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What changed in UWM Holdings Corp's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of UWM Holdings Corp's 2023 and 2024 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 2024 report.

+431 added−444 removedSource: 10-K (2025-02-26) vs 10-K (2024-02-28)

Top changes in UWM Holdings Corp's 2024 10-K

431 paragraphs added · 444 removed · 338 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

49 edited+15 added−2 removed57 unchanged
Biggest changeThe loan is either placed into an investment portfolio (in the case of banks and typically only for certain loans tied to shorter term interest rates) or packaged together with other loans and sold as MBS to investors in the secondary market.
Biggest changeThe loan is either placed into an investment portfolio (in the case of banks and typically only for certain loans with variable or shorter term fixed interest rates) or packaged together with other loans and sold as MBS to investors in the secondary market. 4 Table of Contents Leader in the Wholesale Channel UWM has been the largest wholesale lender in the U.S. since 2015, and through the first nine months of 2024, originated 43.5% of the loans closed through the wholesale channel and 8.4% of the first lien residential mortgages that closed during the first nine months of 2024 in all origination channels (based on data from Inside Mortgage Finance).
Available Information Our annual reports on Form 10-K, quarterly reports on From 10-Q, current reports on Form 8-K, proxy statements and amendments to those reports filed with or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act are available free of charge through the investor relations section of our website at www.uwm.com as soon as reasonably practicable after electronically filing such material with the SEC.
Available Information Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and amendments to those reports filed with or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act are available free of charge through the investor relations section of our website at www.uwm.com as soon as reasonably practicable after electronically filing such material with the SEC.
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.
We strive to foster a culture of diversity and inclusion so that 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.
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.
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.
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.
Unlike “Retail Mortgage Lenders” that 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 utilize two sub-servicers to service the loans for which we have retained servicing rights, one of which is a bank and one is a non-bank lender.
We currently utilize two sub-servicers to service the loans for which we have retained servicing rights, one of which is a bank and one is a non-bank lender.
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.
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 MSRs associated with those loans.
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.
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 interest 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. 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.
Conversely, decreases in 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.
These laws include (i) the Truth-In-Lending Act (TILA), (ii) the Homeowners Protection Act (HPA), (iii) the Real Estate Settlement Procedures Act (RESPA), (iv) the Home Mortgage Disclosure Act (HMDA) and Regulation C, and (v) the Fair Debt Collections Practices Act (FDCPA).
These laws include (i) the Truth-In-Lending Act (TILA), (ii) the Homeowners Protection Act (HPA), (iii) the Real Estate Settlement Procedures Act (RESPA), (iv) the Home Mortgage Disclosure Act (HMDA) and its implementing regulation, Regulation C, and (v) the Fair Debt Collections Practices Act (FDCPA).
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.
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 8 Table of Contents business (whether done internally or outsourced to a sub-servicer). Our in-house servicing team is responsible for monitoring our sub-servicers.
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.
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 to support the underwriting process. We believe that PA+ will help our clients scale their businesses during periods of increased volume.
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).
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).
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.
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.
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.
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 its implementing regulation, Regulation B, promulgated by the CFPB pursuant to ECOA, (ii) the Fair Housing Act (FHA) and (iii) the GLBA.
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.
We continue to work diligently to assess and understand the implications of the regulatory environment in which we operate. Our clients, the Independent Mortgage Brokers, are also subject to extensive regulation at the state level by state licensing authorities and administrative agencies.
Our client facing systems are generally proprietary (other than Blink+ TM ), developed in-house and were built to be scalable and readily modified, which allows us to quickly introduce enhanced features and to change loan program guidelines in response to m arket, industry and regulatory changes without excessive complex programming or dependency on outside entities.
Our client facing systems are generally proprietary, developed in-house and were built to be scalable and readily modified, which allows us to quickly introduce enhanced features and to change loan program guidelines in response to m arket, industry and regulatory changes without excessive complex programming or dependency on outside entities.
We believe our closing process is the most efficient in the industry and results in shorter application to clear-to-close times than any of the other major Retail Mortgage Lenders or Wholesale Mortgage Lenders.
We believe our closing process is the most efficient in the industry and results in shorter application to clear-to-close times than any of the other major Reta il Mortgage Lenders or Wholesale Mortgage Lenders.
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.
Integral components of our strategy are (1) continuing our leadership position in the growing wholesale channel by investing in technology, including AI, 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 allows us to quickly adapt to market conditions and opportunities, and ample capital and liquidity, (3) employing our six pillars to drive a unique culture that we believe results in a durable competitive advantage, (4) originating high quality loans, the vast majority of which are backed directly or indirectly by the federal government, and (5) to minimize market risks and to maximize opportunities in different macroeconomic environments.
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 are also subject to the laws, regulations and rules of the fifty states in which we operate and the District of Columbia. 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.
In certain circumstances, we can be held potentially liable for the acts and practices of our clients for violations of various federal and state consumer protection and other laws and regulations, including but not limited to (i) RESPA and Regulation X, (ii) the Federal Trade Commission Act (FTC Act), the FTC Credit Practices Rules and the FTC Telemarketing Sales Rule, each of which prohibit unfair or deceptive acts or practices and certain related practices; and (iii) the Telephone Consumer Protection Act (TCPA), which restricts telephone solicitations and the use of certain automatic telephone equipment.
In certain circumstances, we may be alleged to be responsible for the acts and practices of our clients for violations of various federal and state consumer protection and other laws and regulations, including but not limited to (i) RESPA and its implementing regulation, Regulation X, (ii) the Federal Trade Commission Act (FTC Act), the FTC Credit Practices Rules and the FTC Telemarketing Sales Rule, each of which prohibit unfair or deceptive acts or practices and certain related practices; and (iii) the Telephone Consumer Protection Act (TCPA), which restricts telephone solicitations and the use of certain automatic telephone equipment.
The residential mortgage loan financing process typically involves three stages: • Initiate Borrower Connection . A broker or other party is approached by a potential borrower for a mortgage loan.
The residential mortgage loan financing process typically involves three stages: • Initiate Borrower Connection . A broker or other party is either approached by or reaches out to a potential borrower for a mortgage loan.
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.
Our exclusive focus on the wholesale channel has resulted in relationships with over 13,000 independent broker businesses throughout the U.S., with over 55,000 associated loan officers—of which approximately 35,000 submitted a loan to us during 2024.
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.
We had receivables of $124.0 million and $148.7 million as of December 31, 2024 and December 31, 2023, respectively, which are due to us from the securitization trusts and/or borrowers. Competition Competition in the residential mortgage loan origination market is intense.
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.
It provides useful communications tools to help our clients stay connected to borrowers and 7 Table of Contents 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. • ChatUWM – An AI-powered mortgage platform exclusively from UWM, designed to streamline loan tasks by offering advanced automated processing for mortgage professionals.
The program allows us to scale business without increasing costs associated with document storage, and processes can be designed in conjunction with the document management system for maximum efficiency. • Blink+ TM – A client facing point of sale (POS) system white-labeled for our clients.
The program allows us to scale business without increasing costs associated with document storage, and processes can be designed in conjunction with the document management system for maximum efficiency. • Blink+ TM – A client facing point of sale system white-labeled for our clients. Blink+ TM allows clients to access our products and pricing, automated underwriting system and fee templates.
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.
We celebrate our team members and all of the ir accomplishments through various events throughout the 10 Table of Contents year. From our annual company-wide family fair with thousands of smiling faces to the annual holiday party, we believe that it is important to focus on the health and happiness of our team members and their families.
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.
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 6 Table of Contents facility utilization and managing risk and sales of MSRs.
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.
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, 2024, we had approximately 9,100 team members, substant ially all of whom are based in our corporate campus in Pontiac, Michigan.
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.
For the years ended December 31, 2024 and December 31, 2023, we delivered an average of 16 and 17 business days, respectively, from loan application to clear to close, as compared to management's estimates of the industry average of 41 cal endar days for both years.
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.
We believe this commitment to our team members is why we have been recognized again in 2024 for being a top workplace in the financial services industry. In a 2024 employee engagement survey, 96% of team members responded that they felt they belonged at UWM from a diversity and inclusion standpoint.
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.
According to the Nationwide Multistate Licensing System ("NMLS"), as of September 30, 2024, there were approximately 360,000 federally registered mortgage loan officers in the U.S.
Blink+ TM allows clients to access our products and pricing, automated underwriting system and fee templates. This solution syncs loan application data, including fees, with our EASE TM program, and replaces a client’s costly existing system free of charge while encouraging lead conversion.
This solution syncs loan application data, including fees, with our EASE TM program, and replaces a client’s costly existing system free of charge while encouraging lead conversion.
I n the face of significant changes in the mortgage market, we have maintained our commitment to high credit quality loans. Our focus on technology and process improvements creates a more efficient origination system for both us and our clients.
I n the face of significant changes in the mortgage market, we have maintained our commitment to high credit quality loans. Our focus on technology and process improvements creates a more efficient origination system for both us and our clients. This has been rewarded with strong client service scores, via our NPS, which we believe is a significant competitive advantage.
