the term “UWMC” means UWM Holdings Corporation, “UWM” means United Wholesale Mortgage, LLC and the “Company,” “we,” “our” and “us” refer to UWM Holdings Corporation and our subsidiaries. Overview We are the publicly traded indirect parent of United Wholesale Mortgage, LLC (“UWM”).
We believe personal and professional growth accelerates careers while promoting productivity and innovation. We heavily invest in the development of each team member. We have approximately 200 training team members dedicated to providing our new hires and existing team members with the trainings and resources necessary to pursue their career paths and ensure compliance with our policies.
We believe personal and professional growth accelerates careers while promoting productivity and innovation. We heavily invest in the development of each team member. We have approximately 400 training team members dedicated to providing our new hires and existing team members with the trainings and resources necessary to pursue their career paths and ensure compliance with our policies.
Integral components of our strategy are (1) continuing our leadership position in the growing wholesale channel by investing in technology and partnership tools designed to meet the needs of Independent Mortgage Brokers and their customers, (2) capitalizing on our strategic advantages which include a singular focus on the wholesale channel, that can quickly adapt to market conditions and opportunities, and ample capital and liquidity, (3) employing our six pillars (see below) to drive a unique culture that we believe results in a durable competitive advantage and (4) originating high quality loans, the vast majority of which are backed directly or indirectly by the federal government, to minimize market risks and to maximize opportunity in different macroeconomic environments.
Integral components of our strategy are (1) continuing our leadership position in the growing wholesale channel by investing in technology and partnership tools designed to meet the needs of Independent Mortgage Brokers and their customers, (2) capitalizing on our strategic advantages which include a singular focus on the wholesale channel, that can quickly adapt to market conditions and opportunities, and ample capital and liquidity, (3) employing our six pillars to drive a unique culture that 4 Table of Contents we believe results in a durable competitive advantage and (4) originating high quality loans, the vast majority of which are backed directly or indirectly by the federal government, to minimize market risks and to maximize opportunity in different macroeconomic environments.
We periodically receive requests from federal, state and local agencies for records, documents and information relating to the policies, procedures and practices of our loan servicing, origination and collection activities. The agencies as well as GSEs and Ginnie Mae, and various investors and lenders also subject us to periodic reviews and audits and examinations.
We periodically receive requests from federal, state, and local agencies for records, documents, and information relating to the policies, procedures and practice of our loan servicing, origination and collection activities. The agencies as well as GSEs and Ginnie Mae, and various investors and lenders also subject us to periodic reviews and audits and examinations.
Diversity and Inclusion 15 Table of Contents We strive to foster a culture of diversity and inclusion so all team members feel respected and no team member feels discriminated against. Our diverse, inclusive culture was built to promote positive attitudes, strong work ethics and individual authenticity. We believe a diverse workforce fosters innovation and cultivates an environment of unique perspectives.
Diversity and Inclusion We strive to foster a culture of diversity and inclusion so all team members feel respected and no team member feels discriminated against. Our diverse, inclusive culture was built to promote positive attitudes, strong work ethics and individual authenticity. We believe a diverse workforce fosters innovation and cultivates an environment of unique perspectives.
When we have identified a pool of mortgage loans to sell to the agencies, non-governmental entities, or through our private label securitization transactions, we repurchase such loans from our warehouse lender and sell the pool of mortgage loans into the secondary market, but generally retain the mortgage servicing rights, or MSRs, associated with those loans.
When we have identified a pool of mortgage loans to sell to the agencies, non-governmental entities, other investors, or through our private label securitization transactions, we typically repurchase such loans from our warehouse lender and sell the pool of mortgage loans into the secondary market, but generally retain the mortgage servicing rights, or MSRs, associated with those loans.
Institutions offering to make residential mortgage loans, regardless of the channel, include regional and community banks, thrifts, credit unions, mortgage banks, mortgage brokers, brokerage firms, insurance companies, and other financial institutions. Some of our competitors may have more name recognition and greater financial and other resources than we have (including access to capital).
Institutions offering to make residential mortgage loans, regardless of the channel, include regional and community banks, thrifts, credit unions, mortgage banks, mortgage brokers, brokerage firms, insurance companies, and other financial institutions. 8 Table of Contents Some of our competitors may have more name recognition and greater financial and other resources than we have (including access to capital).
Human Capital Management We are more than just a mortgage company, we are a team of focused professionals making dreams come true for hopeful homebuyers across the country. We have created a culture that celebrates team spirit and an environment where work-life balance is more than lip-service.
Talent Management We are more than just a mortgage company, we are a team of focused professionals making dreams come true for hopeful homebuyers across the country. We have created a culture that celebrates team spirit and an environment where work-life balance is more than lip-service.
Community Outreach We recognize that our team members are part of the greater community in which they live and work and we are committed to giving back and making a positive impact on these communities around us and supporting our team members in their efforts to do the same.
Community Outreach 10 Table of Contents We recognize that our team members are part of the greater community in which they live and work and we are committed to giving back and making a positive impact on these communities around us and supporting our team members in their efforts to do the same.
This has been rewarded with strong client service scores, via our net promoter scores, which we believe is a significant competitive advantage. Government Regulations Affecting Loan Originations and Servicing We operate in a heavily regulated industry that is highly focused on consumer protection. Our business is subject to extensive oversight and regulation by federal, state and local governmental authorities.
This has been rewarded with strong client service scores, via our net promoter scores, which we believe is a significant competitive advantage. Government Regulations We operate in a heavily regulated industry that is highly focused on consumer protection. Our business is subject to extensive oversight and regulation by federal, state and local governmental authorities.
Additionally, we operate at a competitive disadvantage in some respects to U.S. federal banks and thrifts and their subsidiaries because they enjoy federal preemption and, as a result, conduct their business under relatively uniform U.S. federal rules and standards and are generally not subject to the laws of the states in which they do business (including state 13 Table of Contents “predatory lending” laws).
Additionally, we arguably operate at a competitive disadvantage in some respects to U.S. federal banks and thrifts and their subsidiaries because they enjoy federal preemption and, as a result, conduct their business under relatively uniform U.S. federal rules and standards and are generally not subject to the laws of the states in which they do business (including state “predatory lending” laws).
Our client facing systems are as follows: • Boost - Our exclusive platform which provides independent mortgage brokers with streamlined access to purchase tailored leads, stay in touch with past clients, connect with real estate agents and opt into live call transfers. • BOLT – Allo ws mortgage brokers to obtain initial underwriting approval for qualified borrowers in as little as 15 minutes, which we believe will enable brokers to close loans faster.
Our client facing systems are as follows: • Boost – Our exclusive platform which provides independent mortgage brokers with streamlined access to purchase tailored leads, stay in touch with past clients, connect with real estate agents and opt into live call transfers. • BOLT – Allo ws mortgage brokers to obtain initial underwriting approval for qualified borrowers in as little as 15 minutes, which enables brokers to close loans faster.
Other competitors, such as lenders who originate mortgage loans using their own funds, or direct retail lenders who market directly to homeowners, may have more operational flexibility in approving loans, may have advantages in soliciting home loans from their clients or have access to capital through deposits at lower costs than our warehouse facilities.
Other competitors, such as lenders who originate mortgage loans using their own funds, or retail mortgage lenders, may have more operational flexibility in approving loans, may have advantages in soliciting home loans from their clients or have access to capital through deposits at lower costs than our warehouse facilities.
This team manages the interest rate risk for the business and is responsible for interest rate lock management policies and procedures, hedging the pipeline, managing warehouse facilities and associated facility utilization and managing risk and sales of mortgage servicing rights on the balance sheet.
This team manages the interest rate risk for the business and is responsible for interest rate lock management policies and procedures, hedging the pipeline, managing warehouse facilities and associated facility utilization and managing risk and sales of mortgage servicing rights.
By diversifying the type of sub-servicer, as well as splitting the MSR portfolio between two well recognized and capitalized sub-servicers, we believe it mitigates against certain risks inherent in the servicing business (whether done internally or outsourced to a sub-servicer). Our team of approximately 40 servicing oversight professionals is responsible for monitoring our sub-servicers.
By diversifying the type of sub-servicer, as well as splitting the MSR portfolio between two well recognized and capitalized sub-servicers, we believe it mitigates against certain risks inherent in the servicing business (whether done internally or outsourced to a sub-servicer). Our in-house servicing team is responsible for monitoring our sub-servicers.
We believe this commitment to our team members is why we have been recognized again in 2022 by numerous organizations for being a top employer and a great place to work. In a 2022 employee engagement survey, 95.28% of team members responded that they felt they belonged at UWM from a diversity and inclusion standpoint.
We believe this commitment to our team members is why we have been recognized again in 2023 by numerous organizations for being a top employer and a great place to work. In a 2023 employee engagement survey, 96% of team members responded that they felt they belonged at UWM from a diversity and inclusion standpoint.
Team Members Our team members are the secret to our success, and we believe our team is only as strong as we make it. As of December 31, 2022, we had approximately 6,000 team members, substantially all of whom are based in our corporate campus in Pontiac, Michigan.
Team Members Our team members are the secret to our success, and we believe our team is only as strong as we make it. As of December 31, 2023, we had approximately 6,700 team members, substantially all of whom are based in our corporate campus in Pontiac, Michigan.
Loans that are written under the FHA program, the VA program or the USDA program are guaranteed by the governmental agencies and then transferred to Ginnie Mae pools for sale in the secondary market. Substantially all of our mortgage loans are underwritten to the “Qualified Mortgage” underwriting standards established b y the Consumer Financial Protection Bureau ("CFPB").
Loans that are written under the FHA program, the VA program or the USDA program are guaranteed by the governmental agencies and then transferred to Ginnie Mae pools for sale in the secondary market. The vast majority of our mortgage loans are underwritten to the “Qualified Mortgage” underwriting standards established by the Consumer Financial Protection Bureau ("CFPB").
We had receivables of $135.4 million and $135.1 million as of December 31, 2022 and December 31, 2021, respectively, which are due to us from the securitization trusts and/or borrowers. Competition Competition in the residential mortgage loan origination market is intense.
We had receivables of $148.7 million and $135.4 million as of December 31, 2023 and December 31, 2022, respectively, which are due to us from the securitization trusts and/or borrowers. Competition Competition in the residential mortgage loan origination market is intense.
As of December 31, 2022, approximately 42% of our team members were female and 31% of our team members that choose to identify their ethnicity identified as ethnically diverse. Engagement and Opportunities Continuous improvement is a primary focus of our strategic plan and one of our core pillars.
As of December 31, 2023, approximately 44% of our team members were female and 36% of our team members that choose to identify their ethnicity identified as ethnically diverse. Engagement and Opportunities Continuous improvement is a primary focus of our strategic plan and one of our core pillars.
Infrastructure, Systems and Technologies Advanced technologies and systems We are a technology driven company that continuously seeks to innovate and provide superior systems to our clients, with over 1,100 highly trained team members dedicated to our technology and information systems located in our Pontiac, Michigan headquarters as of December 31, 2022.
Infrastructure, Systems and Technologies Advanced technologies and systems 6 Table of Contents We are a technology driven company that continuously seeks to innovate and provide superior systems to our clients, with over 1,400 (as of December 31, 2023) highly trained team members dedicated to our technology and information systems located in our Pontiac, Michigan headquarters.
Conventional agency-conforming mortgage loans Since 2012, we have been primarily focused on originating conventional, agency-eligible loans that can be sold to Fannie Mae, Freddie Mac or transferred to Ginnie Mae pools for sale in the secondary market. Our conventional agency-conforming loans meet the general underwriting guidelines established by Fannie Mae and Freddie Mac.
Our Loan Programs We focus primarily on originating conventional, agency-eligible loans that can be sold to Fannie Mae, Freddie Mac or transferred to Ginnie Mae pools for sale in the secondary market. Our conventional agency-conforming loans meet the general underwriting guidelines established by Fannie Mae and Freddie Mac.
In 2022, approximately 1.6 million total training hours were delivered to team members. We are dedicated to increasing team member engagement by strategically aligning talent within UWM. As a result, we promoted approximately 1,300 team members during 2022.
In 2023, approximately 1.2 million training hours were delivered to team members. We are dedicated to increasing team member engagement by strategically aligning talent within UWM. As a result, we promoted approximately 1,400 team members during 2023.
These laws, regulations and rules may differ by state and sometimes differ from federal standards, are sometimes vague and subject to differing interpretations – all of which exposes us to legal and compliance risks.
We are also subject to the laws, regulations and rules of the 50 states in which we operate. These laws, regulations and rules may differ by state and sometimes differ from federal standards, and are sometimes vague and subject to differing interpretations – all of which exposes us to legal and compliance risks.
We have a robust sub-servicer oversight program to ensure a high level of borrower satisfaction and to support the relationships between those borrowers and our clients. Our in-house servicing team performs daily, monthly and quarterly testing to determine performance metrics and ensure agency and regulatory compliance and provides regular updates to our executive leadership team.
Their goal is to ensure a high level of borrower satisfaction and to support the relationships between those borrowers and our clients. Our in-house servicing team performs daily, monthly and quarterly testing to determine performance metrics and ensure agency and regulatory compliance and provides regular updates to our executive leadership team.
We also maintain an enterprise data/metrics warehouse which provides our team with the ability to interface with statistical, analytical and reporting tools that provides senior management with visibility into key performance indicators in real time.
We also maintain an enterprise data/metrics warehouse which provides our team with the ability to interface with statistical, analytical and reporting tools that provides senior management with visibility into key performance indicators in real time. Loan Servicing In addition to loan origination, we derive revenue from MSRs related to our loan originations.
It provides useful communications tools to help our clients stay connected to borrowers and monitors home equity, new home listings, and rates to provide relevant market updates to ensure clients stay connected with potential new or repeat borrowers. 11 Table of Contents • UClose TM – Our tool that allows clients to facilitate and easily control the closing process, notably timing, document generation, and title company interaction and the autonomous nature of the tool promotes more timely and efficient closings. • EASE TM – Our “Easiest Application System Ever” is our primary LOS that allows clients to interact with us and to select products, lock rates and run the Automated Underwriting System (AUS).
It provides useful communications tools to help our clients stay connected to borrowers and monitors home equity, new home listings, and rates to provide relevant market updates to ensure clients stay connected with potential new or repeat borrowers. • UClose TM – Our tool that allows clients to facilitate and easily control the closing process, notably timing, document generation, and title company interaction and the autonomous nature of the tool promotes more timely and efficient closings. • EASE TM – Our “Easiest Application System Ever” is our primary LOS that allows clients to interact with us and to select products, lock rates and run the Automated Underwriting System (AUS). • UWM Portal – A bi-directional Application Programming Interface that allows Independent Mortgage Brokers to seamlessly link their LOS platform to UWM’s EASE system, further streamlining the loan underwriting and origination process.
Pursuant to our agreement with the Blink+ TM developer, the developer has agreed to not make its online platform available to other wholesale lenders for a term that extends until November 2023 (or November 2024 to the extent that we have closed at least 25,000 loans using the platform during 2023), subject to a de minimis exception that includes our prior written consent for new participants.
Pursuant to our agreement with the Blink+ TM developer, the developer has agreed to not make its online platform available to other wholesale lenders for a term that extends until November 2024, subject to a de minimis exception that includes our prior written consent for new participants.
Our e xclusive focus on the wholesale channel has resulted in relationships with over 12,000 independent broker businesses throughout the U.S., with over 45,000 associated loan officers—of which approximately 33,000 have submitted a loan to us during the year 2022.
Our exclusive focus on the wholesale channel has resulted in relationships with over 13,000 independent broker businesses throughout the U.S., with over 53,000 associated loan officers—of which approximately 35,000 have submitted a loan to us during the year 2023.
For the year ended December 31, 2022, 94% o f loans originated were sold to Fannie Mae or Freddie Mac, or were transferred to Ginnie Mae pools in the secondary market, while the remainder were primarily jumbo loans that are underwritten to the same “Qualified Mortgage" underwriting standards and have a similar risk profile but are sold to third party investors purely due to loan size . 8 Table of Contents The following table summarizes our loan production by loan type for the periods indicated.
For the year ended December 31, 2023, 93% of loans originated were sold to Fannie Mae or Freddie Mac, or were transferred to Ginnie Mae pools in the secondary market, while the remainder were primarily jumbo loans that are underwritten to the same “Qualified Mortgage" underwriting standards and have a similar risk profile but are sold to third party investors primarily due to loan size .
For both the years ended December 31, 2022 and December 31, 2021, we delivered an average of 18 business days from loan application to clear to close, as compared to management's estimates of the industry averages of 50 and 46 calendar days, respectively.
For the years ended December 31, 2023 and December 31, 2022, we delivered an average of 17 and 18 business days, respectively, from loan applica tion to clear to close, as compared to management's estimates of the industry averages of 41 and 46 cal endar days, respectively.
UWM completed its business combination with Gores Holdings IV, Inc. (“Gores IV”) on January 21, 2021, pursuant to which UWM became an indirect subsidiary of Gores IV. Upon consummation of the business combination, Gores IV changed its name to UWM Holdings Corporation. We began trading on the New York Stock Exchange on January 22, 2021 under the ticker symbol UWMC.
Upon consummation of the business combination, Gores IV changed its name to UWM Holdings Corporation. We began trading on the New York Stock Exchange (“NYSE”) on January 22, 2021 under the ticker symbol UWMC.
We currently retain the majority of the mortgage servicing rights ("MSRs") associated with our production, but we have, and intend to continue to opportunistically sell MSRs depending on market conditions. This nimble approach has provided us funding flexibility, and reduced legacy MSR asset exposure.