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 the year ended December 31, 2024, 89% of loans originated by UWM were sold to Fannie Mae or Freddie Mac, or were transferred to Ginnie Mae pools in the secondary market, while the remainder primarily include non-agency 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, construction loans, and non-qualified mortgage products, including home equity lines of credit (which in many instances are second liens) .
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.
Loan closing speeds and costs to consumers are also positively impacted for clients who use our innovative Title Revi ew and Closing ("TRAC") and TRAC+ services, which provide an efficient alternative to utilizing a traditional lender title policy and title company.
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.
Infrastructure, Systems and Technologies Advanced technologies and systems We are a technology driven company that c ontinuously seeks to innovate and provide superior systems to our clients, with approximately 1,800 team members as of December 31, 2024, compared to approximately 700 team members as of December 31, 2019, dedicated to our technology and information systems located in our Pontiac, Michigan headquarters.
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.
As of December 31, 2024, approximately 45% of our team members were female and 41% of our team members that choose to identify their ethnicity identified as ethnically diverse. Continuous improvement is a primary focus of our strategic plan and one of our core pillars. We believe personal and professional growth accelerates careers while promoting productivity and innovation.
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.
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 government authorities.
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.
After being privately owned for 35 years, on January 21, 2021, UWM completed its business combination with Gores Holdings IV, Inc. and 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”.
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.
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.
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.
We heavily invest in the development of each team member. We have approximately 250 training team members dedicated to providing our new hires and existing team members with the train ings and resources necessary to pursue their career paths and ensure compliance with our policies. In 2024, approximately 1.6 million training hours were delivered to team members.
Our loan origination and loan servicing operations are primarily regulated at the state level by state financial services authorities and administrative agencies, and at the federal level by the CFPB. The CFPB has federal regulatory, supervisory and enforcement authority over the residential mortgage loan origination and servicing industry, including residential mortgage lenders and servicers, such as UWM.
Our loan origination and loan servicing operations are primarily regulated at the state level by state financial services authorities and administrative agencies, and at the federal level by the CFPB.
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. 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.
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.
Specifically, the CFPB has rulemaking authority with respect to the federal consumer financial services laws applicable to mortgage lenders and servicers.
The CFPB has federal regulatory, supervisory and 9 Table of Contents enforcement authority over the residential mortgage loan origination and servicing industry, including residential mortgage lenders and servicers, such as UWM. Specifically, the CFPB has rulemaking authority with respect to the federal consumer financial services laws applicable to mortgage lenders and servicers.
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.
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. • DocHub TM – Our custom-built document management system that allows team members to control the way they view, interact with, and deliver the documents required to close and fund loans.
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.
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 e nsuring that each of these conditions is met prior to granting a “clear-to-close.” In 2021, we launched BOLT, an industry-first technology tool designed to speed up the mortgage approval process for conventional and FHA loans by allowing Independent Mortgage Brokers to obtain initial underwriting approval for qualified borrowers in as little as 15 minutes.
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.
We delivered this speed while receivin g an 84% average monthly client N et Promoter Score ("NPS") for the year ended December 31, 2024 , as well as an 86% average monthly client NPS for the past eight years.
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.
We are dedicated to increasing team member engagement by strategically aligning talent within UWM as well as ensuring that our team members have clear pathways to advance their careers within UWM.
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We also believe that BOLT will unlock underwriter capacity and ultimately drive down our cost-per-loan. • DocHub TM – Our custom-built document management system that allows team members to control the way they view, interact with, and deliver the documents required to close and fund loans.
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Because we exclusively work through the wholesale channel, loan officers that are not currently affiliated with independent brokers do not submit any loans to us. F or the last ten years, we have been the largest originator of residential mortgage loans in the country despite only doing business with a fraction of the market.
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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.
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Our business is premised on our belief that the fastest, cheapest and easiest way for a borrower to obtain a residential mortgage is through the wholesale channel.
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In large part due to our investments in technology and service, the wholesale channel’s share of the market has almost doubled from a low point in 2014, and we believe that there remains ample room for growth in this channel as more consumers become educated on the benefits of the wholesale channel.
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Currently, approximately 2 of every 10 loans are originated through the wholesale channel. If the wholesale channel share continues to grow, we believe that we will continue to materially grow our loan production volume due to our leadership position within the channel.
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For example, if, over time, UWM maintains a 40% market share in the wholesale channel, but the wholesale channel grows from 20% of the overall market to 30% of the overall market, UWM would be in the position to grow from 8% to 12% of the overall market.
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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 5 Table of Contents borrower.
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With TRAC+, UWM also handles the loan closing and disbursement processes normally managed by a title company, giving Independent Mortgage Brokers the option to close a loan without working with a third-party title company or settlement agent.
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We also provide our clients access to our proprietary communication tool, Client Request ("CR"), that allows them to ask general or loan-specific questions, submit requests, and escalate potential issues, which provides a transparent and consistent line of communication between the client and the various internal UWM teams.
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UWM follows four-hour response time service level agreement for initially responding to CRs submitted during normal office hours. The CR system allows clients to track their requests, add comments, upload images, and provide satisfaction feedback after their issue is resolved.
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We believe that our CR communication platform and process is a competitive differentiator for UWM, and contributes positively to our strong client service scores, via NPS.
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BOLT is also utilized by our underwriters, providing them an intuitive platform for a more efficient review of the loan. While underwriters remain responsible for the overall risk assessment of and underwriting decision for the loan, BOLT’s AI and data extraction capabilities reduce much of the manual review of documentation and corresponding data entry redundancies.
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This technology, in turn, creates a more streamlined loan underwriting experience and accurate approval for our brokers, all while maintaining continued compliance with our investors' guidelines and requirements. In 2021, we launched UWM Appraisal Direct, UWM's appraisal ordering and tracking service in which we directly engage appraisers rather than utilizing an appraisal management company.
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We believe that UWM Appraisal Direct streamlines the ordering and completion of property appraisals as part of the underwriting process, leading to high-quality, faster appraisals, and cost savings for borrowers. In 2023, we launched PA+ which is a service that offers an additional level of loan processing support for our clients when needed.
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Additionally, we have invested, and will continue to invest, in emerging technology capabilities such as AI to further automate, augment and improve our operational capabilities, and to improve the experience for and enhance the capabilities of our clients.
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By leveraging AI technology, ChatUWM helps users efficiently import loans, upload and analyze documents, calculate income, run scenarios, navigate guidelines, and enhance overall lending efficiency and precision. • KEEP – An industry-leading technology that utilizes AI to create and send pre-validated refinance opportunities to borrowers in our servicing portfolio as soon as a borrower is able to obtain meaningful savings on their monthly payment, which streamlines the speed and efficiency of the mortgage process for both borrowers and UWM’s broker partners.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeNegative public opinion can result from our actual or alleged conduct in any number of activities. Negative public opinion can also result from actions taken by government regulators and community organizations in response to our activities, from consumer complaints, including in the CFPB complaints database, and from media coverage, whether accurate or not.
Biggest changeNegative public opinion can also result from actions taken by government regulators and community organizations in response to our activities, from consumer complaints, including in the CFPB complaints database, and from media coverage, whether accurate or not. 30 Table of Contents Any of these types of matters could cause us to incur costs, loss of business, fines and legal expenses, regardless of any eventual ruling in our favor, and could also harm the reputation of our brand.
Historically, the value of MSRs has increased when interest rates rise as higher interest rates lead to decreased prepayment rates and higher float earnings, and has decreased when interest rates decline as lower interest rates lead to increased prepayment rates and lower float earnings.
Historically, the value of MSRs has increased when interest rates rise, as higher interest rates lead to decreased prepayment rates and higher float earnings, and the value of MSRs has decreased when interest rates decline as lower interest rates lead to increased prepayment rates and lower float earnings.
We are required to follow specific guidelines and eligibility standards that impact the way we service and originate GSE and U.S. government agency loans, including guidelines and standards with respect to: • credit standards for mortgage loans; • our staffing levels and other servicing practices; • the servicing and ancillary fees that we may charge; • our modification standards and procedures; • the amount of reimbursable and non-reimbursable advances that we may make; and • the types of loan products that are eligible for sale or securitization.
We are required to follow specific guidelines and eligibility standards that impact the way we originate and service GSE and U.S. government agency loans, including guidelines and standards with respect to: • credit standards for mortgage loans; • our staffing levels and other servicing practices; • the servicing and ancillary fees that we may charge; • our modification standards and procedures; • the amount of reimbursable and non-reimbursable advances that we may make; and • the types of loan products that are eligible for sale or securitization.
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.
Such controls may 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.
We are unable, however, to prevent every instance of fraud that may be engaged in by our clients, borrowers or team members, and any seller, real estate broker, notary, settlement agent, appraiser, title agent, or third-party originator that misrepresents facts about a loan, including the information contained in the loan application, property valuation, title information and employment and income stated on the loan application.
We are unable, however, to prevent every instance of fraud that may be engaged in by our clients, borrowers or team members, and any seller, real estate broker, notary, settlement agent, appraiser, title agent, or third-party originator that misrepresents facts about a loan, including the information contained in the loan application, property valuation, title information, employment and income stated on the loan application.
One condition is a requirement that we have received a tax opinion that provides that the applicable assets of Holdings LLC giving rise to the payment are “more likely than not” amortizable (the “Indemnifiable Condition”).
One Payment Condition is a requirement that we have received a tax opinion that provides that the applicable assets of Holdings LLC giving rise to the payment are “more likely than not” amortizable (the “Indemnifiable Condition”).
These laws and regulations apply to loan origination, home appraisal, marketing, use of credit reports, safeguarding of non-public, personally identifiable information about borrowers, foreclosure and claims handling, investment of and interest payments on escrow balances and escrow payment features, and mandate certain disclosures and notices to borrowers.
These laws and regulations mandate certain disclosures and notices to borrowers and apply to loan origination, home appraisal, marketing, use of credit reports, safeguarding of non-public, personally identifiable information about borrowers, foreclosure and claims handling, investment of and interest payments on escrow balances and escrow payment features.
When a mortgage loan we service is in foreclosure, we are generally required to continue to advance delinquent principal and interest to the securitization trust and to make advances for delinquent taxes and insurance and foreclosure costs and the upkeep of vacant property in foreclosure to the extent that we determine that such amounts are recoverable.
When a mortgage loan we service is in foreclosure, we are generally required to continue to advance delinquent principal and interest to the securitization trust and to make advances for delinquent taxes, insurance and foreclosure costs and the upkeep of vacant property in foreclosure to the extent that we determine that such amounts are recoverable.
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.
These regulatory actions and similar actions 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.
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.
Accordingly, the valuation ascribed to us and our Class A common shares may not be indicative of the price that will prevail in the trading market in the future.
These 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.
These 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; • 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.
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.
Coupled with the expansion of social media platforms and similar platforms 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 failure to do so could adversely affect our ability to deliver effective products to our clients, borrowers and loan applicants and adversely affect our business. We rely on third party sub-servicers who service all the mortgage loans on which we hold MSRs, and our financial performance may be adversely affected by their inability to adequately perform their servicing functions.
Any failure to do so could adversely affect our ability to deliver effective products to our clients, borrowers and loan applicants and adversely affect our business. We rely on third party sub-servicers who service all the mortgage loans for which we hold MSRs, and our financial performance may be adversely affected by their inability to adequately perform their servicing functions.
If we are unable to effectively manage our team members during periods of volatility, it could adversely affect our current business operations and our growth. The mortgage industry can be very cyclical, with loan origination volumes varying materially based on macroeconomic conditions.
If we are unable to effectively manage our team members during periods of volatility, it could adversely affect our current business operations and our growth. The mortgage industry can be very cyclical, with loan origination volumes varying materially based largely on macroeconomic conditions.
To resolve issues raised in examinations or other governmental actions, we may be required to take various corrective actions, including changing certain business practices, making refunds or taking other actions that could be financially or competitively detrimental to us. We expect to continue to incur costs to comply with governmental regulations.
To resolve issues raised in examinations or other governmental actions, we may be required to take various corrective actions, including changing certain business practices, making refunds and/or taking other actions that could be financially or competitively detrimental to us. We expect to continue to incur costs to comply with governmental regulations.
Increased regulatory scrutiny and new laws and procedures could cause us to adopt additional compliance measures and incur additional compliance costs in connection with our foreclosure processes. We may incur legal and other costs responding to regulatory inquiries or any allegation that we improperly foreclosed on a borrower.
Increased regulatory scrutiny and new laws and procedures could cause us to adopt additional compliance measures and incur additional compliance costs in connection with our foreclosure processes. We may incur legal and other costs responding to regulatory inquiries or addressing any allegation that we improperly foreclosed on a borrower.
However, loan officers are not obligated to sell or promote our products and many sell or promote competitors’ loan products in addition to our products. Some of our competitors have higher financial strength ratings, offer a larger variety of products, and/or offer higher incentives than we do.
However, loan officers are not obligated to sell or promote our products and many sell or promote competitors’ loan products in addition to our products. Some of our competitors may have higher financial strength ratings, may offer a larger variety of products, and/or may offer higher incentives than we do.
In addition, the trading prices of companies that were formerly special purpose acquisition companies have, and may continue to, experience volatility unrelated to the operating performance of the specific company. The trading prices and valuations of these stocks, and of our securities, may not be predictable.
In addition, the trading prices of companies that were formerly special purpose acquisition companies have experienced, and may continue to, experience volatility unrelated to the operating performance of the specific company. The trading prices and valuations of these stocks, and of our securities, may not be predictable.
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.
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 with meaningful competitive advantages.
The CFPB has issued a number of regulations under the Dodd-Frank Act relating to loan origination and servicing activities, including ability-to-repay, “Qualified Mortgage” standards and other origination standards and practices as well as guidance addressing relationships with brokers, communication with borrowers, secondary market transactions, servicing requirements that address, among other things, periodic billing statements, certain notices and acknowledgments, prompt crediting of borrowers’ accounts for payments received, additional notice, review and timing requirements with respect to delinquent borrowers, loss mitigation, prompt investigation of complaints by borrowers, and lender-placed insurance notices.
The CFPB has issued a number of regulations under the Dodd-Frank Act relating to loan origination and servicing activities, including ability-to-repay, “Qualified Mortgage” standards and other origination standards and practices as well as guidance addressing relationships with brokers, communication with borrowers, secondary market transactions, servicing requirements that address, among other things, periodic billing statements, certain notices and acknowledgments, prompt crediting of borrowers’ accounts for payments received, additional notice, review and timing requirements with respect to delinquent borrowers, loss mitigation, prompt 28 Table of Contents investigation of complaints by borrowers, and lender-placed insurance notices.
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.
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 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.
In addition, the indentures governing our 2025 Senior Notes, 2029 Senior Notes, and 2027 Senior Notes contain covenants imposing operating and financial restrictions on our business.
In addition, the indentures governing our 2025 Senior Notes, 2029 Senior Notes, 2027 Senior Notes, and 2030 Senior Notes contain covenants imposing operating and financial restrictions on our business.
Due to the heavily regulated nature of the mortgage industry, we and our clients are required to comply with a wide array of U.S. federal, state and local laws, rules and regulations that concern, among other things, the manner in which we conduct our loan origination and servicing businesses and the fees that we may charge, and the collection, use, retention, protection, disclosure, transfer and other processing of personal information by us and our clients.
Due to the heavily regulated nature of the mortgage industry, we and our clients are required to comply with a wide array of U.S. federal, state and local laws, rules and regulations that concern, among other things, the manner in which we conduct our loan origination and servicing businesses and the fees that we may charge, and the collection, use, retention, 26 Table of Contents protection, disclosure, transfer and processing of personal information by us and our clients.
The technology and other controls and processes designed to secure our team member, client, borrower and loan applicant information and to prevent, detect and remedy any unauthorized access to that information were designed to obtain reasonable, but not absolute, assurance that such information is secure and that any unauthorized access is identified and addressed appropriately.
The technologies and other controls and processes designed to secure our team member, client, borrower and loan applicant information and to prevent, detect and remedy any unauthorized access to that information were designed to obtain reasonable, but not absolute, assurance that such information is secure and that any unauthorized access is identified and addressed appropriately.
A decrease in the prices paid to us upon sale of our loans could be detrimental to our business, as we are dependent on the cash generated from such sales to fund our future loan closings and repay borrowings under our warehouse facilities.
A decrease in the prices paid to us upon sale could be detrimental to our business, as we are dependent on the cash generated from such sales to fund our future loan closings and repay borrowings under our warehouse facilities.
We are also subject to minimum financial eligibility requirements established by the FHA, VA, USDA, HUD, GSEs, Ginnie Mae, and certain state regulators, including net worth, capital ratio and /or liquidity criteria in order to set a minimum level of capital needed to adequately absorb potential losses and a minimum amount of liquidity needed to service such agency mortgage loans and MBS and cover the associated financial obligations and risks.
We are also subject to minimum financial eligibility requirements established by the FHA, VA, USDA, HUD, GSEs, Ginnie Mae, and certain state regulators, including net worth, capital ratio and /or liquidity criteria in order to set a minimum level of capital needed to adequately absorb potential losses and a minimum amo unt of liquidity needed to service such agency mortgage loans and MBS and cover the associated financial obligations and risks.
Department of Justice (“DOJ”), through its use of a disparate impact theory under the Fair Housing Act, has held home loan lenders responsible for the pricing practices of third parties, alleging that the lender is directly responsible for the total fees and charges paid by the borrower even if the lender neither dictated what the third party could charge nor kept the money for its own account.
Department of Justice (“DOJ”), through its use of a disparate impact theory under the Fair Housing Act, has held originating lenders responsible for the pricing practices of third parties, alleging that the lender is directly responsible for the total fees and charges paid by the borrower even if the lender neither dictated what the third party could charge nor kept the money for its own account.
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.
Our campus could be harmed or rendered inoperable by natural or man-made disasters, including tornadoes, earthquakes, fires, power shortages, telecommunications failures, water shortages, floods, extreme weather conditions, and other natural or man-made disasters, pandemics, or other business interruptions.
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.
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 chann el.
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.
The failure or inability of our clients to 14 Table of Contents successfully market our mortgage products to prospective borrowers 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.