We currently retain the majority of the MSRs associated with our production, but we have, and intend to continue to opportunistically sell MSRs depending on business and liquidity considerations. We believe that this approach has provided us funding flexibility, and reduced legacy MSR asset exposure. When we sell MSRs, we typically sell them in the bulk MSR secondary market.
Utilizing our proprietary system, “Easiest Application System Ever” (EASE TM ), and our dedicated team members we focus on client service, and loan quality throughout the entire loan origination, underwriting and closing processes.
Our Mortgage Lending Process We believe that our highly scaled, efficient and centralized mortgage lending processes are key to our success. Utilizing our proprietary system, “Easiest Application System Ever” (EASE TM ), and our dedicated team members, we focus on client service, and loan quality throughout the entire loan origination, underwriting and closing processes.
Unlike “Retail Mortgage Lenders” that both offer mortgage loans directly to individual borrowers and underwrite the mortgage loans, we do not work directly with the borrower during the mortgage loan financing process. Many of our competitors are primarily Retail Mortgage Lenders that also compete in the wholesale channel as Wholesale Mortgage Lenders.
Unlike “Retail Mortgage Lenders” that both offer mortgage loans directly to individual borrowers and underwrite the mortgage loans, we do not work directly with the borrower during the mortgage loan financing process.
We may also be required to advance taxes, insurance payments, legal fees, and maintenance and preservation costs with respect to property that is subject to foreclosure proceedings.
When a borrower remains delinquent, we may be required to advance principal and interest payments to the securitization trusts on the scheduled remittance date. We may also be required to advance taxes, insurance payments, legal fees, and maintenance and preservation costs with respect to property that is subject to foreclosure proceedings.
Since its inception in 2011, the CFPB has exercised its enforcement jurisdiction aggressively with respect to mortgage industry participants, initiating investigations, entering into consent orders with significant monetary and injunctive relief, and initiating litigation. Often these matters have involved differing theories and interpretations of long-existing laws without first issuing industry guidance or rules.
Since its inception in 2011, the CFPB has exercised its enforcement jurisdiction aggressively with respect to mortgage industry participants, initiating investigations, entering into consent orders with significant monetary and injunctive relief, and initiating litigation.
Our rules-based mortgage loan origination system, or LOS allows multiple teams to work on the same loan at the same time, to track and be alerted to missing or incomplete items, to flag items in order to alert other team members of possible deficiencies and to have visibility into the history, status and progress of loans in process.
By leveraging in-house title counsel to review title related documents and issue attorney title opinion letters ("ATOL(s)"), UWM is able to streamline the title review process and facilitate a faster and easier experience for the borrower. 5 Table of Contents Our rules-based mortgage loan origination system, or LOS allows multiple teams to work on the same loan at the same time, to track and be alerted to missing or incomplete items, to flag items in order to alert other team members of possible deficiencies and to have visibility into the history, status and progress of loans in process.
In addition, the CFPB shares jurisdiction with the FTC with respect to (i) the Equal Credit Opportunity Act (ECOA) and Regulation B issued by the CFPB pursuant to ECOA, (ii) the Fair Housing Act (FHA) and (iii) the GLBA.
Often these matters have involved differing theories and interpretations of long-existing laws without first issuing industry guidance or rules.In addition, the CFPB shares jurisdiction with the FTC with respect to (i) the Equal Credit Opportunity Act (ECOA) and Regulation B issued by the CFPB pursuant to ECOA, (ii) the Fair Housing Act (FHA) and (iii) the GLBA.
MSR valuations have traditionally increased with increased interest rates because higher rates lead to decreased prepayments, thereby extending the average life of the asset and increasing related expected cash flows. Conversely, decreases in long term interest rates generally result in a decrease in the value of the MSR portfolio due to the expectation of higher prepayments.
The net present value of these expected future cash flows is represented on the balance sheet as MSRs. MSR valuations have traditionally increased with increased interest rates because higher long term rates lead to decreased prepayments, thereby extending the average life of the asset and increasing related expected cash flows.
Historically, residential purchase mortgage loan origination volume has experienced less volatility in response to interest rate movements than the refinancing mortgage loan origination volume. Consequently, we believe that by focusing on the purchase business we will be better positioned to deliver m ore consistent volume in increasin g and decreasing interest rate environments.
Consequently, we believe that by focusing on the purchase business we will be better positioned to deliver more consistent volume in increasing and decreasing interest rate environments.
Furthermore, we delivered this speed while receiving an 89% average monthly client Net Promoter Score ("NPS") for the year ended December 31, 2022, as well as an 86% average monthly client NPS for the past six years. • Innovative Technology Platforms.
During 2023, we closed an average of 6.3 loans per month per production team member. Furthermore, we delivered this speed while receiving an 88% average monthly client Net Promoter Score ("NPS") for the year ended December 31, 2023, as well as an 87% average monthly client NPS for the past seven years.
These obligations may require that we advance certain funds to securitization trusts and to others in the event that the borrowers are delinquent on their monthly mortgage payments. When a borrower remains delinquent, we may be required to advance principal and interest payments to the securitization trusts on the scheduled remittance date.
Advance obligations As a servicer, we are obligated to service the loans according to the applicable agency, investor or credit owner guidelines and law. These obligations may require that we advance certain funds to securitization trusts and to others in the event that the borrowers are delinquent on their monthly mortgage payments.
If the mortgage loan is approved, our system generates a “conditions to 9 Table of Contents close” list based on the specifics of the borrower, the property and the loan product and a junior underwriter who generally takes ownership of the file ensuring that each of these conditions is met prior to granting a “clear-to-close.” We utilize technology and automated processes throughout the underwriting process, to provide our underwriters “guard rails” and allow us to efficiently and effectively underwrite loans while mitigating risk.
If the mortgage loan is approved, our system generates a “conditions to close” list based on the specifics of the borrower, the property and the loan product and an underwriter generally takes ownership of the file ensuring that each of these conditions is met prior to granting a “clear-to-close.” In 2023, we launched PA+ which is a service that offers an additional level of loan processing support for our clients when needed.
Commencing in the third quarter of 2022, UWM is the largest overall residential mortgage lender in the U.S., despite originating mortgage loans exclusively through the wholesale channel. For the last eight years, including the year ended December 31, 2022, we have been the largest Wholesale Mortgage Lender in the U.S. by closed loan volume.
UWM is the largest overall residential mortgage lender as well as the largest purchase lender in the U.S., by closed loan volume, despite originating loans exclusively through the wholesale channel. We originate primarily conforming and government loans across all 50 states and the District of Columbia.
We also perform periodic audits of our systems for identity and access management. Loan Servicing In addition to loan origination, we derive revenue from MSRs related to our loan originations. After a loan is originated, loan servicers manage payments, delinquencies, and other administrative functions of mortgages for third party investors.
After a loan is originated, loan servicers manage payments, delinquencies, and other administrative functions of mortgages for third party investors. Servicers derive contractual revenue from servicing fees, generally based on the UPB of the loans in their servicing portfolio as well as other ancillary income.
As a part of our enterprise risk management approach, we monitor our clients’ compliance with applicable laws and regulations. The federal and state laws, rules and regulations to which we or our clients are subject affect nearly all aspects of our lending and servicing operations as well as those of our clients and partners.
As a part of our enterprise risk management approach, we monitor our clients’ compliance with applicable laws and regulations. We dedicate substantial resources to regulatory compliance while ensuring that we meet the needs and expectations of our clients.
As such, MSR cash flows provide a natural hedge to originations, as volumes tend to decline in rising interest rate environments and increase in declining interest rate environments. We retain MSRs for a period of time depending on business and liquidity considerations. When we sell MSRs, we typically sell them in the bulk MSR secondary market.
Conversely, decreases in long term interest rates generally result in a decrease in the value of the MSR portfolio due to the expectation of higher prepayments. As such, MSR cash flows and fair value provide a natural hedge to originations, as origination volumes tend to decline in rising interest rate environments and increase in declining interest rate environments.
We further believe that this competitive advantage is a major reason that has and will continue to drive market share growth and loan production as the wholesale channel grows. 4 Table of Contents Leading in the Growing Wholesale Channel According to the Nationwide Multistate Licensing System ("NMLS"), as of September 30, 2022, there were approximately 386,000 fe derally registered mortgage loan officers in the U.S.
Leader in the Wholesale Channel According to the Nationwide Multistate Licensing System ("NMLS"), as of June 30, 2023, there were approximately 376,000 federally registered mortgage loan officers in the U.S.
These laws have required most lenders to devote considerable resources to building and maintaining automated systems to perform loan-by-loan analysis of points, fees and other factors set forth in the laws, which often vary depending on the location of the mortgaged property. 14 Table of Contents Our clients, the Independent Mortgage Brokers, are also subject to extensive regulation at the state level by state licensing authorities and administrative agencies.
We continue to work diligently to assess and understand the implications of the regulatory environment in which we operate. 9 Table of Contents Our clients, the Independent Mortgage Brokers, are also subject to extensive regulation at the state level by state licensing authorities and administrative agencies.
Removed
We originate primarily conforming and government loans across all 50 states and the District of Columbia. We are focused on propelling the wholesale mortgage broker channel forward.
Added
Our model is focused on the origination business, with a specific focus on purchase loans. Historically, residential purchase mortgage loan origination volume has experienced less volatility in response to interest rate movements than the refinancing mortgage loan origination volume.
Removed
During 2022, as interest rates rose and the mortgage industry experienced a slow-down of refinancings, we continued to make significant strides to provide Independent Mortgage Brokers with a variety of product offerings to address market conditions and bring more awareness to the broker channel overall and the value that this channel provides to consumers.
Added
When an Independent Mortgage Broker or their loan processor uses PA+, a dedicated UWM Loan Coordinator will work with them and their borrower to help order, review, and send UWM documents as part of the loan underwriting process. We believe that PA+ will help our clients scale their businesses during periods of increased volume.
Removed
We operate exclusively as a Wholesale Mortgage Lender and only originate, underwrite and close mortgage loans arranged by an Independent Mortgage Broker. We believe that by focusing only on the wholesale channel, we can be a true partner to our clients (all of which are Independent Mortgage Brokers).
Removed
We believe that by competing in both channels, these competitors have an inherent conflict that makes them a less attractive option for Independent Mortgage Brokers when deciding which lender to work with when originating a mortgage loan.
Removed
As the wholesale channel continues to grow, especially in a rising interest rate environment, we see a significant opportunity for these mortgage loan officers to join the wholesale channel. Benefits to Borrower • Provides Trusted Advisor in Complex Financial Instruments.
Removed
Independent Mortgage Brokers serve as advisors to borrowers, leveraging their deep knowledge base of complex financial products to help borrowers make informed decisions. Independent Mortgage Brokers assist prospective borrowers in analyzing their financial situation, assessing his or her credit history and current mortgage and making an informed decision based on their personal circumstances. • Maximizes Optionality.
Removed
Independent Mortgage Brokers are able to provide borrowers with multiple options on product structure and pricing rather than being rooted in a single platform offering, which we believe empowers borrowers and enhances their borrowing experience. We believe that Independent Mortgage Brokers are able to deliver borrowers access to better rates than their Retail Mortgage Lender counterparts.
Removed
As a partner to our clients, we continually strive to provide a range of residential loan options, so that our clients can match the needs of their borrowers with our product offerings. • Streamlines and Enhances the Experience.
Removed
Independent Mortgage Brokers are best positioned to be the single personalized point-of-contact for the loan process and provide borrowers a superior customer service experience. • Aligns Interest.
Removed
In the wholesale channel, the interests of the Independent Mortgage Broker and the borrower are aligned to achieve the best outcome for the borrower—which increases borrower loyalty to the Independent Mortgage Broker and provides a greater likelihood that the borrower will retain the advisor for future transactions. Benefits to Independent Mortgage Broker • Drives Brand Recognition and Loyalty.
Removed
We believe that allowing Independent Mortgage Brokers to “own” the relationship with the borrower drives client brand recognition and loyalty.
Removed
When borrowers view their Independent Mortgage Brokers as the person who delivered the superior results, rather than just as a conduit to funding, they are more likely to return to that Independent Mortgage Broker for their next residential mortgage loan, whether it is a new purchase or a refinance.
Removed
Our technology provides Independent Mortgage Brokers with advanced personalized marketing tools to establish and maintain their borrower relationships. • Offers Flexibility. We believe that Independent Mortgage Brokers and their loan officers are better served by the wholesale channel as it provides them the flexibility of matching their borrowers’ needs with the most applicable lender and lender program.
Removed
A Wholesale Mortgage Lender needs to earn business every day. If the Wholesale Mortgage Lender is not faster, easier and more affordable, it will not be successful in earning that business. • Develops and Protects Relationship with Borrower.
Removed
Utilizing the wholesale channel with a true Wholesale Mortgage Lender allows Independent Mortgage Brokers to both cultivate new borrower relationships and maintain their relationships with borrowers throughout the mortgage lending process and beyond with less risk of being replaced by the lender in the next new purchase or a refinance.
Removed
Retail Mortgage Lenders that dabble in the wholesale channel do not afford this protected relationship. • Ability to Provide Superior Sophisticated and Personalized Service.
Removed
The wholesale channel allows Independent Mortgage Brokers to offer a diverse set of product options and capitalize on the benefits of scale to offer superior service, such as turn times and pull through rates, with the focus on personal service.
Removed
Our suite of full-service technology platforms positions Independent Mortgage Brokers to effectively compete with banks and other non-bank loan originators by delivering a closely managed end-to-end experience for the borrower from origination through closing. 5 Table of Contents Benefits to UWM • Access to Extensive Network.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

135 edited+27 added−49 removed262 unchanged
Biggest changeThese provisions include: • a capital structure where holders of Class B common stock and holders of Class D common stock each have ten votes per share of Class B common stock and Class D common stock (as compared with holders of Class A common stock and holders of Class C common stock, who each have one vote per share of Class A common stock and Class C common stock, respectively) and consequently have a greater ability to control the outcome of matters requiring stockholder approval, even when the holders of Class B common stock and Class D common stock own significantly less than a majority of the outstanding shares of Common Stock; • no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect candidates to serve as a director of our Board; 40 Table of Contents • a classified Board with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of our Board; • the requirement that, at any time from and after the Voting Rights Threshold Date, directors elected by the stockholders generally entitled to vote may be removed from our Board solely for cause; • the exclusive right of our Board, from and after the Voting Rights Threshold Date, to fill newly created directorships and vacancies with respect to directors elected by the stockholders generally entitled to vote, which prevents stockholders from being able to fill vacancies on our Board; • the prohibition on stockholder action by written consent from and after the Voting Rights Threshold Date, which forces stockholder action from and after the Voting Rights Threshold Date to be taken at an annual or special meeting of stockholders; • the requirement that special meetings of stockholders may only be called by the Chairperson of our Board, our Chief Executive Officer or our Board, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; • the requirement that, from and after the Voting Rights Threshold Date, amendments to certain provisions of our Charter and amendments to the Amended and Restated Bylaws must be approved by the affirmative vote of the holders of at least seventy-five percent (75%) in voting power of our then outstanding shares generally entitled to vote; • our authorized but unissued shares of Common Stock and Preferred Stock, par value $0.0001 per share, are available for future issuances without stockholder approval and could be utilized for a variety of corporate purposes, including future offerings to raise additional capital, acquisitions and employee benefit plans; the existence of authorized but unissued and unreserved shares of Common Stock and Preferred Stock could render more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise; • advance notice procedures set forth in the Amended and Restated Bylaws that stockholders must comply with in order to nominate candidates to our Board or to propose other matters to be acted upon at a meeting of stockholders, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us; and • an exclusive forum provision which provides that, unless we consent in writing to the selection of an alternative forum, (i) any derivative action brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, or employee of ours to our business or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the General Corporation Law of the State of Delaware (the “DGCL”), our Charter or the Amended and Restated Bylaws, or (iv) any action asserting a claim governed by the internal affairs doctrine of the State of Delaware, in each case, will be required to be filed in either (x) the Sixth Judicial Circuit, Oakland County, Michigan (or, if the Sixth Judicial Circuit, Oakland County, Michigan lacks jurisdiction over any such action or proceeding, then another state court of the State of Michigan, or if no state court of the State of Michigan has jurisdiction over any such action or proceeding, then the United States District Court for the Eastern District of Michigan) or (y) the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware lacks jurisdiction over any such action or proceeding, then the Superior Court of the State of Delaware, or, if the Superior Court of the State of Delaware lacks jurisdiction then the U.S.
Biggest changeThese provisions include: • a capital structure where holders of Class B common stock and holders of Class D common stock each have ten votes per share of Class B common stock and Class D common stock (as compared with holders of Class A common stock and holders of Class C common stock, who each have one vote per share of Class A common stock and Class C common stock, respectively) and consequently have a greater ability to control the outcome of matters requiring stockholder approval, even when the holders of Class B common stock and Class D common stock own significantly less than a majority of the outstanding shares of Common Stock; • no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect candidates to serve as a director of our Board; • a classified Board with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of our Board; • the requirement that, at any time from and after the Voting Rights Threshold Date, directors elected by the stockholders generally entitled to vote may be removed from our Board solely for cause; • the exclusive right of our Board, from and after the Voting Rights Threshold Date, to fill newly created directorships and vacancies with respect to directors elected by the stockholders generally entitled to vote, which prevents stockholders from being able to fill vacancies on our Board; 34 Table of Contents • the prohibition on stockholder action by written consent from and after the Voting Rights Threshold Date, which forces stockholder action from and after the Voting Rights Threshold Date to be taken at an annual or special meeting of stockholders; • the requirement that special meetings of stockholders may only be called by the Chairperson of our Board, our Chief Executive Officer or our Board, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; • the requirement that, from and after the Voting Rights Threshold Date, amendments to certain provisions of our Charter and amendments to the Amended and Restated Bylaws must be approved by the affirmative vote of the holders of at least seventy-five percent (75%) in voting power of our then outstanding shares generally entitled to vote; • our authorized but unissued shares of Common Stock and Preferred Stock, par value $0.0001 per share, are available for future issuances without stockholder approval and could be utilized for a variety of corporate purposes, including future offerings to raise additional capital, acquisitions and employee benefit plans; the existence of authorized but unissued and unreserved shares of Common Stock and Preferred Stock could render more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise; and • advance notice procedures set forth in the Amended and Restated Bylaws that stockholders must comply with in order to nominate candidates to our Board or to propose other matters to be acted upon at a meeting of stockholders, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.
If such participants are not available or available on reasonably comparable economic terms, the above changes could have a material effect on our ability to profitably sell loans we originate that are securitized through Fannie Mae, Freddie Mac or Ginnie Mae.
If such participants are not available or not available on reasonably comparable economic terms, the above changes could have a material effect on our ability to profitably sell loans we originate that are securitized through Fannie Mae, Freddie Mac or Ginnie Mae.
High profile fraudulent activity also could negatively impact our brand and reputation, which could impact our business. In addition, significant increases in fraudulent activity could lead to regulatory intervention, which could increase our costs and also negatively impact our business. Our counterparties may terminate our servicing rights, which could have a material adverse effect on our revenues.
High profile fraudulent activity also could negatively impact our brand and reputation, which could impact our business. In addition, significant increases in fraudulent activity could lead to regulatory intervention, which could increase our costs and negatively impact our business. Our counterparties may terminate our servicing rights, which could have a material adverse effect on our revenues.
Our warehouse facilities contain, and our other current or future debt agreements may contain, covenants imposing operating and financial restrictions on our business, including requirements to maintain a certain minimum tangible net worth, minimum liquidity, maximum total debt or liabilities to net worth ratio, profitability requirements, litigation judgment thresholds, and other customary debt covenants.
Our warehouse facilities contain, and our other current or future debt agreements contain or may contain, covenants imposing operating and financial restrictions on our business, including requirements to maintain a certain minimum tangible net worth, minimum liquidity, maximum total debt or liabilities to net worth ratio, profitability requirements, litigation judgment thresholds, and other customary debt covenants.
Such litigation would cause us to incur costs, fines and legal expenses in connection with these matters, regardless of any eventual ruling in our favor, and could also harm the reputation of our brand, any of which could have a material adverse effect on our business, financial condition or results of operations.
Such litigation would cause us to incur costs, fines and legal expenses in connection with these matters, regardless of any eventual ruling in our favor, and could also harm the reputation of our brand, any of which could have a material adverse effect on our business, financial condition or results of operations.
Any such misrepresented information could have a material adverse effect on our business and results of operations. • Because borrowers rely on their loan officer through the entire mortgage process, and some borrowers do not differentiate between their loan officer (or the employer of the loan officer) and their mortgage lender, (i) developing brand recognition can be challenging and requires us to coordinate with our clients and (ii) poor customer service, customer complaints or negative word-of-mouth or publicity resulting from the performance of our clients could severely diminish consumer confidence in and use of our services.
Any such misrepresented information could have a material adverse effect on our business and results of operations. • Because borrowers rely on their loan officer through the entire mortgage process, and some borrowers do not differentiate between their loan officer (or the employer of the loan officer) and their mortgage lender, therefore (i) developing brand recognition can be challenging and requires us to coordinate with our clients and (ii) poor customer service, customer complaints or negative word-of-mouth or publicity resulting from the performance of our clients could severely diminish consumer confidence in and use of our services.
For example, on March 4, 2021, we announced a new policy that we would no longer enter into new transactions with Independent Mortgage Brokers who also sold mortgage loans to two certain market participants, but still allowed these Independent Mortgage Brokers to engage with any of the more than 70 other mortgage loan originators or lenders.
For example, on March 4, 2021, we announced a new policy that we would no longer enter into new transactions with Independent Mortgage Brokers who also sold mortgage loans to certain market participants, but still allowed these Independent Mortgage Brokers to engage with any of the more than 70 other mortgage loan originators or lenders.
Additionally, we operate at a competitive disadvantage to U.S. federal banks and thrifts and their subsidiaries because they enjoy federal preemption and, as a result, conduct their business under relatively uniform U.S. federal rules and standards and are generally not subject to the laws of the states in which they do business (including state “predatory lending” laws).
Additionally, we arguably operate at a competitive disadvantage to U.S. federal banks and thrifts and their subsidiaries because they enjoy federal preemption and, as a result, conduct their business under relatively uniform U.S. federal rules and standards and are generally not subject to the laws of the states in which they do business (including state “predatory lending” laws).
A loan subject to a material misrepresentation is typically unsalable or subject to repurchase if it is sold before detection of the misrepresentation. In addition, the persons and entities making a misrepresentation are often difficult to locate and it is often difficult to collect from them any monetary losses we have suffered.
A loan subject to a material misrepresentation is typically unsalable to the GSEs or subject to repurchase if it is sold before detection of the misrepresentation. In addition, the persons and entities making a misrepresentation are often difficult to locate and it is often difficult to collect from them any monetary losses we have suffered.
As is standard in the industry, under the terms of our master servicing agreements with the GSEs, the GSEs have the right to terminate us as servicer of the loans we service on their behalf at any time and also have the right to cause us to sell the MSRs to a third party.
As is standard in the industry, under the terms of our master servicing agreements with the GSEs, the GSEs have the right to terminate us as servicer of the loans we service on their behalf at any time and have the right to cause us to sell the MSRs to a third party.
Security breaches, cyberattacks such as computer viruses, malicious or destructive code, phishing attacks, denial of service or information, acts of vandalism, natural disasters, fire, power loss, telecommunication failures, team member misconduct, human error and developments in computer intrusion capabilities 21 Table of Contents could result in a compromise or breach of the technology that we or our third-party vendors use to collect, process, retain, transmit and protect the personal information and transaction data of our team members, clients, borrowers and loan applicants.
Security breaches, 15 Table of Contents cyberattacks such as computer viruses, malicious or destructive code, phishing attacks, denial of service or information, acts of vandalism, natural disasters, fire, power loss, telecommunication failures, team member misconduct, human error and developments in computer intrusion capabilities could result in a compromise or breach of the technology that we or our third-party vendors use to collect, process, retain, transmit and protect the personal information and transaction data of our team members, clients, borrowers and loan applicants.
Our failure to comply with applicable U.S. federal, state and local consumer protection and data privacy laws could lead to: 33 Table of Contents • loss of our licenses and approvals to engage in our servicing and lending businesses; • damage to our reputation in the industry; • governmental investigations and enforcement actions; • administrative fines and penalties and litigation; • civil and criminal liability, including class action lawsuits; • increased costs of doing business; • diminished ability to sell loans that we originate or purchase, requirements to sell such loans at a discount compared to other loans or repurchase or address indemnification claims from purchasers of such loans, including the GSEs; • reduced payments by borrowers; • modification of the original terms of mortgage loans; • permanent forgiveness of debt; • delays in the foreclosure process; • increased servicing advances; • inability to raise capital; and • inability to execute on our business strategy, including our growth plans.
Our failure to comply with applicable U.S. federal, state and local consumer protection and data privacy laws could lead to: • loss of our licenses and approvals to engage in our servicing and lending businesses; • damage to our reputation in the industry; • governmental investigations and enforcement actions; • administrative fines and penalties and litigation; • civil and criminal liability, including class action lawsuits; • increased costs of doing business; • diminished ability to sell loans that we originate or purchase, requirements to sell such loans at a discount compared to other loans or repurchase or address indemnification claims from purchasers of such loans, including the GSEs; • reduced payments by borrowers; • modification of the original terms of mortgage loans; • permanent forgiveness of debt; • delays in the foreclosure process; • increased servicing advances; • inability to raise capital; and • inability to execute on our business strategy, including our growth plans.
Our campus could be harmed or rendered inoperable by natural or man-made disasters, including earthquakes, fires, power shortages, telecommunications failures, water shortages, floods, extreme weather conditions, medical epidemics, and other natural or man-made disasters, pandemics, epidemics, or other business interruptions.
Our campus could be harmed or rendered inoperable by natural or man-made disasters, including earthquakes, fires, power shortages, telecommunications failures, water shortages, floods, extreme weather conditions, epidemics, and other natural or man-made disasters, pandemics, or other business interruptions.
Such controls have not always detected, and may in the future fail to prevent or detect, unauthorized access to our team member, client, borrower and loan applicant information.
Such controls have not always prevented or detected, and may in the future fail to prevent or detect, unauthorized access to our team member, client, borrower and loan applicant information.
Any significant increase in seriously delinquent Ginnie Mae loans could have an adverse impact on our balance sheet, as well as our borrowing covenants that are based on balance sheet ratios. Servicers of mortgage loans are often times contractually bound to advance monthly payments to investors, insurers and taxing authorities regardless of whether the borrower actually makes those payments.
Any significant increase in seriously delinquent Ginnie Mae loans could have an adverse impact on our balance sheet, as well as our financial covenants that are based on balance sheet ratios. Servicers of mortgage loans are often times contractually bound to advance monthly payments to investors, insurers and taxing authorities regardless of whether the borrower actually makes those payments.
Accordingly, the valuation ascribed to us and our Class A common may not be indicative of the price of that will prevail in the trading market in the future.
Accordingly, the valuation ascribed to us and our Class A common shares may not be indicative of the price of that will prevail in the trading market in the future.
The loss of the services of our President and Chief Executive Officer or other members of senior management could disrupt and have a detrimental effect on our business.
The loss of the services of our Chairman, President and Chief Executive Officer or other members of senior management could disrupt and have a detrimental effect on our business.
The CFPB has rulemaking authority with respect to most of the federal consumer protection laws applicable to mortgage lenders and servicers, including TILA and RESPA and the FDCPA.
The CFPB has rulemaking and enforcement authority with respect to most of the federal consumer protection laws applicable to mortgage lenders and servicers, including TILA and RESPA and the FDCPA.
Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including: • changes in the valuation of our deferred tax assets and liabilities; • expected timing and amount of the release of any tax valuation allowances; • tax effects of stock-based compensation; • changes in tax laws, regulations or interpretations thereof; • increases in UWMC's ownership of Holdings LLC resulting from Holdings LLC Unit Exchanges; or 42 Table of Contents • lower than anticipated future earnings in jurisdictions where we have lower statutory tax rates and higher than anticipated future earnings in jurisdictions where we have higher statutory tax rates.
Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including: • changes in the valuation of our deferred tax assets and liabilities; • expected timing and amount of the release of any tax valuation allowances; • tax effects of stock-based compensation; • changes in tax laws, regulations or interpretations thereof; • increases in UWMC's ownership of Holdings LLC resulting from Holdings LLC Unit Exchanges; or • lower than anticipated future earnings in jurisdictions where we have lower statutory tax rates and higher than anticipated future earnings in jurisdictions where we have higher statutory tax rates.
The CFPB, HUD and FHFA all have been clear that policing such bias and working to develop new guidance for industry as to how it can reduce human discretion in the home appraisal and valuation process are key agency priorities in 2022.
The CFPB, HUD and FHFA all have been clear that policing such bias and working to develop new guidance for industry as to how it can reduce human discretion in the home appraisal and valuation process are key agency priorities in 2023.
In addition, if we make a payment pursuant to the satisfaction of the Indemnifiable Condition and the applicable tax savings are subsequently disallowed, SFS Corp. will be required to indemnify us for 85% of the taxes and any additional losses attributable to the disallowance.
If we make a payment pursuant to the satisfaction of the Indemnifiable Condition and the applicable tax savings are subsequently disallowed, SFS Corp. will be required to indemnify us for 85% of the taxes and any additional losses attributable to the disallowance.
We sell those loans that we originate that are non-GSE products, such as jumbo mortgage loans, or for which the GSEs may have imposed limitations, directly to either private investors or into the market through private label securitizations.
We sell those loans that we originate that are non-GSE products, such as jumbo mortgage loans and HELOCs, or for which the GSEs may have imposed limitations, directly to either private investors or into the market through private label securitizations.
As a loan servicer, we are examined for compliance with U.S. federal, state and local laws, rules and guidelines by numerous regulatory agencies. It is possible that any of these regulators will inquire about our servicing practices, policies or 37 Table of Contents procedures and require us to revise them in the future.
As a loan servicer, we are examined for compliance with U.S. federal, state and local laws, rules and guidelines by numerous regulatory agencies. It is possible that any of these regulators will inquire about our servicing practices, policies or procedures and require us to revise them in the future.
An assertion of an intellectual property infringement, misappropriation or other violation claim against us could result in adverse judgments, settlement on unfavorable terms or cause us to spend significant amounts to defend the claim, even if we ultimately prevail and we may have to pay significant money damages, lose significant revenues, be prohibited from using the relevant systems, processes, technologies or other intellectual property, cease offering certain products or services, or incur significant license, royalty or technology development expenses.
An assertion of an intellectual property infringement, misappropriation or other violation claim against us could result in adverse judgments, settlement on unfavorable terms or cause us to spend significant amounts to defend the claim, even if we ultimately prevail and we may have to pay significant money damages, lose significant revenues, suffer harm to our reputation, be prohibited from using the relevant systems, processes, technologies or other intellectual property, cease offering certain products or services, or incur significant license, royalty or technology development expenses.
A failure to adequately supervise our clients, service providers and vendors, including outside foreclosure counsel, may also have these negative results. The laws and regulations applicable to us are subject to administrative or judicial interpretation, but some of these laws and regulations have been enacted only recently and may not yet have been interpreted or may be interpreted infrequently.
A failure to adequately supervise our clients, service providers and vendors, including outside foreclosure counsel, may also have these negative results. 28 Table of Contents The laws and regulations applicable to us are subject to administrative or judicial interpretation, but some of these laws and regulations have been enacted only recently and may not yet have been interpreted or may be interpreted infrequently.
In addition, the GSEs and the FHFA, Ginnie Mae, the FTC, HUD, various 36 Table of Contents investors, non-agency securitization trustees and others subject us to periodic reviews and audits. A determination of our failure to comply with applicable law could lead to enforcement action, administrative fines and penalties, or other administrative action.
In addition, the GSEs and the FHFA, Ginnie Mae, the FTC, HUD, various investors, non-agency securitization trustees and others subject us to periodic reviews and audits. A determination of our failure to comply with applicable law could lead to enforcement action, administrative fines and penalties, or other administrative action.
As part of licensing requirements, we are typically required to designate individual licensees of record. We cannot ensure that we are, and will always remain, in full compliance with all state licensing laws and regulations, and we may be subject to fines or penalties, including license revocation, for any non-compliance.
As part of licensing requirements, we are typically required to designate individual licensees of record. We cannot ensure that we are, and will always remain, in full compliance with all state licensing laws and regulations, and we may be 30 Table of Contents subject to fines or penalties, including license revocation, for any non-compliance.
If our ability to sell or securitize mortgage loans is impaired, we may not be able to originate mortgage loans, and if the GSEs and Ginnie Mae become less competitive, it could affect our volume and margins. 29 Table of Contents Substantially all of our loan originations are sold into the secondary market.
If our ability to sell or securitize mortgage loans is impaired, we may not be able to originate mortgage loans, and if the GSEs and Ginnie Mae become less competitive, it could affect our volume and margins. Substantially all of our loan originations are sold into the secondary market.
We could be adversely affected if we do not adequately obtain, maintain, protect and enforce our intellectual property and proprietary rights and may encounter disputes from time to time relating to our use of the intellectual property of third parties. Our proprietary technology platforms and other proprietary rights are important to our success and our competitive position.
We could be adversely affected if we do not adequately obtain, maintain, protect and enforce our intellectual property and proprietary rights and may encounter disputes from time to time relating to our use of the intellectual property of third parties. 19 Table of Contents Our proprietary technology platforms and other proprietary rights are important to our success and our competitive position.
Governmental authorities and various U.S. federal and state agencies have broad oversight and supervisory authority over our business. 32 Table of Contents Because we originate mortgage loans and provide servicing activities nationwide, we must be licensed in all relevant jurisdictions that require licensure and comply with each such jurisdiction’s respective laws and regulations, as well as with judicial and administrative decisions applicable to us.
Governmental authorities and various U.S. federal and state agencies have broad oversight and supervisory authority over our business. Because we originate mortgage loans and provide servicing activities nationwide, we must be licensed in all relevant jurisdictions that require licensure and comply with each such jurisdiction’s respective laws and regulations, as well as with judicial and administrative decisions applicable to us.
Supreme Court has confirmed that the “disparate impact” theory applies to cases brought under the FHA, while emphasizing that a causal relationship must be shown between a specific policy of the defendant and a discriminatory result that is not justified by a legitimate, non-discriminatory business objective of the defendant.
Supreme Court has confirmed that the “disparate impact” theory applies to cases brought under the FHA, while emphasizing that a causal relationship must be shown between a specific policy of the defendant and a discriminatory result that is not justified by a legitimate, non-discriminatory business objective of the 31 Table of Contents defendant.
While increased delinquencies generate higher ancillary revenues, including late fees, these fees are likely not sufficient to offset the increased cost of servicing the loans. An increase in delinquencies could therefore be detrimental to our business. Recently, financial markets have experienced significant volatility.