For example, the earlier disposition of assets following an exchange or purchase of Holdings LLC Common Units (along with the stapled shares of Class D common stock or Class C common stock) may accelerate payments under the tax receivable agreement and increase the present value of such payments, and the disposition of assets before such an exchange or purchase may increase the tax liability of SFS Corp.
For example, the earlier disposition of assets following an exchange or purchase of Holdings LLC Common Units (along with the stapled shares of Class D common stock or Class C common stock) may accelerate payments under the tax receivable agreement and increase the present value of such payments, and the disposition of assets before such an 22 Table of Contents exchange or purchase may increase the tax liability of SFS Corp.
As a result, we may not be able to leverage our assets as fully as we would choose, which could reduce our return on equity, and could significantly impede us from growing our business and place us at a competitive disadvantage in relation to federally chartered banks and certain other financial institutions.
As a resu lt, we may not be able to leverage our assets as fully as we would choose, which could reduce our return on equity, and could significantly impede us from growing our business and place us at a competitive disadvantage in relation to federally chartered banks and certain other financial institutions.
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.
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.
Holdings LLC is treated as a partnership for U.S. federal income tax purposes and, as such, will not be subject to any entity-level U.S. federal income tax. Instead, taxable income will be allocated to us and SFS Corp., as holders of membership interests in Holdings LLC (the “Holdings LLC Common Units”).
Holdings LLC is treated as a partnership for U.S. federal income tax purposes and, as such, under current law, will not be subject to any entity-level U.S. federal income tax. Instead, taxable income will be allocated to us and SFS Corp., as holders of membership interests in Holdings LLC (the “Holdings LLC Common Units”).
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.
Any such misrepresented information could have a material adverse effect on our business and results of operations. • 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.
If this information is inappropriately accessed and used by a third party or a team member for illegal purposes, such as identity theft, we may be responsible to the affected individuals for any losses they may have incurred as a result of such misappropriation.
If this 16 Table of Contents information is inappropriately accessed and used by a third party or a team member for illegal purposes, such as identity theft, we may be responsible to the affected individuals for any losses they may have incurred as a result of such misappropriation.
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.
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.
In most states in which we operate, a regulatory agency regulates and enforces laws relating to mortgage lenders and mortgage loan servicing companies such as us. In most states, we are subject to periodic examination by state regulatory authorities. Some states in which we operate require special licensing or provide extensive regulation of our business.
In most states in which we operate, a regulatory agency regulates and enforces laws relating to mortgage lenders and mortgage loan servicing companies. In most states, we are subject to periodic examination by state regulatory authorities. Some states in which we operate require special licensing or provide extensive regulation of our business.
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.
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.
Changes in interest rates are also a key driver of the performance of our servicing portfolio, particularly because our portfolio includes MSRs, the values of which are highly sensitive to changes in interest rates.
Fluctuations in interest rates are a key driver of the performance of our servicing portfolio, particularly because our portfolio includes MSRs, the values of which are highly sensitive to changes in interest rates.
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.
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 or Ginnie Mae due to economic or other circumstances that are difficult to anticipate and are terminated as servicer under their agreements with the GSEs or Ginnie Mae; • 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 18 Table of Contents • if one or more of our sub-servicers terminate their agreement with us.
Our ability to effectively manage significant increases and decreases in loan origination volume will depend on our ability to hire, integrate, train and retain highly-qualified personnel for all areas of our organization during these periods of changing volume.
Our ability to effectively manage significant increases and decreases in loan origination volume 15 Table of Contents will depend on our ability to hire, integrate, train and retain highly-qualified personnel for all areas of our organization during these periods of changing volume.
As we depend solely on third parties to deliver us mortgage loans, we may be at a competitive disadvantage to financial institutions or direct-to-consumer mortgage lenders that market to, and have a direct relationship with, the borrower.
As we depend solely on third parties to deliver us mortgage loans, we may, in certain market conditions, be at a competitive disadvantage to financial institutions or direct-to-consumer mortgage lenders that market to, and have a direct relationship with, the borrower.
Together, these provisions may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
Together, these provisions may make more difficult the removal of management and may discourage 32 Table of Contents transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
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.
Any significant repurchases, substitutions, indemnifications or premium recapture could be detrimental to our business and financial condition. 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.
We expect more states to enact legislation similar to the CCPA and CPRA, which provide consumers with privacy rights such as the right to request deletion of their data, the right to receive data on record for them and the right to know what categories of data (generally) are maintained about them, and increases the privacy and security obligations of entities handling certain personal information of such consumers.
We expect more states to enact legislation similar to the CCPA and CPRA, which increase the privacy and security obligations of entities handling certain personal information of such consumers and could require us to provide consumers with privacy rights such as the right to request deletion of their data, the right to receive data on record for them and the right to know what categories of data (generally) are maintained about them.
The failure to satisfy those and other regulatory requirements could limit our ability to originate, purchase, sell or service loans in a certain state, or could result in a default under our financing and servicing agreements and have a material adverse effect on our operations.
The failure to satisfy 29 Table of Contents those and other regulatory requirements could limit our ability to originate, purchase, sell or service loans in a certain state, or could result in a default under our financing and servicing agreements and have a material adverse effect on our operations.
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.
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: 31 Table of Contents • 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.
Approximately 1.15% of our serviced loans were 60+ days delinquent and 0.18% were in forbearance as of December 31, 2023. Government intervention also occurs periodically as a result of natural disasters or other events that cause widespread borrower harm. Similar challenges and risks to servicers, including us, will likely occur when such events transpire in the future.
Approximately 1.37% of our serviced loans were 60+ days delinquent and 0.11% were in forbearance as of December 31, 2024. Government intervention also occurs periodically as a result of natural disasters or other events that cause widespread borrower harm. Similar challenges and risks to servicers, including us, will likely occur when such events transpire in the future.
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.
The implementation of technology changes and upgrades to maintain current and integrate new technology systems, such as AI, 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.
Risks Associated with Our Corporate Structure and Common Stock We are controlled by SFS Corp., whose interests may conflict with our interests and the interests of other stockholders.
Risks Associated with Our Corporate Structure and our Capital Structure We are controlled by SFS Corp., whose interests may conflict with our interests and the interests of other stockholders.
At the direction of the FHFA, Fannie Mae and Freddie Mac have aligned their guidelines for servicing delinquent mortgages, which could result in monetary incentives for servicers that perform well and to assess compensatory penalties against servicers in connection with the failure to meet specified timelines relating to delinquent loans and foreclosure proceedings, and other breaches of servicing obligations.
At the direction of the FHFA, Fannie Mae and Freddie Mac have aligned their guidelines for servicing delinquent mortgages, which could result in monetary incentives for servicers that perform well, and which may also result in assessing compensatory penalties against servicers in connection with 13 Table of Contents the failure to meet specified timelines relating to delinquent loans and foreclosure proceedings, and other breaches of servicing obligations.
Our Board of Directors will determine the appropriate uses for any excess cash so accumulated, which may include, among other uses, special dividends or the payment obligations under the tax receivable agreement. However, we will have no obligation to distribute such cash (or other available cash other than any declared dividend) to our stockholders.
Our Board of Directors will determine the appropriate uses for any excess cash so accumulated, which may include, among other uses, special dividends. However, we will have no obligation to distribute such cash (or other available cash other than any declared dividend) to our stockholders.
If our loans are found to have been originated in violation of predatory or abusive lending laws, we could be subject to lawsuits or governmental actions, or could be fined or incur losses. Both the scope of the laws, rules and regulations and the intensity of the regulatory oversight to which our business is subject continue to increase over time.
If our loans are found to have been originated in violation of predatory or abusive lending laws, we could be subject to lawsuits or governmental actions, or could be fined or incur losses. 27 Table of Contents Both the scope of the laws, rules and regulations and the intensity of the regulatory oversight to which our business is subject has increased over time.
Borrowings under some of our finance and warehouse facilities are at variable rates of interest based on short term rate indexes, whereas our mortgage loans that serve as collateral for such facilities are generally based on long-term interest rates, which also exposes us to interest rate risk.
Borrowings under our warehouse facilities and some of our other financing facilities are at variable rates of interest based on short term rate indexes, whereas our mortgage loans that serve as collateral for the warehouse facilities are generally based on long-term interest rates, which exposes us to interest rate risk.
Shares of Class A common stock issuable upon the exercise of our Warrants or in connection with the Earn-Out or upon Holdings LLC Unit Exchanges may result in dilution to the then existing holders of our Class A common stock and increase the number of shares eligible for resale in the public market.
Shares of Class A common stock issuable upon the exercise of our Warrants or in connection with the Earn-Out or upon Exchange Transactions may result in dilution to the then existing holders of our Class A common stock and increase the number of shares eligible for resale in the public market.
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.
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. 33 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.
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.
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 that we have failed to comply with applicable law could lead to enforcement action, administrative fines and penalties, or other administrative action.
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, even if it is without merit, 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 materially adverse effect on our business, financial condition or results of operations.
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 .
In the case of repurchases, we typically repurchase such loan and resell it into a non-conforming market at a discount from the repurchase price. As of December 31, 2024, we had accrued a $87.6 million reserve for repurchase and indemnification obligations. Actual repurchase and indemnification obligations could materially exceed the reserves recorded in our consolidated financial statements .