While increased delinquencies generate higher 11 Table of Contents ancillary revenues, including late fees, these fees are likely not sufficient to offset the increased cost of servicing the loans. An increase in delinquencies could therefore be detrimental to our business. Recently, financial markets have experienced significant volatility.
The tax receivable agreement will make certain simplifying assumptions regarding the determination of the cash savings that we realize or are deemed to realize from the Covered Tax Attributes, which may result in payments pursuant to the tax receivable agreement in excess of those that would result if such assumptions were not made.
The tax receivable agreement will make certain simplifying assumptions regarding the determination of the cash savings that we realize or are deemed to realize from the 21 Table of Contents Covered Tax Attributes, which may result in payments pursuant to the tax receivable agreement in excess of those that would result if such assumptions were not made.
In addition, the covenants and restrictions in our warehouse facilities, indentures governing our Senior Notes, and other debt agreements may restrict our ability to, among other things: • make certain investments; • declare or pay dividends on capital stock; • redeem or purchase capital stock and certain debt obligations; • incur liens; • enter into transactions with affiliates; • enter into certain agreements restricting our subsidiaries’ ability to pay dividends; • incur indebtedness; and • consolidate, merge, make acquisitions and sell assets.
In addition, the covenants and restrictions in our warehouse facilities, indentures governing our Senior Notes, and other debt agreements may restrict our ability to, among other things: • make certain investments; • declare or pay dividends on capital stock; • redeem or purchase capital stock and certain debt obligations; • incur liens; • enter into transactions with affiliates; • enter into certain agreements restricting our subsidiaries’ ability to pay dividends; 26 Table of Contents • incur indebtedness; and • consolidate, merge, make acquisitions and sell assets.
The implementation of technology changes and upgrades to maintain current and integrate new technology systems may also cause service interruptions. Any such disruption could interrupt or delay our ability to provide services to our clients and could also impair the ability of third parties to provide critical services to our business.
The implementation of technology changes and upgrades to maintain current and integrate new technology systems may also cause service interruptions. Any such disruption could interrupt or delay 16 Table of Contents our ability to provide services to our clients and could also impair the ability of third parties to provide critical services to our business.
We fund a vast majority of the mortgage loans we originate through borrowings under our short-term warehouse facilities and funds generated by our operations. Our ability to fund our loan originations may be impacted by our ability to secure further such borrowings on accept able terms.
We fund a vast majority of the mortgage loans we originate through borrowings under our short-term warehouse facilities and funds generated by our operations. Our ability to fund our loan originations may be impacted by our ability to secure further such borrowings on acceptable terms.
As the pool of qualified candidates has continued to be limited and there continues to be significant competition for talent, we may face challenges to hire and retain highly qualified personnel in changing environments. Additionally, we invest heavily in training our team members, which increases their value to competitors who may seek to recruit them.
As the pool of qualified candidates has continued to be limited and there continues to be significant competition for talent, we may face challenges in hiring and retaining highly qualified personnel in changing environments. Additionally, we invest heavily in training our team members, which increases their value to competitors who may seek to recruit them.
Regulatory agencies and consumer advocacy groups are becoming more aggressive in asserting claims that the practices of lenders and loan servicers violate anti-discrimination laws. Antidiscrimination statutes, such as the FHA and the ECOA, prohibit creditors from discriminating against loan applicants and borrowers based on certain characteristics, such as race, ethnicity, sex, religion and national origin.
Regulatory agencies and consumer advocacy groups are asserting claims that the practices of lenders and loan servicers violate anti-discrimination laws. Antidiscrimination statutes, such as the FHA and the ECOA, prohibit creditors from discriminating against loan applicants and borrowers based on certain characteristics, such as race, ethnicity, sex, religion and national origin.
Regulatory enforcement and fines have also increased across the financial services sector. We expect that our business and that of our clients will remain subject to extensive regulation and supervision. These regulatory changes could result in an increase in our regulatory compliance burden and associated costs and place restrictions on our origination and servicing operations.
Regulatory enforcement and fines have also become more significant across the financial services sector. We expect that our business and that of our clients will remain subject to extensive regulation and supervision. These regulatory changes could result in an increase in our regulatory compliance burden and associated costs and place restrictions on our origination and servicing operations.
Consequently, we rely on our clients and their loan officers to 19 Table of Contents provide us accurate information on behalf of borrowers, including financial statements and other financial information, for us to use in deciding whether to approve loans.
Consequently, we rely on our clients and their loan officers to provide us accurate information on behalf of borrowers, including financial statements and other financial information, for us to use in deciding whether to approve loans.
The actual tax benefit, as well as the amount and timing of any payments under the tax receivable agreement, will vary depending upon a number of factors, including, among others, the timing of exchanges by or purchases from SFS Corp., the price of our Class A common stock at the time of the exchanges or purchases, the extent to which such exchanges are taxable, the amount and timing of the taxable income we generate in the future and the tax rate then applicable, and the portion of our payments under the tax receivable agreement constituting imputed interest. 27 Table of Contents Future payments under the tax receivable agreement could be substantial.
The actual tax benefit, as well as the amount and timing of any payments under the tax receivable agreement, will vary depending upon a number of factors, including, among others, the timing of exchanges by or purchases from SFS Corp., the price of our Class A common stock at the time of the exchanges or purchases, the extent to which such exchanges are taxable, the amount and timing of the taxable income we generate in the future and the tax rate then applicable, and the portion of our payments under the tax receivable agreement constituting imputed interest.
The payments under the tax receivable agreement are not conditioned upon SFS Corp.’s continued ownership of us. We are not required to make a payment of the 85% applicable tax savings to SFS Corp. unless and until at least one of the payment conditions has been satisfied (the “Payment Conditions”).
Future payments under the tax receivable agreement could be substantial. The payments under the tax receivable agreement are not conditioned upon SFS Corp.’s continued ownership of us. We are not required to make a payment of the 85% applicable tax savings to SFS Corp. unless and until at least one of the payment conditions has been satisfied (the “Payment Conditions”).
It is not yet possible to determine whether such proposals will be enacted and, if so, when they will be enacted, what form any final legislation or policies might take or how proposals, legislation or policies may impact the MBS market and our business.
It is not yet possible to determine whether such proposals will be enacted and, if so, when they will be enacted, what form any final legislation or policies might 12 Table of Contents take or how proposals, legislation or policies may impact the MBS market and our business.
Any talent acquisition and retention challenges or mismanagement of our personnel needs in these 20 Table of Contents situations could reduce our operating efficiency, increase our costs of operations and harm our overall financial condition.
Any talent acquisition and retention challenges or mismanagement of our personnel needs in these situations could reduce our operating efficiency, increase our costs of operations and harm our overall financial condition.
Under NYSE rules, a company of which more than 50% of the voting power is held by another person or group of persons acting together is a “controlled company” and may elect not to comply with the following NYSE rules regarding corporate governance: • the requirement that a majority of our Board of directors consist of independent directors; 39 Table of Contents • the requirement that compensation of our executive officers be determined by a majority of the independent directors of the Board or a compensation committee comprised solely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and • the requirement that director nominees be selected, or recommended for the Board’s selection, either by a majority of the independent directors of the Board or a nominating committee comprised solely of independent directors with a written charter addressing the committee’s purpose and responsibilities.
Under NYSE rules, a company of which more than 50% of the voting power is held by another person or group of persons acting together is a “controlled company” and may elect not to comply with the following NYSE rules regarding corporate governance: • the requirement that a majority of our Board of directors consist of independent directors; • the requirement that compensation of our executive officers be determined by a majority of the independent directors of the Board or a compensation committee comprised solely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and • the requirement that director nominees be selected, or recommended for the Board’s selection, either by a majority of the independent directors of the Board or a nominating committee comprised solely of independent directors with a written charter addressing the committee’s purpose and responsibilities. 33 Table of Contents Three of our ten directors are independent directors and our Board has an independent audit committee.
In addition, the policy, which has generated significant publicity and a legal proceeding, could adversely affect our reputation or affect our ability to attract new Independent Mortgage Brokers.
In addition, the policy, which has generated significant publicity and legal proceedings, could adversely affect our reputation or affect our ability to attract new Independent Mortgage Brokers.
Any issued or registered intellectual property rights owned by or licensed to us may be challenged, invalidated, held unenforceable or circumvented in litigation or other proceedings, and such intellectual 25 Table of Contents property rights may be lost or no longer provide us meaningful competitive advantages.
Any issued or registered intellectual property rights owned by or licensed to us may be challenged, invalidated, held unenforceable or circumvented in litigation or other proceedings, and such intellectual property rights may be lost or no longer provide us meaningful competitive advantages.
These regulatory actions and similar responses to the COVID-19 pandemic that may be passed in the future could increase our operating costs and negatively impact our liquidity, as they may extend the period for which we are required to make advances for delinquent principal and interest, taxes and insurance, and could delay our ability to seek reimbursement from the investor to recoup some or all of the advances.
These regulatory actions and similar that may be taken in the future could increase our operating costs and negatively impact our liquidity, as they may extend the period for which we are required to make advances for delinquent principal and interest, taxes and insurance, and could delay our ability to seek reimbursement from the investor to recoup some or all of the advances.
Loans originated outside of the guidelines of Fannie Mae, Freddie Mac, and the FHA, USDA, or VA (for loans securitized with Ginnie Mae), such as jumbo loans are sold individually or in bulk to private investors, through mortgage conduits and through our own private label securitizations into MBS.
Loans originated outside of the guidelines of Fannie Mae, Freddie Mac, and the FHA, USDA, or VA (for loans securitized with Ginnie Mae), such as jumbo loans and home equity lines of credit (HELOCs) are sold individually or in bulk to private investors, through mortgage conduits and through our own private label securitizations into MBS.
Moreover, any deterioration in market conditions that leads to an increase in loan delinquencies will result in higher expenses for loans we service for the GSEs and Ginnie Mae. The increased cost to service loans could decrease the estimated value of our MSRs.
Moreover, any deterioration in market conditions that leads to an increase in loan delinquencies will result in higher expenses for loans we service. The increased cost to service loans could decrease the estimated value of our MSRs.
If we are unable to preserve our culture, this could negatively impact our future success, including our ability 26 Table of Contents to attract and retain team members, encourage innovation and teamwork, and effectively focus on and pursue our mission and corporate objectives.
If we are unable to preserve our culture, this could negatively impact our future success, including our ability to attract and retain team members, encourage innovation and teamwork, and effectively focus on and pursue our mission and corporate objectives.
Coupled with the expansion of social media platforms and similar devices that allow individuals access to a broad audience, these claims, whether or not they have merit, could result in reputational risk, negative publicity, out-of-pockets costs and distraction to our management team. 38 Table of Contents We are subject to various consumer protection regulatory regimes which expose us to liability directly from consumers.
Coupled with the expansion of social media platforms and similar devices that allow individuals access to a broad audience, these claims, whether or not they have merit, could result in reputational risk, negative publicity, out-of-pocket costs and distractions to our management team. We are subject to various consumer protection regulatory regimes which expose us to liability directly from consumers.
Any future increases in guarantee fees or changes to their structure or increases in the premiums borrowers are required to pay to the FHA or private mortgage insurers for insurance or to the VA or the USDA for 18 Table of Contents guarantees could increase mortgage origination costs.
Any future increases in guarantee fees or changes to their structure or increases in the premiums borrowers are required to pay to the FHA or private mortgage insurers for insurance or to the VA or the USDA for guarantees could increase mortgage origination costs.
The willingness of Independent Mortgage Brokers to originate mortgage loans with us is dependent on (i) the rates that we are able to offer our clients’ borrowers for mortgage loans, (2) our customer service, and (3) compensation.
The willingness of Independent Mortgage Brokers to originate mortgage loans with us is dependent on (i) the rates that we are able to offer our clients’ borrowers for mortgage loans, (ii) our customer service, and (iii) compensation.
Our hedging strategies also require us to provide cash margin to our hedging counterparties from time to time. The Financial Industry Regulatory Authority (FINRA) requires us to provide daily cash margin to (or receive daily cash margin from, depending on the daily value of related instrument) our hedging counterparties from time to time.
Our hedging strategies also require us to provide cash margin to our hedging counterparties from time to time. The Financial Industry Regulatory Authority (FINRA) requires us to provide daily cash margin to (or receive daily cash margin from, depending on the daily value of related instrument) our hedging counterparties in excess of certain thresholds.
In addition, we have grown our number of team members materially in recent years and have increased our profile in the community and nationally. As a result, the number of lawsuits against us regarding alleged violation of employment laws, including wage and hour, and other employment issues, has and may continue to increase.
In addition, we have a large number of team members and have increased our profile in the community and nationally. As a result, the number of lawsuits against us regarding alleged violation of employment laws, including wage and hour, and other employment issues, has and may continue to increase.
In the case of repurchases, we typically repurchase such loan and resell it into a non-conforming market at a discount to the repurchase price. As of December 31, 2022, we had accrued a $60.5 million reserve for repurchase and indemnification obligations. Actual repurchase and indemnification obligations could materially exceed the reserves recorded in our consolidated financial statements.
In the case of repurchases, we typically repurchase such loan and resell it into a non-conforming market at a discount to the repurchase price. As of December 31, 2023, we had accrued a $62.9 million reserve for repurchase and indemnification obligations. Actual repurchase and indemnification obligations could materially exceed the reserves recorded in our consolidated financial statements .
The failure or inability of our clients to successfully market our mortgage products could, in turn, have a material adverse impact on our business, financial condition and results of operations. • Because of our focus exclusively on the wholesale channel, communication with borrowers is primarily made through loan officers employed by third parties.
The failure or inability of our clients to successfully market our mortgage products could, in turn, have a material adverse impact on our business, financial condition and results of operations. • Communication with prospective borrowers is primarily made through loan officers employed by third parties.
If we do not handle borrower complaints effectively, our reputation and brand may suffer and we may lose our borrowers’ confidence which could have a material adverse impact on our results of operations and profitability. • Growth in our market share is principally dependent on growth in the market share controlled by the wholesale channel.
If we do not handle borrower complaints effectively, our reputation and brand may suffer and we may lose our borrowers’ confidence which could have a material adverse impact on our results of operations and profitability. 14 Table of Contents • Growth in our market share is principally dependent on growth in the market share controlled by the wholesale chann el.
In a declining interest rate environment, the fair value of MSRs generally decreases as prepayment expectations increase consequently truncating the average estimated life of the MSRs resulting in expected decreases in cash flows.
In a declining interest rate environment, the fair value of MSRs generally decreases as prepayment expectations increase consequently truncating the average estimated life of the MSRs, and estimated float earnings decrease, resulting in expected decreases in cash flows.
For example, we rely on third-party vendors for our online mortgage application services, to generate the documents required for closing the document, to generate flood certifications and to confirm employment.
For example, we rely on third-party vendors for our online mortgage application services, to generate the documents required for closing the mortgage, to generate flood certifications, to confirm employment, and to facilitate appraisal services for borrowers.
Economic factors such as increased interest rates, slow economic growth or inflationary conditions, the pace of home price appreciation or the lack of it, changes in household debt levels, and increased unemployment, stagnant or declining wages or decreased purchasing power due to inflation affect our borrowers’ income and thus their ability and willingness to make loan payments. 16 Table of Contents National or global events affect all such macroeconomic conditions.
Economic factors such as increased interest rates, slow economic growth or inflationary conditions, the pace of home price appreciation or the lack of it, changes in household debt levels, and increased unemployment, stagnant or declining wages or decreased purchasing power due to inflation affect our borrowers’ income and thus their ability and willingness to make loan payments.
The occurrence of one or more of the foregoing events or a determination by any court or regulatory agency that our servicing policies and procedures do not comply with applicable law could lead to penalties and fines, changes to our servicing practices and standards, transfer of our servicing responsibilities, increased delinquencies on mortgage loans we service or any combination of these events.
The occurrence of one or more of the foregoing events or a determination by any court or regulatory agency that our servicing policies and procedures do not comply with applicable law could lead to penalties and fines, changes to our servicing practices and standards, transfer of our servicing responsibilities, increased delinquencies on mortgage loans we service or any combination of these events, which could adversely affect our business, financial condition or results of operations.
Any significant repurchases, substitutions, indemnifications or premium recapture could be detrimental to our business. Our business is dependent on our ability to maintain and expand our relationships with our clients, the Independent Mortgage Brokers. Our clients are the Independent Mortgage Brokers who refer us mortgage loans to originate.
Any significant repurchases, substitutions, indemnifications or premium recapture could be detrimental to our business and financial condition. 13 Table of Contents Our business is dependent on our ability to maintain and expand our relationships with our clients, the Independent Mortgage Brokers. Our clients are the Independent Mortgage Brokers who refer us mortgage loans to originate.
The provision of our Charter requiring exclusive forum in the state courts in the State of Michigan or the State of Delaware for certain types of lawsuits may have the effect of discouraging lawsuits against our directors and officers. 41 Table of Contents Our Charter requires that, unless we consent in writing to the selection of an alternative forum, (i) any derivative action brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, or employee of our business to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL, our Charter or Amended and Restated Bylaws, or (iv) any action asserting a claim governed by the internal affairs doctrine of the State of Delaware, in each case, to be filed in either (x) the Sixth Judicial Circuit, Oakland County, Michigan (or, if the Sixth Judicial Circuit, Oakland County, Michigan lacks jurisdiction over any such action or proceeding, then another state court of the State of Michigan, or if no state court of the State of Michigan has jurisdiction over any such action or proceeding, then the United States District Court for the Eastern District of Michigan) or (y) the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware lacks jurisdiction over any such action or proceeding, then the Superior Court of the State of Delaware, or, if the Superior Court of the State of Delaware lacks jurisdiction then the U.S.
Our Charter requires that, unless we consent in writing to the selection of an alternative forum, (i) any derivative action brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, or employee of our business to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL, our Charter or Amended and Restated Bylaws, or (iv) any action asserting a claim governed by the internal affairs doctrine of the State of Delaware, in each case, to be filed in either (x) the Sixth Judicial Circuit, Oakland County, Michigan (or, if the Sixth Judicial Circuit, Oakland County, Michigan lacks jurisdiction over any such action or proceeding, then another state court of the State of Michigan, or if no state court of the State of Michigan has jurisdiction over any such action or proceeding, then the United States District Court for the Eastern District of Michigan) or (y) the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware lacks jurisdiction over any such action or proceeding, then the Superior Court of the State of Delaware, or, if the Superior Court of the State of Delaware lacks jurisdiction then the U.S.
Other of our competitors, such as financial institutions who originate mortgage loans using their own funds, may have more 24 Table of Contents flexibility in holding loans.
Our other competitors, such as financial institutions who originate mortgage loans using their own funds, may have more flexibility in holding loans.
Under the Holdings LLC Second Amended & Restated Limited Liability Company Agreement (the “Holdings LLC A&R Company Agreement”), Holdings LLC will generally be required from time to time to make pro rata distributions in cash to its equityholders, SFS Corp. and us, in amounts sufficient to cover the taxes on their allocable share of the taxable income of Holdings LLC.
Under the Holdings LLC Second Amended & Restated Limited Liability Company Agreement (the “Holdings LLC A&R Company Agreement”), Holdings LLC will generally be required from time to time to make distributions in cash to its equityholders, SFS Corp. and us, in amounts sufficient to cover the taxes on their allocable share of the taxable income of Holdings LLC, which may not be pro-rata based on equity holdings due to different tax rates.
In addition, we and our clients are currently subject to a variety of, and may in the future become subject to additional U.S. federal, state and local laws that are continuously evolving and developing, including, but not limited to, laws on advertising, as well as privacy laws, including the Telephone Consumer Protection Act (“TCPA”), the Gramm-Leach-Bliley Act (“GLBA”), the CAN-SPAM Act, the California Consumer Privacy Act (“CCPA”), the California Privacy Rights Act (“CPRA”), the Virginia Consumer Data Protection Act and the Colorado Privacy Act.
In addition, we and our clients are currently subject to a variety of, and may in the future become subject to additional U.S. federal, state and local laws that are continuously evolving and developing, including, but not limited to, laws on advertising, as well as privacy laws, including the Telephone Consumer Protection Act (“TCPA”), the Gramm-Leach-Bliley Act (“GLBA”), the CAN-SPAM Act, and a growing number of state privacy laws including, most notably, the California Consumer Privacy Act ("CCPA") and the California Privacy Rights Act ("CPRA").
Our future success depends to a significant extent on the continued services of our senior management, including Mat Ishbia, our President and Chief Executive Officer. The experience of our senior management is a valuable asset to us and would be difficult to replace.
Loss of our key management could result in a material adverse effect on our business. Our future success depends to a significant extent on the continued services of our senior management, including Mat Ishbia, our President and Chief Executive Officer. The experience of our senior management is a valuable asset to us and would be difficult to replace.
These lenders are obligated to resell the same assets back to us at the end of the term of the transaction, which typically ranges from 30 to 90 days, but which may have terms of up to 364 days or longer. These repurchase agreements subject us to various risks: • The warehouse facilities subject us to counterparty risk.
These lenders are obligated to resell the same assets back to us at the end of the term of the transaction, which typically ranges from 30 to 90 days, but may have terms of up to 364 days or longer.
In periods of rising interest rates, the fair value of the MSRs generally increases as prepayment expectations decrease, consequently extending the average estimated life of the MSRs resulting in expected increases in cash flows.
In pe riods of rising interest rates, the fair value of the MSRs generally increases as prepayment expectations decrease, consequently extending the average estimated life of the MSRs, and estimated float earnings increase, resulting in expected increases in cash flows.
Specifically, we may be adversely affected: • if our sub-servicers breach their servicing obligations or are unable to perform their servicing obligations properly, which may subject us to damages or termination of the servicing rights, and cause us to lose loan servicing income and/or require us to indemnify an investor or securitization trustee against losses as a result of any such breach or failure; • by regulatory actions taken against any of our sub-servicers, which may adversely affect their licensing and, as a result, their ability to perform their servicing obligations under GSE and U.S. government agency loans which require such licensing; • by a default by any of our sub-servicers under their debt agreements, which may impact their access to capital to be able to perform their obligations; • if any of our sub-servicers were to face adverse actions from the GSEs and are terminated as servicer under their agreements with the GSEs; • if our sub-servicers fail to meet their obligations due to economic or other circumstances that are difficult to anticipate, including as a result of the impact of the COVID-19 pandemic; 23 Table of Contents • if as a result of poor performance by our sub-servicers, we experience greater than expected delinquencies and foreclosures on the mortgage loans being serviced, which could lead to liability from third party claims or adversely affect our ability to access the capital and secondary markets for our loan funding requirements; • if any of our sub-servicers become subject to bankruptcy proceedings; or • if one or more of our sub-servicers terminate their agreement with us.
Specifically, we may be adversely affected: • if our sub-servicers breach their servicing obligations or are unable to perform their servicing obligations properly, which may subject us to damages or termination of the servicing rights, and cause us to lose loan servicing income and/or require us to indemnify an investor or securitization trustee against losses as a result of any such breach or failure; • by regulatory actions taken against any of our sub-servicers, which may adversely affect their licensing and, as a result, their ability to perform their servicing obligations under GSE and U.S. government agency loans which require such licensing; • by a default by any of our sub-servicers under their debt agreements, which may impact their access to capital to be able to perform their obligations; 17 Table of Contents • if any of our sub-servicers were to face adverse actions from the GSEs or Ginnie Mae and are terminated as servicer under their agreements with the GSEs or Ginnie Mae; • if our sub-servicers fail to meet their obligations due to economic or other circumstances that are difficult to anticipate, including as a result of the impact of pandemics, epidemics, disease outbreaks and other public health crises ; • if as a result of poor performance by our sub-servicers, we experience greater than expected delinquencies and foreclosures on the mortgage loans being serviced, which could lead to liability from third party claims or adversely affect our ability to access the capital and secondary markets for our loan funding requirements; • if any of our sub-servicers were the target of a cyberattack or other security breach, resulting in the unauthorized release, misuse, loss or destruction of information related to our current or former borrowers, or material disruption of our or our clients network access or business operations; • if any of our sub-servicers become subject to bankruptcy proceedings; or • if one or more of our sub-servicers terminate their agreement with us.
For example, if the violation is related to our servicing operations it could lead to a transfer of our servicing responsibilities, increased delinquencies on mortgage loans we service or any combination of these events. Such a determination could also require us to 35 Table of Contents modify our servicing standards.
For example, if the violation is related to our servicing operations it could lead to a transfer of our servicing responsibilities, increased delinquencies on mortgage loans we service or any combination of these events. Such a determination could also require us to modify our servicing standards. The expense of complying with new or modified servicing standards may be substantial.
Three of our nine directors are independent directors and our Board has an independent audit committee. However, our Board does not have a majority of independent directors, or a compensation committee comprised of solely independent directors or a nominating committee. Rather, actions with respect to executive compensation will be taken by the compensation committee on which Mr.
However, our Board does not have a majority of independent directors, or a compensation committee comprised of solely independent directors or a nominating committee. Rather, actions with respect to executive compensation will be taken by the Compensation Committee on which Mr. Mat Ishbia sits, and compensation decisions with respect to Mr.
If short term interest rates increase, our debt service obligations on certain of our 17 Table of Contents variable-rate indebtedness will increase and if long-term rates do not increase in kind (i.e., the yield curve flattens or inverts) our net income and cash flows, including cash available for servicing our indebtedness, could correspondingly decrease.
If short term interest rates increase, our debt service obligations on certain of our variable-rate indebtedness will increase and if long-term rates do not increase in kind, our net income and cash flows, including cash available for servicing our indebtedness, could correspondingly decrease.
Our warehouse facilities typically renew annually, although as of December 31, 2022, three of our facilities ($4.0 billion in available credit) had a two year renewal term. However, as of December 31, 2022, all but $401.0 million of our warehouse facilities were uncommitted and can be term inated by the applicable lender at any time.
Our warehouse facilities typically renew annually, although as of December 31, 2023, one of our facilities ($3.0 billion in available credit) had a two year renewal term. As of December 31, 2023, all but $750.0 million of our warehouse facilities were uncommitted and can be terminate d by the applicable lender at any time.
Mat Ishbia sits, and compensation decisions with respect to Mr. Ishbia’s compensation will be taken by a special subcommittee, and director nominations will be made by our full Board. Our Board has determined that Kelly Czubak, Isiah Thomas and Robert Verdun are “independent directors,” as defined in the NYSE listing rules and applicable SEC rules.
Ishbia’s compensation will be taken by a special subcommittee, and director nominations will be made by our full Board. Our Board has determined that Stacey Coopes, Kelly Czubak, and Robert Verdun are “independent directors,” as defined in the NYSE listing rules and applicable SEC rules.
A rapidly rising interest rate environment may increase the likelihood of additional margin calls that could adversely impact our liquidity.
A rapidly rising interest rate environment may increase the likelihood of additional margin calls that could adversely impact our liquidity. • The warehouse facilities subject us to counterparty risk.
Our data security management program includes identity, trust, vulnerability and threat management business processes as well as the adoption of standard data protection policies. We measure our data security effectiveness through industry-accepted methods and remediate significant findings.
We invest in industry-standard security technology designed to protect our data and business processes against risk of a data security breach and cyberattack. Our data security management program includes identity, trust, vulnerability and threat management business processes as well as the adoption of standard data protection policies. We measure our data security effectiveness through industry-accepted methods and remediate significant findings.
For example, as interest rates rise, the value of existing mortgage assets falls. We employ various economic hedging strategies to mitigate the interest rate and the anticipated loan financing probability or “pull-through risk” inherent in such mortgage assets.
We employ various economic hedging strategies to mitigate the interest rate and the anticipated loan financing probability or “pull-through risk” inherent in such mortgage assets.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeDistrict Court for the Eastern District of Michigan, seeking monetary damages and injunctive relief. The complaint alleges that AML breached the parties’ wholesale broker agreement by submitting mortgage loans and mortgage loan applications to certain select retail lenders. On February 25, 2022, AML filed its answer to the complaint and included certain counterclaims, including fraud and misrepresentation, against UWM.
Biggest changeOn February 3, 2022, UWM filed a complaint against America’s Moneyline, Inc. (“AML”), a former client, in the U.S. District Court for the Eastern District of Michigan, seeking monetary damages and injunctive relief. The complaint alleges that AML breached the parties’ wholesale broker agreement by submitting mortgage loans and mortgage loan applications to certain select retail lenders.
Okavage seeks class certification, treble damages, attorneys’ fees and injunctive relief. We filed a renewed motion to dismiss on September 7, 2021. On July 27, 2022, the magistrate judge assigned to consider our motion to dismiss recommended that the amended complaint be dismissed in its entirety without prejudice.
Okavage seeks class certification, treble damages, attorneys’ fees and injunctive relief. UWM filed a renewed motion to dismiss on September 7, 2021. On July 27, 2022, the Magistrate Judge assigned to consider UWM's motion to dismiss recommended that the amended complaint be dismissed in its entirety without prejudice.
Item 2. Properties Our corporate headquarters, located in Pontiac, Michigan, is comprised of five separately leased buildings with approximately 1.4 million square feet of occupied space, that house substantially all of our operations. In addition, we have two land leases, one providing parking space for our team members and the other an outdoor food court pavilion.
Item 2. Properties 37 Table of Contents Our corporate headquarters, located in Pontiac, Michigan, is comprised of leased buildings with approximately 1.4 million square feet of occupied space, that house substantially all of our operations. In addition, we have two land leases, one providing parking space for our team members and the other an outdoor food court pavilion.
UWM filed a motion to dismiss AML’s counterclaims, and on December 12, 2022, the court granted UWM’s motion in large part, dismissing all of AML’s counterclaims except for its declaratory judgment claim. The case remains pending.
On February 25, 2022, AML filed its answer to the complaint and included certain counterclaims, including fraud and misrepresentation, against UWM. UWM filed a motion to dismiss AML’s counterclaims, and on December 12, 2022, the court granted UWM’s motion in large part, dismissing all of AML’s counterclaims except for its declaratory judgment claim.
In response, Okavage filed a second amended class action complaint on November 8, 2022. On December 14, 2022, UWM and its CEO filed a motion to dismiss the second amended complaint, and that motion remains pending. On February 3, 2022, UWM filed a complaint against America’s Moneyline, Inc. (“AML”), a former client, in the U.S.
In response, Okavage filed a second amended class action complaint on November 8, 2022. On March 24, 2023, Okavage filed a motion for leave to file a supplemental complaint, which the court granted on July 18, 2023. On August 14, 2023, UWM filed a motion to dismiss the supplemental class action complaint.
Added
While UWM's motion to dismiss is pending before the Court, on February 6, 2024, the Magistrate Judge issued a report and recommendation that UWM's motion be granted and that the complaint be dismissed on all counts. The plaintiffs have filed objections to the Magistrate's report. We have until March 5, 2024 to file our response to the objections.
Added
On March 8, 2023, AML filed an amende d counterclaim. On April 19, 2023, UWM filed a motion to dismiss the amended counterclaim, and that motion remains pending.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe graph assumes $100 invested on January 21, 2021 and reflects the cumulative total return on that investment, including the reinvestment of all dividends where applicable, through December 31, 2022.
Biggest changeThe graph assumes $100 invested on January 21, 2021 and reflects the cumulative total return on that investment, including the reinvestment of all dividends where applicable, through December 31, 2023. 39 Table of Contents ________________________________________ We use January 21, 2021 as our initial measuring point because we completed our business combination with Gores IV on January 21, 2021, the date on which our shares of Class A common stock began trading on the NYSE.
The share repurchase program authorizes the Company to repurchase shares of the Company’s Class A common stock from time to time, in the open market or through privately negotiated transactions, at management's discretion based on market and business conditions, applicable legal and regulatory requirements as well as other factors. Shares purchased will be retired.
The share repurchase program authorized the Company to repurchase shares of the Company’s Class A common stock from time to time, in the open market or through privately negotiated transactions, at management's discretion based on market and business conditions, applicable legal and regulatory requirements as well as other factors. Shares purchased were retired.
The closing price of the Class A common stock and Warrants as of February 24, 2023 was $4.19 and $0.17, respectively. Holders As of February 24, 2023, there were 45 holders of record of our Class A common stock and 3 holders of record of our Warrants. Such numbers do not include beneficial owners holding our securities through nominee names.
The closing price of the Class A common stock and Warrants as of February 23, 2024 was $6.69 and $0.23, respectively. Holders As of February 23, 2024, there were 39 holders of record of our Class A common stock and 3 holders of record of our Warrants. Such numbers do not include beneficial owners holding our securities through nominee names.
As of December 31, 2022, the remaining amount authorized under the share repurchase program was $218.4 million. 44 Table of Contents Performance Graph The graph below compares the cumulative total return for our common stock for the period from the closing of the Business Combination transaction on January 21, 2021 through December 31, 2022 with the comparable cumulative returns of two indices: the Russell 2000 Index and the Dow Jones US Mortgage Finance Index, which is an industry index comprised of mortgage financing companies.
Performance Graph The graph below compares the cumulative total return for our common stock for the period from the closing of the Business Combination transaction on January 21, 2021 through December 31, 2023 with the comparable cumulative returns of two indices: the Russell 2000 Index and the Dow Jones US Mortgage Finance Index, which is an industry index comprised of mortgage financing companies.
The new plan will expire on May 11, 2023 unless otherwise modified or terminated by the Company's Board of Directors at any time in the Company's sole discretion. There were no repurchases of the Company's shares of its outstanding Class A common stock during the year ended December 31, 2022.