Accordingly, decreases in MSR values could decrease the available borrowing capacity under these facilities, or require mandatory repayments of outstanding borrowings on these facilities, which could adversely affect our financial condition and liquidity.
Accordingly, decreases in MSR values could decrease the available borrowing capacity under these facilities, or require mandatory repayments of outstanding borrowings on these facilities, which could adversely affect our financial condition and liquidity. We face intense competition that could adversely affect our business.
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.
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 Stacey Coopes, Kelly Czubak, and Robert Verdun are “independent directors,” as defined in the NYSE listing rules and applicable SEC rules.
The minimum liquidity requirements of the GSEs and Ginnie Mae were changed effective in 2023, increasing such requirements, and Ginnie Mae implemented a new minimum risk-based capital ratio requirement which becomes effective as of December 31, 2024.
The minimum liquidity requirements of the GSEs and Ginnie Mae were updated in 2023, increasing certain requirements, and Ginnie Mae implemented a new minimum risk-based capital ratio requirement which became effective as of December 31, 2024.
Additionally, the evolution and increased adoption and widespread availability of new artificial intelligence technologies may increase our cybersecurity risks. We, our clients, borrowers and loan applicants, regulators and other third parties have been subject to, and are likely to continue to be the target of, cyberattacks and other security breaches.
Additionally, the evolution and increased adoption and widespread availability of new AI technologies may increase our cybersecurity risks, including the potential ability to bypass encryption protections. We, our clients, borrowers and loan applicants, regulators and other third parties have been subject to, and are likely to continue to be the target of, cyberattacks and other security breaches.
Rising interest rates have also decreased demand for new mortgage originations because existing homebuyers are hesitant to move and give up their current low interest rate loan and while the higher cost of home ownership adversely impacts move-up or new homebuyers.
Specifically, higher mortgage rates have, and may continue to adversely affect demand for new mortgage originations because existing homebuyers are hesitant to move and give up their current low interest rate loan and the higher cost of home ownership adversely impacts move-up or new homebuyers.
At our election, SFS Corp. may satisfy all or a portion of this indemnity by transferring Holdings LLC Common Units held by it.
At our election, SFS Corp. may satisfy all or a portion of the Indemnifiable Condition by transferring Holdings LLC Common Units held by it.
We have the opportunity to elect any of the exemptions afforded a controlled company. Because SFS Corp. controls more than a majority of our total voting power, we are a “controlled company” within the meaning of NYSE listing rules.
As a “controlled company” within the meaning of NYSE listing rules, we qualify for exemptions from certain corporate governance requirements. We have the opportunity to elect any of the exemptions afforded a controlled company. Because SFS Corp. controls more than a majority of our total voting power, we are a “controlled company” within the meaning of NYSE listing rules.
We have also issued $2.0 billion in principal amount of senior unsecured notes which mature in 2025, 2027, and 2029. Currently, the coupon on each of these senior unsecured notes is lower than prevailing market interest rates.
Furthermore, we have also issued $2.8 billion in principal amount of senior unsecured notes that mature in 2025, 2027, 2029 and 2030. Currently, the coupon on the 2025, 2027 and 2029 senior unsecured notes is lower than prevailing market interest rates.
These non-GSE sales typically take longer to execute which can increase the amount of time that a mortgage loan is on our books, which exposes us to additional market risk and increased liquidity requirements.
Furthermore, non-GSE and Ginnie Mae sales typically take longer to execute which can increase the amount of time that a mortgage loan is held, which exposes us to additional market risk and increased liquidity requirements.
As such, it is difficult to predict the problems we may encounter in improving our websites’ and other technologies’ functionality.
As such, it is difficult to predict the problems we may encounter in improving the functionality of our websites and other technologies.
We also derive other material financial benefits from these relationships, including the assumption of credit risk on securitized loans in exchange for our payment of guarantee fees and the ability to avoid certain loan inventory finance costs through streamlined loan funding and sale procedures, which benefits we would lose if we were unable to complete the sale or securitization of our loans.
In addition, we also derive other material financial benefits from these relationships, including the assumption of credit risk on securitized loans in exchange for the payment of guarantee fees and the ability to avoid certain loan inventory finance costs through streamlined loan funding and sale procedures.
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.
Three of our ten 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.
These standards include, among other items, compliance with origination guidelines and compliance with applicable federal, state and local laws and regulations, underwriting in conformity with the applicable agency, FHA or VA guidelines, appraisals, insurance and legal documents.
These standards include, among other items, adherence to origination guidelines and compliance with applicable federal, state and local laws and regulations, underwriting in conformity with the applicable guidelines, and conformity with guidelines relating to, appraisals, insurance and legal documents generally.
To the extent we are dependent on any particular technology or technological solution, we may be harmed if such technology or technological solution (1) becomes non-compliant with existing industry standards, (2) fails to meet or exceed the capabilities of our competitors’ equivalent technologies or technological solutions, (3) becomes increasingly expensive to service, retain and update, (4) becomes subject to third-party claims of intellectual property infringement, misappropriation or other violation, or (5) malfunctions or functions in a way we did not anticipate or that results in loan defects potentially requiring repurchase.
For example, we have invested, and will continue to, invest significant capital resources on developing, maintaining and improving our proprietary technology platforms, including through the integration of AI into these platforms and processes. 19 Table of Contents To the extent we are dependent on any particular technology or technological solution, we may be harmed if such technology or technological solution (1) becomes non-compliant with existing industry standards, (2) fails to meet or exceed the capabilities of our competitors’ equivalent technologies or technological solutions, (3) becomes increasingly expensive to service, retain and update, (4) becomes subject to third-party claims of intellectual property infringement, misappropriation or other violation, or (5) malfunctions or functions in a way we did not anticipate or that results in loan defects potentially requiring repurchase.
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.
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.
Changes in accounting interpretations or assumptions could impact our financial statements. 32 Table of Contents Accounting rules for mortgage loan sales and securitizations, valuations of financial instruments and MSRs, investment consolidations, income taxes and other aspects of our operations are highly complex and involve significant judgment and assumptions.
Accounting rules for mortgage loan sales and securitizations, valuations of financial instruments and MSRs, investment consolidations, income taxes and other aspects of our operations are highly complex and involve significant judgment and assumptions.
In addition, (1) 1,502,069,787 shares of Class A common stock (or approximately 1,592,831,471 shares of Class A common stock if the full amount of the Earn-Out Shares is earned) may be issued to SFS Corp. or its transferees or assignees in connection with future Holdings LLC Unit Exchanges and (2) 15,874,987 shares may be issued upon exercise of our outstanding Warrants with a strike price of $11.50 per share.
In addition, there are (1) 1,440,332,098 shares of Class A common stock (or approximately 1,531,093,782 shares of Class A common stock if the full amount of the Earn-Out Shares is earned) that may be issued to SFS Corp. or it s transferees or assignees in connection with future Holdings LLC Unit Exchanges and (2) 15,874,987 shares may be issued upon exercise of our outstanding Warrants with a strike price of $11.50 per share.
The success and growth of our business will depend upon our ability to be a leader in technological innovation in our industry. We operate in an industry experiencing rapid technological change and frequent product introductions. In order to succeed, we must lead our peers in designing, innovating and introducing new technology and product offerings.
The success and growth of our business will depend upon our ability to be a leader in technological innovation in our industry. We operate in an industry experiencing rapid technological change and frequent product introductions.
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.
Our warehouse facilities typically renew annually, although as of December 31, 2024, two of our facilities ($4.5 billion in available credit) had two year renewal terms. As of December 31, 2024, all but $900.0 million of our warehouse facilities were uncommitted and can be terminated by the applicable lender at any time.
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.
Loss of our key management could result in a material adverse effect on our business. 17 Table of Contents Our future success depends to a significant extent on the continued services of our senior management, including Mat Ishbia, our Chairman, President and Chief Executive Officer.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe Audit Committee (the “Audit Committee”) of our Board has oversight of the Company’s risk management program, and cybersecurity is a component of our overall approach to risk management. Our cybersecurity policies, standards, processes and practices are integrated across our operational risk management programs and are based on industry recognized frameworks.
Biggest changeThe Audit Committee of our Board (the “Audit Committee”) has oversight of the Company’s risk management program, and cybersecurity is a component of our overall approach to risk management. Our cybersecurity policies, standards, processes and practices are integrated across our operational risk management programs and are based on industry recognized frameworks.
In addition, our agreements with material vendors, including subservicers, contain indemnification provisions with respect to cybersecurity matters. 36 Table of Contents • Independent Assessments with Outside Consultants: In addition to the broad capabilities of our internal information security team, we also engage various outside consultants, including contractors, auditors, and other third parties, to among other things , conduct independent assessments and regular testing of our networks and systems to identify vulnerabilities through penetration testing, while also measuring and advising on potential improvements to our incident prevention, response and documentation procedures. • Team Member Education & Awareness: We provide in-depth training to new team members, as well as annual, mandatory training for all team members regarding cybersecurity threats as a means to equip our team members with effective tools to identify and prevent cybersecurity threats, and to communicate our evolving information security policies, standards, processes and practices.
In addition, our agreements with material vendors, including subservicers, contain indemnification provisions with respect to cybersecurity matters. • Independent Assessments with Outside Consultants: In addition to the broad capabilities of our internal information security team, we also engage various outside consultants, including contractors, auditors, and other third parties, to among other things , conduct independent assessments and regular testing of our networks and systems to identify vulnerabilities through penetration testing, while also measuring and advising on potential improvements to our incident prevention, response and documentation procedures. • Team Member Education & Awareness: We provide in-depth training to new team members, as well as annual, mandatory training for all team members regarding cybersecurity threats as a means to equip our team members with effective tools to identify and prevent cybersecurity threats, and to communicate our evolving information security policies, standards, processes and practices.
These efforts include a wide range of activities, including penetration testing multiple times throughout the year, adoption and regular evaluation of incident response plans and procedures, regular team member email phishing test campaigns, email security monitoring, real-time vulnerability scanning and intrusion detection, team member cybersecurity awareness programs, regular audits and evaluations of internal and third-party systems, and continuous improvement of the information security management system.
These efforts include a wide range of activities, including penetration testing multiple times throughout the year, adoption and regular evaluation of incident response plans and procedures, regular team member email phishing test campaigns, email security monitoring, real-time vulnerability scanning and intrusion detection, team member cybersecurity awareness programs, regular 35 Table of Contents audits and evaluations of internal and third-party systems, and continuous improvement of the information security management system.
In addition, we have a Risk Committee comprised of our top executives from across UWM, including our Chief Executive Officer, Chief Risk Officer, Chief Operating Officer, Chief Financial Officer and Chief Accounting Officer, Chief People Officer, CISO and several other leaders across our legal, operational and reporting functions.
In addition, we have a Risk Committee comprised of our top executives from across the Company, including our Chief Executive Officer, Chief Risk Officer, Chief Operating Officer, Chief Financial Officer and Chief Accounting Officer, Chief People Officer, CISO and several other leaders across our legal, operational and reporting functions.
In addition, the full Board may review and assess cybersecurity risks as part of its responsibilities for our risk management oversight.
In addition, the full Board may review and assess cybersecurity threats as part of its responsibilities for our risk management oversight.
A cybersecurity threat is any potential unauthorized occurrence, on or conducted through, our information systems that may result in adverse effects on the confidentiality, integrity or availability of our information systems or any information residing therein.
A cybersecurity threat is any potential unauthorized occurrence, on 34 Table of Contents or conducted through, our information systems that may result in adverse effects on the confidentiality, integrity or availability of our information systems or any information residing therein.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 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.
Biggest changeItem 2. Properties 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 providing an outdoor food court pavilion.
We lease the space from entities controlled by Mat Ishbia, our CEO and Jeff Ishbia, a director and our founder. We believe that our corporate headquarters is suitable and adequate to meet the needs of our business. I tem 3.
We lease the space from entities controlled by Mat Ishbia, our CEO, and Jeff Ishbia, a director and our founder. We believe that our corporate headquarters is suitable and adequate to meet the needs of our business.
Removed
Legal Proceedings We operate in a heavily regulated industry that is highly sensitive to consumer protection, and we are subject to numerous federal, state and local laws. We are routinely involved in consumer complaints, regulatory actions and legal proceedings in the ordinary course of our business.
Removed
We are also routinely involved in state regulatory audits and examinations, and occasionally involved in other governmental proceedings arising in connection with our respective business. The resolution of these matters, including the matters specifically described below, is not currently expected to have a material adverse effect on our financial position, financial performance or cash flows.
Removed
On April 23, 2021, a complaint was filed in the U.S. District Court for the Middle District of Florida against the Company and Mat Ishbia, individually by The Okavage Group, LLC ("Okavage") on behalf of itself and all other mortgage brokers who are, or have been clients of UWM and either Fairway Independent Mortgage or Rocket Pro TPO.
Removed
After the Company and Mat Ishbia filed a motion to dismiss the complaint, Okavage filed a motion for leave to amend its complaint on August 2, 2021, and on August 3, 2021, the Court granted Okavage's motion and ordered the clerk to file Plaintiff’s First Amended Class Action Complaint with its corresponding attachments.
Removed
In its amended complaint, Okavage dropped the Company as a defendant and added UWM as a defendant.
Removed
Okavage purports to represent the same set of mortgage brokers as in its original complaint and alleges that UWM’s new policy to no longer enter into new transactions with Independent Mortgage Brokers who also sold mortgage loans to these two market participants amounted to anticompetitive conduct under federal and Florida antitrust laws.
Removed
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.
Removed
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.
Removed
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.
Removed
On 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.
Removed
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.
Removed
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 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.
Biggest changeThe closing price of the Class A common stock and Warrants as of February 24, 2025 was $6.44 and $0.17, respectively. Holders As of February 24, 2025, there were 36 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.
In connection with the declaration of a dividend on our shares of Class A common stock, the Board, in its capacity as the Manager of Holdings LLC (UWMC's consolidated subsidiary and UWM's direct parent), is required pursuant to the terms of the Holdings LLC Second Amended and Restated Operating Agreement, to determine whether to (a) make distributions from Holdings LLC to only UWMC, as the owner of the Class A Units of Holdings LLC with the proportional amount due to SFS Corp. as the owner of the Class B Units of Holdings LLC, being distributed upon the sooner to occur of (i) the Board making a determination to do so or (ii) the date on which Class B Units of Holdings LLC are converted into shares of Class B common stock of UWMC or (b) make proportional and simultaneous distributions from Holdings LLC to both UWMC, as the owner of the Class A Units of Holdings LLC and to SFS Corp. as the owner of the Class B Units of Holdings LLC.
In connection with the declaration of a dividend on our shares of Class A common stock, the Board, in its capacity as the Manager of Holdings LLC (UWMC's consolidated subsidiary and UWM's direct parent), is required pursuant to the terms of the Second Amended and Restated Operating Agreement of Holdings LLC, to determine whether to (a) make distributions from Holdings LLC to only UWMC, as the owner of the Class A Units of Holdings LLC with the proportional amount due to SFS Corp. as the owner of the Class B Units of Holdings LLC, being distributed upon the sooner to occur of (i) the Board making a determination to do so or (ii) the date on which Class B Units of Holdings LLC are converted into shares of Class B common stock of UWMC or (b) make proportional and simultaneous distributions from Holdings LLC to both UWMC, as the owner of the Class A Units of Holdings LLC and to SFS Corp. as the owner of the Class B Units of Holdings LLC.
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.
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, 2024 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.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Price and Ticker Symbol Our Class A co mmon stock and Warrants are currently listed on the NYSE under the symbols "UWMC" and "UWMCWS," respectively.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Price and Ticker Symbol Our Class A common stock and Warrants are currently listed on the NYSE under the symbols "UWMC" and "UWMCWS," respectively.
The 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 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, 2024. 37 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.
Removed
Share Repurchase Program On May 9, 2021, the Company's Board of Directors authorized a share repurchase program of up to $300.0 million in aggregate value of the Company’s Class A common stock effective May 11, 2021.
Removed
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.
Removed
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

123 edited+32 added−22 removed75 unchanged
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.
Biggest changeResults of Operations for the Year Ended December 31, 2024, 2023 and 2022 For the year ended December 31, ($ in thousands) 2024 2023 2022 Revenue Loan production income $ 1,528,840 $ 1,000,547 $ 981,988 Loan servicing income 636,665 818,703 792,072 Change in fair value of mortgage servicing rights (294,999) (854,148) 284,104 Loss on other interest rate derivatives (215,436) — — Interest income 508,621 346,225 314,462 Total revenue, net 2,163,691 1,311,327 2,372,626 Expenses Salaries, commissions and benefits 689,160 530,231 552,886 Direct loan production costs 190,277 104,262 90,369 Marketing, travel, and entertainment 96,782 84,515 74,168 Depreciation and amortization 45,474 46,146 45,235 General and administrative 209,838 170,423 179,549 Servicing costs 110,986 131,792 166,024 Interest expense 490,763 320,256 305,987 Other expense (income) (5,546) (5) 23,739 Total expenses 1,827,734 1,387,620 1,437,957 Earnings (loss) before income taxes 335,957 (76,293) 934,669 Provision (benefit) for income taxes 6,582 (6,511) 2,811 Net income (loss) 329,375 (69,782) 931,858 Net income (loss) attributable to non-controlling interest 314,971 (56,552) 890,143 Net income (loss) attributable to UWM Holdings Corporation $ 14,404 $ (13,230) $ 41,715 41 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) 2024 2023 2022 Loan origination volume by type Purchase: Conventional $ 56,899,265 $ 58,833,673 $ 62,274,030 Government 29,257,856 29,640,141 23,773,422 Jumbo and other (1) 9,924,433 5,381,530 4,782,879 Total purchase $ 96,081,554 $ 93,855,344 $ 90,830,331 Refinance: Conventional $ 17,300,663 $ 7,082,401 $ 27,059,252 Government 20,382,191 5,189,598 7,834,636 Jumbo and other (1) 5,668,998 2,148,540 1,561,242 Total refinance 43,351,852 14,420,539 36,455,130 Total loan origination volume $ 139,433,406 $ 108,275,883 $ 127,285,461 Portfolio metrics Average loan amount $ 386 $ 368 $ 365 Weighted average loan-to-value ratio 81.91 % 82.89 % 79.67 % Weighted average credit score 737 737 738 Weighted average note rate 6.53 % 6.65 % 4.82 % Percentage of loans sold To GSEs/GNMA 89 % 93 % 94 % To other counterparties 11 % 7 % 6 % Servicing-retained 91 % 95 % 97 % Servicing-released 9 % 5 % 3 % (1) Comprised of non-agency jumbo products, construction loans, and non-qualified mortgage products, including home equity lines of credit ("HELOCs") (which in many instances are second liens). 42 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) 2024 2023 Primary loss $ (1,823,222) $ (1,514,340) $ (308,882) 20.4 % Loan origination fees 463,957 284,185 179,772 63.3 % Provision for representation and warranty obligations (43,438) (38,676) (4,762) 12.3 % Capitalization of MSRs 2,931,543 2,269,378 662,165 29.2 % Loan production income $ 1,528,840 $ 1,000,547 $ 528,293 52.8 % Gain margin (1) 1.10 % 0.92 % 0.18 % 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 % (1) Represents total loan production income divided by total loan origination volume for the applicable period.