The program expired on May 11, 2023 pursuant to its terms. There were no repurchases of the Company's shares of its outstanding Class A common stock during the year ended December 31, 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

118 edited+21 added−37 removed81 unchanged
Biggest change(6) Reflects the change (decrease/(increase)) in the fair value of the retained investment securities. 48 Table of Contents Results of Operations for the Years Ended December 31, 2022, 2021 and 2020 For the year ended December 31, ($ in thousands) 2022 2021 2020 Revenue Loan production income $ 981,988 $ 2,585,807 $ 4,551,415 Loan servicing income 792,072 638,738 288,304 Change in fair value of mortgage servicing rights 284,104 (587,813) — Gain on sale of mortgage servicing rights — 1,791 (62,285) Interest income 314,462 331,770 161,160 Total revenue, net 2,372,626 2,970,293 4,938,594 Expenses Salaries, commissions and benefits 552,886 697,680 552,143 Direct loan production costs 90,369 72,952 54,459 Marketing, travel, and entertainment 74,168 62,472 20,367 Depreciation and amortization 45,235 35,098 16,820 General and administrative 179,549 133,334 98,856 Servicing costs 166,024 108,967 70,835 Amortization, impairment and pay-offs of mortgage servicing rights — — 573,118 Interest expense 305,987 304,656 167,036 Other expense/(income) 23,739 (23,107) — Total expenses 1,437,957 1,392,052 1,553,634 Earnings before income taxes 934,669 1,578,241 3,384,960 Provision for income taxes 2,811 9,841 2,450 Net income 931,858 1,568,400 3,382,510 Net income attributable to non-controlling interest 890,143 1,469,955 N/A Net income attributable to UWM Holdings Corporation $ 41,715 $ 98,445 N/A 49 Table of Contents Loan production income The table below provides details of the composition of our loan production for each of the periods presented: Loan Production Data: For the year ended December 31, ($ in thousands) 2022 2021 2020 Loan origination volume by type Purchase: Conventional $ 62,274,030 $ 63,026,794 $ 33,717,939 Government 23,773,422 14,833,808 8,619,874 Jumbo and other 4,782,879 9,395,143 583,299 Total purchase $ 90,830,331 $ 87,255,745 $ 42,921,112 Refinance: Conventional $ 27,059,252 $ 120,152,065 $ 119,807,647 Government 7,834,636 12,034,583 18,921,473 Jumbo and other 1,561,242 7,061,299 897,409 Total refinance 36,455,130 139,247,947 139,626,529 Total loan origination volume $ 127,285,461 $ 226,503,692 $ 182,547,641 Portfolio metrics Average loan amount $ 365 $ 346 $ 325 Weighted average loan-to-value ratio 79.67 % 71.68 % 71.01 % Weighted average credit score 738 750 758 Weighted average note rate 4.82 % 2.90 % 3.01 % Percentage of loans sold To GSEs 94 % 90 % 99 % To other counterparties 6 % 10 % 1 % Servicing-retained 97 % 99 % 100 % Servicing-released 3 % 1 % — % The components of loan production income for the periods presented were as follows: For the year ended December 31, Change Change % ($ in thousands) 2022 2021 Primary gain (loss) $ (1,479,762) $ (244,134) $ (1,235,628) 506.1 % Loan origination fees 278,594 477,759 (199,165) (41.7) % Provision for representation and warranty obligations (30,416) (45,301) 14,885 (32.9) % Capitalization of MSRs 2,213,572 2,397,483 (183,911) (7.7) % Loan production income $ 981,988 $ 2,585,807 $ (1,603,819) (62.0) % Gain margin (1) 0.77 % 1.14 % (0.37) % For the year ended December 31, Change Change % ($ in thousands) 2021 2020 Primary gain (loss) $ (244,134) $ 2,291,731 $ (2,535,865) (110.7) % Loan origination fees 477,759 399,996 77,763 19.4 % Provision for representation and warranty obligations (45,301) (36,510) (8,791) 24.1 % Capitalization of MSRs 2,397,483 1,896,198 501,285 26.4 % Loan production income $ 2,585,807 $ 4,551,415 $ (1,965,608) (43.2) % Gain margin (1) 1.14 % 2.49 % (1.35) % (1) Represents total loan production income divided by total loan origination volume for the applicable period.
Biggest changeResults of Operations for the Years Ended December 31, 2023, 2022 and 2021 For the year ended December 31, ($ in thousands) 2023 2022 2021 Revenue Loan production income $ 1,000,547 $ 981,988 $ 2,585,807 Loan servicing income 818,703 792,072 638,738 Change in fair value of mortgage servicing rights (854,148) 284,104 (587,813) Gain on sale of mortgage servicing rights — — 1,791 Interest income 346,225 314,462 331,770 Total revenue, net 1,311,327 2,372,626 2,970,293 Expenses Salaries, commissions and benefits 530,231 552,886 697,680 Direct loan production costs 104,262 90,369 72,952 Marketing, travel, and entertainment 84,515 74,168 62,472 Depreciation and amortization 46,146 45,235 35,098 General and administrative 170,423 179,549 133,334 Servicing costs 131,792 166,024 108,967 Interest expense 320,256 305,987 304,656 Other expense (income) (5) 23,739 (23,107) Total expenses 1,387,620 1,437,957 1,392,052 Earnings (loss) before income taxes (76,293) 934,669 1,578,241 Provision (benefit) for income taxes (6,511) 2,811 9,841 Net income (loss) (69,782) 931,858 1,568,400 Net income (loss) attributable to non-controlling interest (56,552) 890,143 1,469,955 Net income (loss) attributable to UWM Holdings Corporation $ (13,230) $ 41,715 $ 98,445 43 Table of Contents Loan production income The table below provides details of the composition of our loan production for each of the periods presented: Loan Production Data: For the year ended December 31, ($ in thousands) 2023 2022 2021 Loan origination volume by type Purchase: Conventional $ 58,833,673 $ 62,274,030 $ 63,026,794 Government 29,640,141 23,773,422 14,833,808 Jumbo and other (1) 5,381,530 4,782,879 9,395,143 Total purchase $ 93,855,344 $ 90,830,331 $ 87,255,745 Refinance: Conventional $ 7,082,401 $ 27,059,252 $ 120,152,065 Government 5,189,598 7,834,636 12,034,583 Jumbo and other (1) 2,148,540 1,561,242 7,061,299 Total refinance 14,420,539 36,455,130 139,247,947 Total loan origination volume $ 108,275,883 $ 127,285,461 $ 226,503,692 Portfolio metrics Average loan amount $ 368 $ 365 $ 346 Weighted average loan-to-value ratio 82.89 % 79.67 % 71.68 % Weighted average credit score 737 738 750 Weighted average note rate 6.65 % 4.82 % 2.90 % Percentage of loans sold To GSEs 93 % 94 % 90 % To other counterparties 7 % 6 % 10 % Servicing-retained 95 % 97 % 99 % Servicing-released 5 % 3 % 1 % (1) Comprised of non-agency jumbo products and non-qualified mortgage products, including home equity lines of credit ("HELOCs") (which in many instances are second liens) and construction loans. 44 Table of Contents The components of loan production income for the periods presented were as follows: For the year ended December 31, Change Change % ($ in thousands) 2023 2022 Primary loss $ (1,514,340) $ (1,479,762) $ (34,578) 2.3 % Loan origination fees 284,185 278,594 5,591 2.0 % Provision for representation and warranty obligations (38,676) (30,416) (8,260) 27.2 % Capitalization of MSRs 2,269,378 2,213,572 55,806 2.5 % Loan production income $ 1,000,547 $ 981,988 $ 18,559 1.9 % Gain margin (1) 0.92 % 0.77 % 0.15 % For the year ended December 31, Change Change % ($ in thousands) 2022 2021 Primary loss $ (1,479,762) $ (244,134) $ (1,235,628) 506.1 % Loan origination fees 278,594 477,759 (199,165) (41.7) % Provision for representation and warranty obligations (30,416) (45,301) 14,885 (32.9) % Capitalization of MSRs 2,213,572 2,397,483 (183,911) (7.7) % Loan production income $ 981,988 $ 2,585,807 $ (1,603,819) (62.0) % Gain margin (1) 0.77 % 1.14 % (0.37) % (1) Represents total loan production income divided by total loan origination volume for the applicable period.
The decrease salaries, commissions and benefits was partially offset by an increase in other expense of $46.8 million, primarily due to decline in fair value of retained investment securities and a smaller decline in the fair value of the Public and Private Warrants.
The decrease in salaries, commissions and benefits was partially offset by an increase in other expense of $46.8 million, primarily due to a decline in fair value of retained investment securities and a smaller decline in the fair value of the Public and Private Warrants.
Net income Net income was $931.9 million for the year ended December 31, 2022, a decrease of $636.5 million or 40.6%, as compared to $1.57 billion for the year ended December 31, 2021.
Net income was $931.9 million for the year ended December 31, 2022, a decrease of $636.5 million or 40.6%, as compared to $1.57 billion for the year ended December 31, 2021.
Net cash used in financing activities Net cash used in financing activities was $9.58 billion for the year ended December 31, 2022 compared to cash provided by financing activities of $9.26 billion for the same period in 2021.
Net cash used in financing activities was $9.58 billion for the year ended December 31, 2022 compared to cash provided by financing activities of $9.26 billion for the same period in 2021.
On or after April 15, 2024, we may, at our option, redeem the 2029 Senior Notes in whole or in part during the twelve-month period beginning on the following dates at the following redemption prices: April 15, 2024 at 102.750%; April 15, 2025 at 101.375%; or April 15, 2026 until maturity at 100.000%, of the principal amount of the 2029 Senior Notes to be redeemed on the redemption date plus accrued and unpaid interest.
On or after April 15, 2024, we may, at our option, redeem the 2029 Senior Notes in whole or in part during the twelve-month period beginning on the following dates at the following redemption prices: April 15, 2024 at 102.750%; April 15, 2025 at 101.375%; or April 15, 2026 until maturity at 100%, of the principal amount of the 2029 Senior Notes to be redeemed on the redemption date plus accrued and unpaid interest.
On or after June 15, 2024, we may, at our option, redeem the 2027 Senior Notes in whole or in part during the twelve-month period beginning on the following dates at the following redemption prices: June 15, 2024 at 102.875%; June 15, 2025 at 101.438%; or June 15, 2026 until maturity at 100.000%, of the principal amount of the 2027 Senior Notes to be redeemed on the redemption date plus accrued and unpaid interest.
On or after June 15, 2024, we may, at our option, redeem the 2027 Senior Notes in whole or in part during the twelve-month period beginning on the following dates at the following redemption prices: June 15, 2024 at 102.875%; June 15, 2025 at 101.438%; or June 15, 2026 until maturity at 100%, of the principal amount of the 2027 Senior Notes to be redeemed on the redemption date plus accrued and unpaid interest.
For purposes of both initial and subsequent measurement, the fair value of MSRs is determined using a valuation model that calculates the present value of estimated net future servicing fee income. The model includes estimates of prepayment speeds, discount rate, cost to service, float earnings, contractual servicing income, and ancillary income and late fees, among others.
For purposes of both initial and subsequent measurement, the fair value of MSRs is determined using a valuation model that calculates the present value of estimated net future servicing income. The model includes estimates of prepayment speeds, discount rate, cost to service, float earnings, contractual servicing income, and ancillary income and late fees, among others.
When we have the unilateral right to repurchase Ginnie Mae pool loans we have previously sold (generally loans that are more than 90 days past due) and the call option results in a more than trivial benefit to us, the previously sold assets are required to be re-recognized on the balance sheet.
When we have the unilateral right to repurchase certain Ginnie Mae pool loans we have previously sold (generally loans that are more than 90 days past due) and the call option results in a more than trivial benefit to us, the previously sold assets are required to be re-recognized on the balance sheet.
As many of the commitments expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. In addition, we have contracts to sell mortgage loans into the secondary market at specified future dates (commitments to sell loans), and forward commitments to sell MBS at specified future dates and interest rates.
As many of the commitments expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. In addition, we have contracts to sell loans into the secondary market at specified future dates (commitments to sell loans), and forward commitments to sell MBS at specified future dates and interest rates.
IRLCs and FLSCs are free standing derivative financial instruments. We estimate the value of derivatives based on estimates of the price that would be received to sell an asset or paid to transfer a liability. Each individual contract is the basis for the determination.
IRLCs and FLSCs are free standing derivative financial instruments. We estimate the fair value of derivatives based on estimates of the price that would be received to sell an asset or paid to transfer a liability. Each individual contract is the basis for the determination.
As we have committed to providing a mortgage loan at a specific interest rate, we hedge that risk by selling forward-settling mortgage-backed securities and FLSCs in the To Be Announced ("TBA") market.
As we have committed to providing a mortgage loan at a specific interest rate, we generally hedge that risk by selling forward-settling mortgage-backed securities and FLSCs in the To Be Announced ("TBA") market.
Prior to June 15, 2024, we may, at our option, redeem up to 40% of the aggregate principal amount of the 2027 Senior Notes originally issued at a redemption price of 105.75% of the principal amount of the 2027 Senior Notes redeemed on the redemption date plus accrued and unpaid interest with the net proceeds of certain equity offerings.
Prior to June 15, 2024, we may, at our option, redeem up to 40% of the aggregate principal amount of the 2027 Senior Notes originally issued at a redemption price of 105.750% of the principal amount of the 2027 Senior Notes redeemed on the redemption date plus accrued and unpaid interest with the net proceeds of certain equity offerings.
Components of Operating Expenses Our operating expenses include salaries, commissions and benefits, direct loan production costs, marketing, travel and entertainment, depreciation and amortization, servicing costs, general and administrative (including professional services, occupancy and equipment), interest expense, and other expense/(income) (primarily related to the increase or decrease, respectively, in the fair value of the liability for the Public and Private Warrants, the increase or decrease, respectively, in the Tax Receivable Agreement liability, and the decrease or increase, respectively, in the fair value of retained investment securities).
Components of Operating Expenses Our operating expenses include salaries, commissions and benefits, direct loan production costs, marketing, travel and entertainment, depreciation and amortization, servicing costs, general and administrative (including professional services, occupancy and equipment), interest expense, and other expense (income) (primarily related to the increase or decrease, respectively, in the fair value of the liability for the Public and Private Warrants, the increase or decrease, respectively, in the 41 Table of Contents Tax Receivable Agreement liability, and the decrease or increase, respectively, in the fair value of retained investment securities).
The Company entered into sale and repurchase agreements for a portion of the retained beneficial interests in the securitization trusts established to faci litate its private label securitization transactions which have been accounted for as borrowings against investment securities.
UWM entered into sale and repurchase agreements for a portion of the retained beneficial interests in the securitization trusts established to faci litate its private label securitization transactions which have been accounted for as borrowings against investment securities.
We establish a reserve which is estimated based on our assessment of our contingent and non-contingent obligations, including the universe of loans which may still be at risk for indemnity, expected 64 Table of Contents frequency, appeal rate success, expected loss severity, expected economic conditions, as well as an estimate for the cost of a market participant’s potential readiness to stand by to perform on such obligations.
We establish a reserve which is estimated based on our assessment of our contingent and non-contingent obligations, including the universe of loans which may still be at risk for indemnity, expected frequency, appeal rate success, expected loss severity, expected economic conditions, as well as an estimate for the cost of a market participant’s potential readiness to stand by to perform on such obligations.
These investment securities are financed on average at approximately 80% of the outstanding principal balance, and exchanges of cash collateral are required if the fair value of the retained investment securities less the haircut is less than the principal balance plus accrued interest on the secured borrowings.
These investment securities are financed on average at approximately 75% of the outstanding principal balance, and exchanges of cash collateral are required if the fair value of the retained investment securities less the haircut is less than the principal balance plus accrued interest on the secured borrowings.
Our mortgage origination business derives revenue from originating, processing and underwriting primarily Government-sponsored enterprises ("GSE") conforming mortgage loans, along with FHA, USDA and VA mortgage loans, which are subsequently pooled and sold in the secondary market.
Our mortgage origination business derives revenue from originating, processing and underwriting primarily government-sponsored enterprise ("GSE") conforming mortgage loans, along with FHA, USDA and VA mortgage loans, which are subsequently pooled and sold in the secondary market.
The decrease in other expenses was primarily due to a decrease in salaries, commissions and benefits of $144.8 million, or 20.8%, due to decreases in incentive compensation (primarily bonuses and commissions) attributable to decreased loan production and a decrease in the average number of team members.
The decrease in other costs was primarily due to a decrease in salaries, commissions and benefits of $144.8 million, or 20.8%, due to decreases in incentive compensation (primarily bonuses and commissions) attributable to decreased loan production and a decrease in the average number of team members.
Loan production income includes all components related to the origination and sale of mortgage loans, including: 46 Table of Contents • primary gain, which represents the premium we may receive in excess of the loan principal amount adjusted for previous fair value adjustments, and certain fees charged by investors upon sale of loans into the secondary market.
Loan production income includes all components related to the origination and sale of mortgage loans, including: • primary gain, which represents the premium we may receive in excess of the loan principal amount adjusted for previous fair value adjustments, and certain fees charged by investors upon sale of loans into the secondary market.
The following table presents a reconciliation of net income, the most directly comparable U.S.
The following table presents a reconciliation of net income (loss), the most directly comparable U.S.
In executing these transactions, the Company sells mortgage loans to a securitization trust for cash and, in some cases, retained interests in the trust. The securitization entities are funded through the issuance of beneficial interests in the securitized assets.
In executing these transactions, UWM sells mortgage loans to a securitization trust for cash and, in some cases, retained interests in the trust. The securitization entities are funded through the issuance of beneficial interests in the securitized assets.
With a culture of continuous innovation of technology and enhanced client experience, we lead our market by building upon our proprietary and exclusively licensed technology platforms, superior service and focused partnership with the independent mortgage broker community. We originate primarily conforming and government loans across all 50 states and the District of Colu mbia .
With a culture of continuous innovation of technology and enhanced client experience, we lead our market by building upon our proprietary and exclusively licensed technology platforms, superior service and focused partnership with the independent mortgage broker community. We originate primarily conforming and government loans across all 50 states and the District of Columbia.
Loan production income was $982.0 million for the year ended December 31, 2022, a decrease of $1.60 billion, or 62.0%, as compared to $2.59 billion for the year ended December 31, 2021.
Loan production income was $982.0 million for the year ended December 31, 2022, a decrease of $1.6 billion, or 62.0%, as compared to $2.59 billion for the year ended December 31, 2021.
When we sell or securitize a pool of loans, the proceeds we receive from the sale or securitization of the loans are used to pay back the amounts we owe on the warehouse facilities. The remaining funds received then become available to be re- 55 Table of Contents advanced to originate additional loans.
When we sell or securitize a pool of loans, the proceeds we receive from the sale or securitization of the loans are used to pay back the amounts we owe on the warehouse facilities. The remaining funds received then become available to be re-advanced to originate additional loans.
The decrease in income tax provision for the year ended December 31, 2022, as compared to the same period in 2021, was primarily due to the decrease in pre-tax income attributable to the Company.