Net income (loss) Net loss was $69.8 million for the year ended December 31, 2023, a decrease of $1.0 billion or 107.5%, as compared to net income of $931.9 million for the year ended December 31, 2022.
Net loss was $69.8 million for the year ended December 31, 2023, a decrease of $1.0 billion or 107.5%, as compared to net income of $931.9 million for the year ended December 31, 2022.
The decrease in cash flows from operating activities year-over-year was primarily driven by the larger decrease in mortgage loans at fair value in the period ended December 31, 2022 as compared to the period ended December 31, 2023 as well as a decrease in net income 2023, adjusted for non-cash items, including the capitalization and change in fair value of MSRs.
The decrease in cash flows from operating activities year-over-year was primarily driven by the larger decrease in mortgage loans at fair value in the period ended December 31, 2022 as compared to the period ended December 31, 2023 as well as a decrease in net income in 2023, adjusted for non-cash items, including the capitalization and change in fair value of MSRs.
The indentures governing the 2025 Senior Notes, the 2029 Senior Notes, and the 2027 Senior Notes contain certain operating covenants and restrictions, subject to a number of exceptions and qualifications, including restrictions on our ability to (1) incur additional non-funding indebtedness unless either (y) the Fixed Charge Coverage Ratio (as defined in the applicable indenture) is no less than 3.0 to 1.0 or (z) the Debt-to-Equity Ratio (as defined in the applicable indenture) does not exceed 2.0 to 1.0, (2) merge, consolidate or sell assets, (3) make restricted payments, including distributions, (4) enter into transactions with affiliates, (5) enter into sale and leaseback transactions and (6) incur liens securing indebtedness.
The indentures governing the 2025 Senior Notes, the 2027 Senior Notes, the 2029 Senior Notes, and the 2030 Senior Notes contain certain operating covenants and restrictions, subject to a number of exceptions and qualifications, including restrictions on our ability to (1) incur additional non-funding indebtedness unless either (y) the Fixed Charge Coverage Ratio (as defined in the applicable indenture) is no less than 3.0 to 1.0 or (z) the Debt-to-Equity Ratio (as defined in the applicable indenture) does not exceed 2.0 to 1.0, (2) merge, consolidate or sell assets, (3) make restricted payments, including distributions, (4) enter into transactions with affiliates, (5) enter into sale and leaseback transactions and (6) incur liens securing indebtedness.
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.
Beginning on 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%, of the principal amount of the 2027 Senior Notes to be redeemed on the redemption date plus accrued and unpaid interest.
Beginning on 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.
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 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 changes in relevant 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 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 decrease in net income was primarily the result of a decrease in total revenue, net of $1.1 billion, partially offset by a decrease in total expenses (including income taxes) of $59.7 million, as further described above.
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 increase in loan servicing income during the year ended December 31, 2023 was primarily driven by higher average retained servicing fees, partially offset by a decline in the average servicing portfolio.
The mortgage origination process generally begins with a borrower entering into an IRLC with us that is arranged by an independent mortgage advisor, pursuant to which we have committed to enter into a mortgage at specified interest rates and terms within a specified period of time with a borrower who has applied for a loan and met certain credit and underwriting criteria.
The mortgage origination process generally begins with a borrower entering into an IRLC with us that is arranged by an Independent Mortgage Broker, pursuant to which we have committed to enter into a mortgage at specified interest rates and terms within a specified period of time with a borrower who has applied for a loan and met certain credit and underwriting criteria.
If we are unable to achieve the cost assumption, the MSRs' operational economics will lag fair value. Refer to Note 5 - Mortgage Servicing Rights to the consolidated financial statements for additional detail regarding the quantitative impact on the fair value of MSRs as a result of adverse changes in key unobservable inputs.
If we are unable to achieve the cost assumption, the MSRs' operational economics will lag fair value. Refer t o Note 5 - Mortgage Servicing Rights to the consolidated financial statements for additional detail regarding the quantitative impact on the fair value of MSRs as a result of adverse changes in key unobservable inputs.
For a given mortgage loan, servicing revenue from the retained servicing fee declines over time as the principal balance of the loan is reduced.
For a given mortgage loan, servicing revenue from the retained servicing fee generally declines over time as the principal balance of the loan is reduced.
Non-funding debt includes the Company's senior notes, lines of credit, borrowings against investment securities, equipment notes payable, and finance leases. We use Adjusted EBITDA to evaluate our operating performance, and it is one of the measures used by our management for planning and forecasting future periods.
Non-funding debt includes the Company's senior notes, lines of credit, borrowings against investment securities, and finance leases. We use Adjusted EBITDA to evaluate our operating performance, and it is one of the measures used by our management for planning and forecasting future periods.
To originate and aggregate loans for sale or securitization into the secondary market, we use our own working capital and borrow or obtain funding on a short-term basis primarily through uncommitted and committed warehouse facilities that we have established with large global banks, regional or specialized banks and certain agencies.
To originate and aggregate loans for sale or securitization into the secondary market, we use our own working capital and borr ow or obtain funding on a short-term basis primarily through uncommitted and committed warehouse facilities that we have established with large global banks, regional or specialized banks and certain agencies.
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. When we sell MSRs, we typically sell them in the bulk MSR secondary market.
We currently retain the MSRs associated with the majority of 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. When we sell MSRs, we typically sell them in the bulk MSR secondary market.
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.
We exclude the non-cash income/expense impact of 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.
Other Financing Facilities Senior Notes On November 3, 2020, our consolidated subsidiary, UWM, issued $800.0 million in aggregate principal amount of senior unsecured notes due November 15, 2025 (the “2025 Senior Notes”). The 2025 Senior Notes accrue interest at a rate of 5.500% per annum.
Other Financing Facilities Senior Notes 49 Table of Contents On November 3, 2020, our consolidated subsidiary, UWM, issued $800.0 million in aggregate principal amount of senior unsecured notes due November 15, 2025 (the “2025 Senior Notes”). The 2025 Senior Notes accrue interest at a rate of 5.500% per annum.
Interest expense on funding facilities decreased due to lower average warehouse balances and higher credits from warehouse lenders on custodial and other deposits, partially offset by higher interest rates on warehouse facilities (all of which are variable based on short-term interest rate benchmarks plus a spread).
Interest expense on funding facilities decreased due to lower average warehouse balances and 45 Table of Contents higher credits from warehouse lenders on custodial and other deposits, partially offset by higher interest rates on warehouse facilities (all of which are variable based on short-term interest rate benchmarks plus a spread).
Increases in prepayment speeds generally have an adverse effect on the fair value of MSRs. Discount rates imply a rate of return. Similarly, 56 Table of Contents discount rates are subjective and, in practice, are often imputed to reconcile to prices observed from recent trades.
Increases in prepayment speeds generally have an adverse effect on the fair value of MSRs. Discount rates imply a rate of return. Similarly, discount rates are subjective and, in practice, are often imputed to reconcile to prices observed from recent trades.
Derivative Financial Instruments Derivatives are recognized as assets or liabilities on the balance sheets and are measured at estimated fair value with changes recorded in the consolidated statements of operations within "loan production income" in the period in which they occur.
Derivative Financial Instruments IRLCs and FLSCs are derivative financial instruments and are recognized as assets or liabilities on the balance sheets and are measured at estimated fair value with changes recorded in the consolidated statements of operations within "loan production income" in the period in which they occur.
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.
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 and certain other fees related to the origination of a loan; ◦ servicing fee income; ◦ interest income on mortgage loans; and ◦ sale of MSRs and excess servicing cash flows.
Interest income increased due to higher average note rates on mortgage loans at fair v alue, partially offset by lower average balances of mortgage loans at fair value.
Interest income increased due to higher average note rates on mortgage loans at fair value, partially offset by lower average balances of mortgage loans at fair value.
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 borrowings against investment securities have remaining terms ranging from one to three months as of December 31, 2024, 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.
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.