The decrease in income tax provision for the year ended December 31, 2023, as compared to the same period in 2022, was primarily due to the decrease in pre-tax income attributable to the Company.
The key unobservable inputs used in determining the fair value of our MSRs include the discount rate, prepayment speeds, and the cost of servicing. 63 Table of Contents Changes in economic and other relevant conditions could cause actual results to differ from assumptions used to determine fair value.
The key unobservable inputs used in determining the fair value of our MSRs include the discount rate, prepayment speeds, and the cost of servicing. Changes in economic and other relevant conditions could cause actual results to differ from assumptions used to determine fair value.
The decrease in loan production income was 50 Table of Contents primarily driven by a decrease in loan production volume, along with a decrease of 37 basis points in gain margin, from 114 basis points for the year ended December 31, 2021 to 77 basis points for the same period in 2022.
The decrease in loan production income was primarily driven by a decrease in loan production volume, along with a decrease of 37 basis points in gain margin, from 114 basis points for the year ended December 31, 2021 to 77 basis points for the same period in 2022.
The beneficial interests take the form of trust certificates, some of which are sold to investors and some of which may be retained by the Company due to regulatory requirements.
The beneficial interests take the form of trust certificates, some of which are sold to investors and some of which may be retained by UWM due to regulatory requirements.
We were in compliance with the terms of these indentures as of December 31, 2022. MSR Facility On September 30, 2022, the Company's consolidated subsidiary, UWM, entered into a Loan and Security Agreement with Citibank, N.A.
We were in compliance with the terms of these indentures as of December 31, 2023. MSR Facilities On September 30, 2022, the Company's consolidated subsidiary, UWM, entered into a Loan and Security Agreement with Citibank, N.A.
GAAP, and it may not be comparable to a similarly titled measure reported by other companies. Adjusted EBITDA has limitations as an analytical tool, and it should not 47 Table of Contents be considered in isolation or as an alternative to revenue, net income or any other performance measures derived in accordance with U.S.
GAAP, and it may not be comparable to a similarly titled measure reported by other companies. Adjusted EBITDA has limitations as an analytical tool, and it should not be considered in isolation or as an alternative to revenue, net income or any other performance measures derived in accordance with U.S.
When we have identified a pool of mortgage loans to sell to the agencies, non-governmental entities, or through our private label securitization transactions, we repurchase loans not already owned by us from our warehouse lender and sell the pool of mortgage loans into the secondary market, but in most instances retain the mortgage servicing rights, or MSRs, associated with those loans.
When we have 40 Table of Contents identified a pool of mortgage loans to sell to the agencies, non-governmental entities, other investors, or through our private label securitization transactions, we repurchase loans not already owned by us from our warehouse lender and sell the pool of mortgage loans into the secondary market, but in most instances retain the mortgage servicing rights, or MSRs, associated with those loans.
No amounts were outstanding under the Revolving Credit Facility as of December 31, 2022. Borrowings Against Investment Securities In 2021, the Company's consolidated subsidiary, UWM, began selling some of the mortgage loans that it originates through private label securitization transactions.
No amounts were outstanding under the Revolving Credit Facility as of December 31, 2023. Borrowings Against Investment Securities In 2021, our consolidated subsidiary, UWM, began selling some of the mortgage loans that it originates through private label securitization transactions.
The sources of funds needed to satisfy these cash r equirements include cash flows from operations and investing activities, including cash flows from sales of MSRs, sale or securitization of loans into the secondary market, loan origination fees, servicing fee income, and interest income on mortgage loans.
The sources of funds needed to satisfy these cash requirements include cash flows from operations and investing activities, including cash flows from sales of MSRs and excess servicing cash flows, sale or securitization of loans into the secondary market, loan origination fees, servicing fee income, and interest income on mortgage loans.
Liquidity and Capital Resources Overview Historically, our primary sources of liquidity have included: • borrowings including under our warehouse facilities and other financing facilities; • cash flow from operations and investing activities, including: ◦ sale or securitization of loans into the secondary market; ◦ loan origination fees; 54 Table of Contents ◦ servicing fee income; ◦ interest income on mortgage loans; and ◦ sale of MSRs.
Liquidity and Capital Resources Overview Historically, our primary sources of liquidity have included: • borrowings including under our warehouse facilities and other financing facilities; • cash flow from operations and investing activities, including: ◦ sale or securitization of loans into the secondary market; ◦ loan origination fees; ◦ servicing fee income; ◦ interest income on mortgage loans; and ◦ sale of MSRs and excess servicing cash flows.
Four of our warehouse line s advance based on the fair value of the loans, rather than principal balance. For those lines, we exchange collateral for modest changes in value. As of December 31, 2022, there were no outstanding exchanges of collateral.
Four of our warehouse lines advance based on the fair value of the loans, rather than principal balance. For those lines, we exchange collateral for modest changes in value. As of December 31, 2023, there were no outstanding exchanges of collateral.
As part of such evaluation, we regularly review our levels of indebtedness and available equity, our strategic investments, including technology and growth of the wholesale channel, the availability or desirability of growth through the acquisition of other companies or other mortgage portfolios, the repurchase or redemption of our outstanding indebtedness, or repurchases of our common stock or common stock derivatives.
As part of such evaluation, we regularly review our levels of secured and unsecured 49 Table of Contents indebtedness and available equity, our strategic investments, including technology and growth of the wholesale channel, the availability or desirability of growth through the acquisition of other companies or other mortgage portfolios, the repurchase or redemption of our outstanding indebtedness, or repurchases of our common stock or common stock derivatives.
“Risk Factors” and elsewhere in this Form 10-K. Business Overview We are the largest overall residential mortgage lender in the U.S., despite originating mortgage loans exclusively through the wholesale channel.
“Risk Factors” and elsewhere in this Form 10-K. Business Overview We are the largest overall residential mortgage lender in the U.S., by closed loan volume, despite originating mortgage loans exclusively through the wholesale channel.
Servicing costs increased $57.1 million for the year ended December 31, 2022 from the year ended December 31, 2021 as a result of the increase in the average servicing portfolio and Ginnie Mae loan loss mitigation expenses in 2022.
Servicing costs increased $57.1 million for the year ended December 31, 2022 from the year ended December 31, 2021 as a result of the increase in the average servicing portfolio and higher loss mitigation expenses in 2022.
During the time we hold the loans pending sale, we earn interest income from the borrower on the underlyi ng mortgage loan note. This income is partially offset by the interest and fees we have to pay under the warehouse facilities. Interest rates under the warehouse facilities are typically based on a reference interest rate benchmark plus a spread.
During the time we hold the loans pen ding sale, we earn interest income from the borrower on the underlying mortgage loan note. This income is partially offset by the interest and fees we have to pay under the warehouse facilities. Interest rates under the warehouse facilities are typically based on a reference interest rate benchmark plus a spread.
The year ended December 31, 2021 also included the impacts of the business combination transaction (net proceeds and higher distributions to SFS Corp.), proceeds from the issuance of the 2029 Senior Notes and the repayment of the secured line of credit.
The year ended December 31, 2021 also included the impacts of the business combination transaction (net proceeds and higher distributions to SFS Corp.), proceeds from the issuance of the 2029 Senior Notes.
When the mortgage loan is sold into the secondary market, any difference between the proceeds received and the current fair value of the loan is recognized in current period earnings; • loan origination fees we charge to originate a loan, which generally represent flat, per-loan fee amounts; • provision for representation and warranty obligations, which represent the reserves initially established for our estimated liabilities associated with the potential repurchase or indemnity of purchasers of loans previously sold due to representation and warranty claims by investors.
When the mortgage loan is sold into the secondary market, any difference between the proceeds received and the current fair value of the loan is recognized in current period earnings; • loan origination and certain other fees related to the origination of a loan, which generally represent flat, per-loan fee amounts; • provision for representation and warranty obligations, which represent the reserves initially established at the time of sale for our estimated liabilities associated with the potential repurchase or indemnity of purchasers of loans previously sold due to representation and warranty claims by investors.
We exclude the change in the Tax Receivable Agreement liability, the change in fair value of the Public and Private Warrants, the change in fair value of retained investment securities, and the change in fair value of MSRs due to valuation inputs or assumptions, or impairment or recovery of MSRs prior to the election of the fair value method of accounting for MSRs, as these represent non-cash, non-realized adjustments to our earnings, which is not indicative of our performance or results of operations.
We exclude the change in the Tax Receivable Agreement liability, the change in fair value of the Public and Private Warrants, the change in fair value of retained investment securities, and the change in fair value of MSRs due to valuation inputs or assumptions as these represent non-cash, non-realized adjustments to our earnings, which is not indicative of our performance or results of operations.
Income Taxes We recorded a $2.8 million provision for income taxes during the year ended December 31, 2022, compared to a provision for income taxes of $9.8 million for the year ended December 31, 2021 and $2.5 million for the year ended December 31, 2020.
Income Taxes We recorded a $6.5 million benefit for income taxes during the year ended December 31, 2023, compared to a provision for income taxes of $2.8 million for the year ended December 31, 2022 and $9.8 million for the year ended December 31, 2021.
As of December 31, 2022, we had $101.3 million outstanding under individual trades executed pursuant to a master repurchase agreement with a counterparty which is collateralized by the investment securities (beneficial interests in the trusts) that we retained due to regulatory requirements.
As of December 31, 2023, we had $93.8 million outstanding under individual trades executed pursuant to a master repurchase agreement with a counterparty which is collateralized by the investment securities (beneficial interests in the trusts) that we retained due to regulatory requirements.
These financial covenants include, but are not limited to, maintaining (i) a certain minimum tangible net worth, (ii) minimum liquidity, (iii) a maximum ratio of total liabilities or total debt to tangible net worth, and (iv) pre-tax net income requirements.
These financial covenants include, but are not limited to, maintaining (i) a certain minimum tangible net worth, (ii) minimum liquidity, (iii) a maximum ratio of total liabilities or total debt to tangible net worth, and (iv) profitability.
The Revolving Credit Agreement contains certain financial and operating covenants and restrictions, subject to a number of exceptions and qualifications, and the availability of funds under the Revolving Credit Facility is subject to our continued compliance with th ese covenants. The Company was in compliance with these covenants as of December 31, 2022.
The Revolving Credit Agreement contains certain financial and operating covenants and restrictions, subject to a number of exceptions and qualifications, and the availability of funds under the Revolving Credit Facility is subject to our continued compliance with th ese covenants. We were in compliance with these covenants as of December 31, 2023.
In addition, each of these facilities, as well as our unsecured lines of credit, includes cross default or cross acceleration provisions that could result in all facilities terminating if an event of default or acceleration of maturity occurs under any facility . We were in compliance with all covenants under these facilities as of December 31, 2022.
In addition, each of these facilities, as well as our secured and unsecured lines of credit, includes cross default or cross acceleration provisions that could result in all facilities terminating if an event of default or acceleration of maturity occurs under any facili ty. We were in compliance with all covenants under these facilities as of December 31, 2023.
This increase was primarily driven by a decrease in interest expense on funding facilities, due to lower average warehouse borrowing balances (due to lower production volume in 2022) and higher escrow credits provided by warehouse lenders, offset by higher interest rates on warehouse facilities (all of which are based on variable interest rate benchmarks plus a spread).
This increase was primarily driven by a decrease in interest expense on funding facilities, due to lower average warehouse borrowing balances (due to lower production volume in 2022) and higher credits from warehouse lenders on custodial and other deposits, offset by higher interest rates on warehouse facilities (all of which are variable based on short-term interest rate benchmarks plus a spread).
On November 22, 2021, our consolidated subsidiary, UWM, issued $500.0 million in aggregate principal amount of senior unsecured notes due June 15, 2027 (the "2027 Senior Notes"). The 2027 Senior Notes accrue interest at a rate of 5.750% per annum.
On November 22, 2021, our consolidated subsidiary, UWM, issued $500.0 million in aggregate principal amount of senior unsecured notes due June 15, 2027 (the "2027 Senior Notes"). The 2027 Senior Notes accrue interest at a rate of 5.750% per annum. Interest on the 2027 Senior Notes is due semi-annually on June 15 and December 15 of each year.
The MSR Facility contains covenants which include certain financial requirements, including maintenance of minimum tangible net worth, minimum liquidity, maximum debt to net worth ratio, and net income as defined in the agreement. As of December 31, 2022, the Company was in compliance with all applicable covenants.
The GNMA MSR Facility contains covenants which include certain financial requirements, including maintenance of minimum tangible net worth, minimum liquidity, maximum debt to net worth ratio, and net income as defined in the agreement. As of December 31, 2023, we were in compliance with all applicable covenants.
Years Ended December 31, 2022, 2021 and 2020 Summary For the year ended December 31, 2022, we originated $127.3 billion in residential mortgage loans, which was a decrease of $99.2 billion, or 44%, from the year ended December 31, 2021.
For the year ended December 31, 2022, we originated $127.3 billion in loans, which was a decrease of $99.2 billion, or 44%, from the year ended December 31, 2021.
(4) Reflects the change (increase/(decrease)) in the fair value of the Public and Private Warrants. (5) Reflects the change (increase/(decrease)) in the Tax Receivable Agreement liability. Refer to Note 1 - Organization, Basis of Presentation and Summary of Significant Accounting Policies to the consolidated financial statements for additional information related to the Tax Receivable Agreement.
Refer to Note 1 - Organization, Basis of Presentation and Summary of Significant Accounting Policies to the consolidated financial statements for additional information related to the Tax Receivable Agreement. (5) Reflects the change (decrease/(increase)) in the fair value of the retained investment securities.
We record our potential purchase obligation at the gross amount of the loan eligible to be repurchased. The related asset and liability for the Ginnie Mae pool loans eligible for repurchase are presented separately on the consolidated balance sheet.
We record our potential purchase obligation at the unpaid principal balance of the loan. The related asset and liability for the Ginnie Mae pool loans eligible for repurchase are presented separately on the consolidated balance sheet.
Mortgage loans at fair value were $7.1 billion at December 31, 2022, compared to $16.9 billion as of December 31, 2021. Mortgage servicing rights MSRs represent the fair value assigned to the rights to the contracts that obligate us to service the loans sold in exchange for a servicing fee.
Mortgage loans at fair value were $5.45 billion at December 31, 2023, compared to $7.13 billion as of December 31, 2022. Mortgage servicing rights MSRs represent the fair value assigned to the rights in the contracts that obligate us to service the loans sold in exchange for a servicing fee.
Net cash provided by investing activities Net cash provided by investing activities was $1.29 billion for the year ended December 31, 2022 compared to $199.8 million of net cash provided by investing activities for the same period in 2021.
Net cash provided by investing activities Net cash provided by investing activities was $1.83 billion for the year ended December 31, 2023 compared to $1.29 billion of net cash provided by investing activities for the same period in 2022.
We define Adjusted EBITDA as earnings bef ore interest expense on non-funding debt, provision for income taxes, depreciation and amortization, stock-based compensation expense, the change in fair value of MSRs due to valuation inputs or assumptions (for periods subsequent to the election of the fair value method accounting for MSRs - see Note 1 to the consolidated financial statements), and the impairment or recovery of MSRs (for periods prior to the election of the fair value method of accounting for MSRs), the impact of non-cash deferred compensation expense, the change in fair value of the Public and Private Warrants, the change in the Tax Receivable Agreement liability, and the change in fair value of retained investment securities.
We define Adjusted EBITDA as earnings bef ore interest expense on non-funding debt, provision for income taxes, depreciation and amortization, stock-based compensation expense, the change in fair value of MSRs due to valuation inputs or assumptions, the impact of non-cash deferred compensation expense, the change in fair value of the Public and Private Warrants, the change in the Tax Receivable Agreement liability, and the change in fair value of retained investment securities.
For the year ended December 31, 2022, we recognized $868.8 million of income due to changes in the fair value of MSRs as a result of changes in valuation inputs and assumptions, primarily as a result of increases in market interest rates, compared to $286.3 million for the same period in the prior year.
For the year ended December 31, 2023, we recognized a loss of $330.0 million due to changes in the fair value of MSRs as a result of changes in valuation inputs and assumptions, primarily as a result of decreases in market interest rates, compared to $868.8 million of income recognized for the same period in the prior year as a result of increased in market interest rates.
Net cash used in operating activities was $9.96 billion for the year ended December 31, 2021 compared to net cash provided by operating activities of $56.4 million for the same period in 2020.
Net cash provided by operating activities was $8.27 billion for the year ended December 31, 2022 compared to net cash used in operating activities of $9.96 billion for the same period in 2021.
The change in fair value for the year ended December 31, 2022 was primarily attributable to an increase in fair value of approximately $868.8 million due to changes in valuation inputs/assumptions, mainly as a result of higher interest rates, partially offset by a decline in fair value of approximately $556.9 million due to realization of cash flows and decay (including loans paid in full) and approximately $27.8 million of net reserves and transaction costs for bulk MSR sales.
The net increase in fair value for the year ended December 31, 2022 of approximately $284.1 million was attributable to an increase of approximately $868.8 million resulting from changes in valuation inputs and assumptions, primarily due to increases in market interest rates, partially offset by declines of approximately $556.9 million due to realization of cash flows, decay, and other (including loans paid in full) and approximately $27.8 million of net reserves and transaction costs for bulk MSR sales.
The increase in cash flows provided by investing activities was primarily driven by an increase in proceeds from the sales of MSRs. Net cash provided by investing activities was $199.8 million for the year ended December 31, 2021 compared to $231.9 million of net cash provided by investing activities for the same period in 2020.
The increase in cash flows provided by investing activities was primarily driven by an increase in proceeds from the sales of MSRs and excess servicing cash flows. Net cash provided by investing activities was $1.29 billion for the year ended December 31, 2022 compared to $199.8 million of net cash provided by investing activities for the same period in 2021.
All such mortgage loans must adhere to a set of eligibili ty criteria to be acceptable. As of December 31, 2022, no amount was outstanding through the ASAP+ program and $2.0 million was outstanding under the EF program.
All such mortgage loans must adhere to a set of eligibility criteria to be acceptable. As of December 31, 2023, no amount was outstanding under the ASAP+ program and $53.9 million was outstanding through the EF program.
There are also differences between assumptions used to determine fair value (what a buyer would pay) and what we can achieve in its operations. Prepayment speeds can change quickly and be materially different between buyers. Consequently, prepayment speed assumptions often differ from our estimates. Increases in prepayment speeds generally have an adverse effect on the fair value of MSRs.
There are also differences between assumptions used to determine fair value (what a buyer would pay) and what we can achieve in our operations. Prepayment speeds can change quickly and related assumptions can be materially different between buyers. Consequently, prepayment speed assumptions often differ from our estimates.
GAAP financial measure, to Adjusted EBITDA: For the year ended December 31, ($ in thousands) 2022 2021 2020 Net income $ 931,858 $ 1,568,400 $ 3,382,510 Interest expense on non-funding debt 132,647 86,086 28,062 Provision for income taxes 2,811 9,841 2,450 Depreciation and amortization 45,235 35,098 16,820 Stock-based compensation expense 7,545 6,467 — Change in fair value of MSRs due to valuation inputs or assumptions (1) (868,803) (286,348) — (Recovery)/Impairment of MSRs (2) — — 19,584 Deferred compensation, net (3) 7,370 21,900 4,665 Change in fair value of Public and Private Warrants (4) (7,683) (36,105) — Change in Tax Receivable Agreement liability (5) 3,200 11,937 — Change in fair value of investment securities (6) 28,222 1,061 — Adjusted EBITDA $ 282,402 $ 1,418,337 $ 3,454,091 (1) Reflects the change ((increase)/decrease) in fair value of MSRs due to changes in valuation inputs or assumptions, including discount rates and prepayment speed assumptions, primarily due to changes in market interest rates.
GAAP financial measure, to Adjusted EBITDA: 42 Table of Contents For the year ended December 31, ($ in thousands) 2023 2022 2021 Net income (loss) $ (69,782) $ 931,858 $ 1,568,400 Interest expense on non-funding debt 172,498 132,647 86,086 Provision (benefit) for income taxes (6,511) 2,811 9,841 Depreciation and amortization 46,146 45,235 35,098 Stock-based compensation expense 13,832 7,545 6,467 Change in fair value of MSRs due to valuation inputs or assumptions (1) 330,031 (868,803) (286,348) Deferred compensation, net (2) (7,938) 7,370 21,900 Change in fair value of Public and Private Warrants (3) 6,060 (7,683) (36,105) Change in Tax Receivable Agreement liability (4) (1,575) 3,200 11,937 Change in fair value of investment securities (5) (4,491) 28,222 1,061 Adjusted EBITDA $ 478,270 $ 282,402 $ 1,418,337 (1) Reflects the change ((increase)/decrease) in fair value of MSRs due to changes in valuation inputs or assumptions, including discount rates and prepayment speed assumptions, primarily due to changes in market interest rates.
The borrowings against investment securities have remaining terms ranging from four to eight months as o f December 31, 2022, and interest rates based on twelve-mo nth LIBOR or SOFR plus a spread. We intend to renew these sale and repurchase agreements upon their maturity during the required holding period for the retained investment securities.
The borrowings against investment securities have remaining terms ranging from one to two months as of December 31, 2023, and interest rates based on SOFR plus a spread. We intend to renew these sale and repurchase agreements upon their maturity during the required holding period for the retained investment securities.
The increase in cash flows from operating 60 Table of Contents activities was primarily driven by the decrease in mortgage loans at fair value as of December 31, 2022, notwithstanding the early roll-out of the increased loan size limits discussed above, offset by a decrease in net income 2022, adjusted for non-cash items, including the capitalization and change in fair value of MSRs.
The increase in cash flows from operating activities was primarily driven by the decrease in mortgage loans at fair value as of December 31, 2022, offset by a decrease in net income 2022, adjusted for non-cash items, including the capitalization and change in fair value of MSRs.
GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.
Critical Accounting Estimates and Use of Significant Estimates Preparation of financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.
Historically, our primary uses of funds have included: • origination of loans; • retention of MSRs from our loan sales; • payment of interest expense; • payment of operating expenses; and • dividends on, and repurchases of, our Class A common stock and distributions to SFS Corp.
Historically, our primary uses of funds have included: • origination of loans; • retention of MSRs from our loan sales; • payment of interest expense; • payment of operating expenses; and • dividends on, and repurchases of, our Class A common stock and distributions to SFS Corp., including tax distributions Our consolidated subsidiary, Holdings LLC, is generally required from time to time to make distributions in cash to SFS Corp.
The decrease was primarily the result of the decrease in total revenue, net of $1.97 billion, partially offset by a decrease in total expenses of $161.6 million, as further described above.
The decrease in net income was primarily the result of a decrease in total revenue, net of $1.06 billion, partially offset by a decrease in total expenses (including income taxes) of $59.7 million, as further described above.
The maximum exposure under our representations and warranties obligations would be the outstanding principal balance, any premium received on all loans ever sold by us that are not subject to agency certainty clauses, as well as potential costs associated with repurchasing or indemnifying the buyers, less any loans that have already been paid in full by the borrower, loans that have defaulted without a breach of representations and warranties, that have been indemnified via settlement or make whole, or that have been repurchased.
The initial estimated provision for these losses is included in "loan production income" in the consolidated statements of operations, with subsequent changes in estimates recorded as part of "general and administrative" expenses. 57 Table of Contents The maximum exposure under our representations and warranties obligations would be the outstanding principal balance, any premium received on all loans ever sold by us that are not subject to agency certainty clauses, as well as potential costs associated with repurchasing or indemnifying the buyers, less any loans that have already been paid in full by the borrower, loans that have defaulted without a breach of representations and warranties, that have been indemnified via settlement or make whole, or that have been repurchased .
Adjusted EBITDA for the year ended December 31, 2021 was $1.42 billion as compared to $3.45 billion for the year ended December 31, 2020. Refer to the " Non-GAAP Financial Measures " section below for a detailed discussion of how we define and calculate Adjusted EBITDA.
Adjusted EBITDA for the year ended December 31, 2023 was $478.3 million as compared to $282.4 million for the year ended December 31, 2022. Refer to the " Non-GAAP Financial Measures " section below for a detailed discussion of how we define and calculate Adjusted EBITDA.
For the periods presented below, our loan servicing portfolio consisted of the following: ($ in thousands) December 31, 2022 December 31, 2021 UPB of loans serviced 312,454,025 319,807,457 Number of loans serviced 967,050 1,017,027 MSR portfolio delinquency count (60+ days) as % of total 0.85 % 0.81 % Weighted average note rate 3.64 % 2.94 % Weighted average service fee 0.2862 % 0.2624 % Change in Fair Value of Mortgage Servicing Rights The change in fair value of MSRs was a net increase of $284.1 million for the year ended December 31, 2022 as compared with a net decrease of $587.8 million for the year ended December 31, 2021.
As of the dates presented below, our loan servicing portfolio of loans serviced for others consisted of the following: ($ in thousands) December 31, 2023 December 31, 2022 UPB of loans serviced $ 299,456,189 $ 312,454,025 Number of loans serviced 905,129 967,050 MSR portfolio delinquency count (60+ days) as % of total 1.15 % 0.85 % Weighted average note rate 4.43 % 3.64 % Weighted average service fee 0.3029 % 0.2862 % Change in Fair Value of Mortgage Servicing Rights The change in fair value of MSRs was a net decrease of $854.1 million for the year ended December 31, 2023 as compared with a net increase of $284.1 million for the year ended December 31, 2022.
Cash flow data for the year ended December 31, 2022, 2021 and 2020 For the year ended December 31, ($ in thousands) 2022 2021 2020 Net cash provided by (used in) operating activities $ 8,268,182 $ (9,956,963) $ 56,412 Net cash provided by investing activities 1,290,346 199,751 231,882 Net cash (used in) provided by financing activities (9,584,718) 9,264,463 802,260 Net (decrease) increase in cash and cash equivalents $ (26,190) $ (492,749) $ 1,090,554 Cash and cash equivalents at the end of the period 704,898 731,088 1,223,837 Net cash provided by operating activities Net cash provided by operating activities was $8.27 billion for the year ended December 31, 2022 compared to net cash used in operating activities of $9.96 billion for the same period in 2021.
Cash flow data for the years ended December 31, 2023, 2022 and 2021 For the year ended December 31, ($ in thousands) 2023 2022 2021 Net cash provided by (used in) operating activities $ 165,244 $ 8,268,182 $ (9,956,963) Net cash provided by investing activities 1,829,962 1,290,346 199,751 Net cash (used in) provided by financing activities (2,202,636) (9,584,718) 9,264,463 Net decrease in cash and cash equivalents $ (207,430) $ (26,190) $ (492,749) Cash and cash equivalents at the end of the period 497,468 704,898 731,088 Net cash provided by operating activities Net cash provided by operating activities was $165.2 million for the year ended December 31, 2023 compared to net cash provided by operating activities of $8.27 billion for the same period in 2022.
The Company repurcha sed $355.8 million, $133.4 million and $53.1 million in UPB of loa ns during the years ended December 31, 2022, 2021 and 2020, respectively, related to its representations and warranties obligations.
The Company repurchased $259.0 million, $355.8 million and $133.4 million in UPB of loans during the years ended December 31, 2023, 2022 and 2021, respectively, related to its representations and warranties obligations.
Derivative assets and liabilities were $82.9 million and $49.7 million, respectively, as of December 31, 2022, as compared to $67.4 million and $36.7 million, respectively, as of December 31, 2021.
Derivative assets and liabilities were $33.0 million and $40.8 million, respectively, as of December 31, 2023, as compared to $82.9 million and $49.7 million, respectively, as of December 31, 2022.
As of December 31, 2022, the Company had delivered $5.3 million of collateral to counterparty under these sale and repurchase agreements. Finance Leases As of December 31, 2022, our finance lease liabilities were $43.5 million, $27.9 million of which relates to leases with related parties.
As of December 31, 2023, we had delivered no collateral to the counterparty under these sale and repurchase agreements. 53 Table of Contents Finance Leases As of December 31, 2023, our finance lease liabilities were $30.7 million, $26.3 million of which relates to leases with related parties.
The increase in loan servicing income during the year ended December 31, 2022 was primarily driven by the increased average servicing portfolio.
The increase in loan servicing income during the year ended December 31, 2023 was primarily driven by higher average servicing fees, partially offset by a decline in the average servicing portfolio.
The Company’s financing lease agreements have remaining terms ranging from approxima tely three months to thirteen years.
The Company’s financing lease agreements have remaining terms ranging from approximately two months to twelve years.
The blended average pullthrough rate was 77% and 86%, as of December 31, 2022 and December 31, 2021, respectivel y.
The blended average pullthrough rate was 76% and 77% as of December 31, 2023 and December 31, 2022, respectively .
MSRs were $4.5 billion as of December 31, 2022, compared to $3.3 billion as of December 31, 2021.
MSRs were $4.03 billion as of December 31, 2023, compared to $4.45 billion as of December 31, 2022.
Net income attributable to the Company of $41.7 million for the year ended December 31, 2022 reflects the net income of UWM attributable to the Company due to its approximate 6% ownership interest in Holdings LLC for this period.
Net loss attributable to the Company of $13.2 million and net income attributable to the Company of $41.7 million for the years ended December 31, 2023 and 2022, respectively, includes the net income (loss) of UWM attributable to the Company due to its approximate 6% ownership interest in Holdings LLC for these periods.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeActual results could differ materially. 65 Table of Contents December 31, 2022 ($ in thousands) Down 25 bps Up 25 bps Increase (decrease) in assets Mortgage loans at fair value $ 51,981 $ (57,344) MSRs (88,322) 82,026 IRLCs 38,856 (45,731) Total change in assets $ 2,515 $ (21,049) Increase (decrease) in liabilities FLSCs $ (97,967) $ 103,382 Total change in liabilities $ (97,967) $ 103,382 Credit risk We are subject to credit risk, which is the risk of default that results from a borrower’s inability or unwillingness to make contractually required mortgage payments.
Biggest changeDecember 31, 2023 ($ in thousands) Down 25 bps Up 25 bps Increase (decrease) in assets Mortgage loans at fair value $ 23,100 $ (26,364) MSRs (148,428) 154,516 IRLCs 31,927 (39,744) Total change in assets $ (93,401) $ 88,408 Increase (decrease) in liabilities FLSCs $ (69,941) $ 78,201 Total change in liabilities $ (69,941) $ 78,201 Credit risk 58 Table of Contents We are subject to credit risk, which is the risk of default that results from a borrower’s inability or unwillingness to make contractually required mortgage payments.
There are certain limitations inherent in the sensitivity analysis presented, including the necessity to conduct the analysis based on a single point in time and the inability to include the complex market reactions that normally would arise from the market shifts modeled. We used December 31, 2022 market rates on our instruments to perform the sensitivity analysis.
There are certain limitations inherent in the sensitivity analysis presented, including the necessity to conduct the analysis based on a single point in time and the inability to include the complex market reactions that normally would arise from the market shifts modeled. We used December 31, 2023 market rates on our instruments to perform the sensitivity analysis.
Because origination volumes tend to increase in declining interest rate environments and decrease in increasing rate environments, we believe that servicing provides a natural hedge to our origination business. We do not specifically hedge MSRs but manage the economic risk through partially offsetting impact of servicing and mortgaging originations.
Because origination volumes tend to increase in declining interest rate environments and decrease in increasing rate environments, we believe that our origination business provides a natural hedge to servicing. We do not specifically hedge MSRs but manage the economic risk through partially offsetting impact of servicing and mortgage originations.
Management believes that the increase in the weighted average loan to value ratio year over year is primarily due to the increase in the percentage of purchase volume to total loan origination volume in 2022. Counterparty risk We are subject to risk that arises from our financing facilities and interest rate risk hedging activities.
Management believes that the increase in the weighted average loan to value ratio year over year is primarily due to the increase in the percentage of purchase volume to total loan origination volume in 2023. Counterparty risk We are subject to risk that arises from our financing facilities and interest rate risk hedging activities.
The master netting agreements contain a legal right to offset amounts due to and from the same counterparty. We incurred no losses due to nonperformance by any of our counterparties during the years ended December 31, 2022 or December 31, 2021.
The master netting agreements contain a legal right to offset amounts due to and from the same counterparty. We incurred no losses due to nonperformance by any of our counterparties during the years ended December 31, 2023 or December 31, 2022.
With our financing facilities, we seek to mitigate this risk by ensuring that we have sufficient borrowing capacity with a variety of well-established counterparties to meet our funding needs as well as fostering long-term relationships. 66 Table of Contents
With our financing facilities, we seek to mitigate this risk by ensuring that we have sufficient borrowing capacity with a variety of well-established counterparties to meet our funding needs as well as fostering long-term relationships. 59 Table of Contents
In accordance with the best practices outlines by The Treasury Market Practices Group, we execute Securities Industry and Financial Markets Association trading agreements with all material trading partners. Each such agreement provides for an exchange of margin money should either party’s exposure exceed a predetermined contractual limit. Such margin requirements limit our overall co unterparty exposure.
In accordance with the best practices outlines by The Treasury Market Practices Group, we execute Securities Industry and Financial Markets Association trading agreements with all material trading partners. Each such agreement provides for an exchange of margin should either party’s exposure exceed a predetermined contractual limit. Such margin requirements limit our overall counterparty exposure.
In a declining interest rate environment, the fair value of MSRs generally decreases as expected prepayments increase consequently truncating the estimated life of the MSRs resulting in expected decreases in cash flows.
In a declining interest rate environment, the fair value of MSRs generally decreases as expected prepayments increase consequently truncating the estimated life of the MSRs, and estimated float earnings decrease, resulting in expected decreases in cash flows.
In periods of rising interest rates, the fair value of the MSRs generally increases as expected prepayments decrease, consequently extending the estimated life of the MSRs resulting in expected increases in cash flows.
In periods of rising interest rates, the fair value of the MSRs generally increases as expected prepayments decrease, consequently extending the estimated life of the MSRs, and estimated float earnings increase, resulting in expected increases in cash flows.
The following table summarizes the estimated change in the fair value of our mortgage loans at fair value, MSRs, IRLCs and FLSCs as of December 31, 2022 given hypothetical instantaneous parallel shifts in the yield curve.
The following table summarizes the estimated change in the fair value of our mortgage loans at fair value, MSRs, IRLCs and FLSCs as of December 31, 2023 given hypothetical instantaneous parallel shifts in the yield curve. Actual results could differ materially.
For the year end ed December 31, 2022, our originated loans had a weighted average loan to value ratio of 79.67%, and a weig hted average FICO score of 738. For the year ended December 31, 2021, our originated loans had a weighted average loan to value ratio of 71.68%, and a weighted average FICO score of 750.
For the year ended December 31, 2023, our originated loans had a weighted average loan to value ratio of 82.89%, and a weighted average FICO score of 737. For the year ended December 31, 2022, our originated loans had a weighted average loan to value ratio of 79.67%, and a weighted average FICO score of 738.

Other UWMC 10-K year-over-year comparisons