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, gains or losses on other interest rate derivatives, the impact of non-cash deferred compensation expense, the change in fair value of the Public and Private Warrants, the non-cash income/expense impact of the change in the Tax Receivable Agreement liability, and the change in fair value of retained investment securities.
The increase due to improved pricing in 2023 was partially offset by a decrease in loan production volume of $19.0 billion, or 14.9%, from $127.3 billion to $108.3 billion during the year ended December 31, 2023, as compared to the same period in 2022, due to lower refinance volume as a result of the higher primary mortgage interest rate environment during all of 2023, partially offset by an increase in purchase volume despite the higher interest rate environment during all of 2023.
This was partially offset by a decrease in loan production volume of $19.0 billion, or 14.9%, from $127.3 billion to $108.3 billion during the year ended December 31, 2023, as compared to the same period in 2022, due to lower industry-wide refinance volume as a result of the higher primary mortgage interest rate environment during all of 2023, partially offset by an increase in purchase volume despite the higher interest rate environment during all of 2023.
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.
Our mortgage origination business derives revenue from originating, processing and underwriting primarily GSE conforming mortgage loans, along with FHA, USDA and VA mortgage loans, which are subsequently pooled and sold in the secondary market.
Our consolidated subsidiary, Holdings LLC, is generally required from time to time to make distributions in cash to SFS Corp. (as well as distributions to UWMC) in amounts sufficient to cover the taxes on its allocable share of the taxable income of Holdings LLC.
Holdings LLC is generally required from time to time to make distributions in cash to SFS Corp. (as well as distributions to UWMC) in amounts sufficient to cover the taxes on its allocable share of the taxable income of Holdings LLC.
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.
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 and certain other fees related to the origination of a loan, servicing fee income, and interest income on mortgage loans.
The fair value of mortgage loans is estimated using observable market information including pricing from current cash commitments from government sponsored enterprises, recent market commitment prices, or broker quotes, as if the loans were to be sold currently into the secondary market.
The fair value of mortgage loans is estimated using observable market information including pricing from current cash commitments from GSEs, recent market commitment prices, or broker quotes, as if the loans were to be sold currently into the secondary market.
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.
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 facility. We were in compliance with all covenants under these facilities as of December 31, 2024.
At that point, the mortgage loan is legally owned by our warehouse facility lender and is subject to our repurchase right (other th an when we self-warehouse).
At that point, the mortgage loan is legally owned by our warehouse facility lender and is subject to our repurchase right (other than when we self-warehouse).
The Company’s financing lease agreements have remaining terms ranging from approximately two months to twelve years.
The Company’s financing lease agreements have remaining terms ranging from approximately two months to eleven years.
This discussion and analysis contains forward-looking statements that involve risks and uncertainties which could cause our actual results to differ materially from those anticipated in these forward-looking statements, including, but not limited to, risks and uncertainties discussed under the heading “Cautionary Note Regarding Forward-Looking Statements,” in this report and in Part I. Item 1A.
This discussion and analysis contains forward-looking statements that involve risks and uncertainties which could cause our actual results to differ materially from those anticipated in these forward-looking statements, including, but not limited to, risks and uncertainties discussed under the heading “Cautionary Note Regarding Forward-Looking Statements,” in this report and in Part I, Item 1A “Risk Factors” and elsewhere in this Form 10-K.
When the mortgage loan is closed, we fund the loan with approximately 2-3%, on average, of our own funds and the remainder with funds drawn under one of our warehouse facilities (except when we opt to "self-warehouse" in which case we use our cash to fund the entire loan).
When the mortgage loan is closed, we fund the loan with approximately 2-3%, on average, of our own funds and the remainder with funds drawn under 38 Table of Contents one of our warehouse facilities (except when we opt to "self-wareh ouse" in which case we use our cash to fund the entire loan).
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.
The Company repurchased $234.4 million, $259.0 million and $355.8 million in UPB of loans during the years ended December 31, 2024, 2023 and 2022, respectively, related to its representations and warranties obligations.
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).
Interest income represents interest earned on mortgage loans at fair value. 39 Table of Contents 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).
The GNMA MSR facility is collateralized by all of UWM's mortgage servicing rights that are appurtenant to mortgage loans pooled in securitization by Ginnie Mae that meet certain criteria. Available borrowings, as well as mandatory curtailments, under the GNMA MSR facility are based on the fair 52 Table of Contents market value of the collateral.
The Ginnie Mae MSR facility is collateralized by all of UWM's mortg age servicing rights that are appurtenant to mortgage loans pooled in securitization by Ginnie Mae that meet certain criteria. Available borrowings, as well as mandatory curtailments, under the Ginnie Mae MSR facility are based on the fair market value of the collateral.
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.
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 ownership interest in Holdings LLC throughout 2023 and 2022.
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.
The Ginnie Mae 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, 2024, we were in compliance with all applicable covenants covenants under the Ginnie Mae MSR Facility.
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.
As of December 31, 2024, we had $90.6 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.
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.
We were in compliance with the terms of these indentures as of December 31, 2024. MSR Facilities In 2022, the Company's consolidated subsidiary, UWM, entered into a Loan and Security Agreement with Citibank, N.A.
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.
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 repurchase loans not al ready owned by us from our warehouse lender and sell the pool of mortgage loans into the secondary market, but in most instances retain the MSRs associated with those loans.
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.
As part of such evaluation, we regularly review our levels of secured and unsecured indebtedness, available borrowing capacity and available equity, unsecured debt maturities, 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.
On January 30, 2023, UWM, entered into Amendment No. 1 to the Loan and Security Agreement with Citibank, permitting UWM, with the prior consent of Citibank, to enter into transactions for the sale of excess servicing cash flows (as discussed below) whereby Citibank will release its security interest in that portion of the collateral.
On January 30, 2023, UWM, amended the Loan and Security Agreement with Citibank, to permit UWM, with the prior consent of Citibank, to enter into transactions for the sale of excess servicing cash flows (as discussed below) whereby Citibank will release its security interest in that portion of the collateral.
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.
(4) Reflects the non-cash (income) expense impact of the change 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. (5) Reflects the change ((increase)/decrease) in the fair value of the retained investment securities.
Concurrently with this declaration, the Board, in its capacity as the Manager of Holdings LLC, under the Holdings LLC Second Amended and Restated Operating Agreement, approved a proportional distribution of $150.2 million from Holdings LLC to SFS Corp. with respect to Class B Units of Holdings LLC. The dividend and the distributions were paid on January 11, 2024.
Concurrently with this declaration, the Board, in its capacity as the Manager of Holdings LLC, under the Holdings LLC Second Amended and Restated Operating Agreement, approved a proportional distribution of $144.0 million from Holdings LLC to SFS Corp. with respect to Class B Units of Holdings LLC. The dividend and the distributions were paid on January 9, 2025.
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.
The Revolving Credit Agreement contains certain financial and operating covenants and restrictions, subject to a number of exceptions and qualificati ons, and the availability of funds under the Revolving Credit Facility is subject to our continued compliance with these covenants. We were in compliance with these covenants as of December 31, 2024.
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.
We estimate the fair value of IRLCs and FLSCs 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.
The net decrease in fair value of MSRs 46 Table of Contents for the year ended December 31, 2023 was primarily attributable to a decline in fair value of approximately $484.8 million due to realization of cash flows, decay, and other (including loans paid in full), a decline in fair value of approximately $330.0 million due to changes in valuation inputs and assumptions, mainly as a result of changes in market interest rates, and approximately $39.3 million of net reserves and transaction costs for bulk MSR sales and sales of excess servicing cash flows.
The decrease in fair value for the year ended December 31, 2023 of approximately $854.1 million was primarily attributable to a decline of approximately $484.8 million due to realization of cash flows, decay, and other (including loans paid in full), a decline of approximately $330.0 million resulting from changes in valuation inputs and assumptions, primarily due to changes in relevant market interest rates, and approximately $39.3 million of net reserves and transaction costs for bulk MSR sales and sales of excess servicing cash flows.
During the year ended December 31, 2023, we sold excess servicing cash flows on certain agency loans for proceeds of approximately $588.6 million. Revolving Credit Facility On August 8, 2022, UWM entered into the Revolving Credit Agreement, between UWM, as the borrower, and SFS Corp., as the lender.
During the years ended December 31, 2024 and December 31, 2023, we sold excess servicing cash flows on certain agency loans for proceeds of approximately $427.7 million and $588.6 million, respectively. Revolving Credit Facility In 2022, UWM entered into the Revolving Credit Agreement, between UWM, as the borrower, and SFS Corp., as the lender.
On March 20, 2023, our consolidated subsidiary, UWM, entered into a Credit Agreement with Goldman Sachs Bank USA, providing UWM with up to $500.0 million of uncommitted borrowing capacity to finance the origination, acquisition or holding of certain mortgage servicing rights (the "GNMA MSR facility").
In 2023 , the Company's consolidated subsidiary, UWM, entered into a Credit Agreement with Goldman Sachs Bank USA, providing UWM with up to $500.0 million of uncommitted borrowing capacity to finance the origination, acquisition or holding of certain mortgage servicing rights (the "Ginnie Mae MSR facility").
Borrowings under the GNMA MSR facility bear interest based on SOFR plus an applicable margin . The draw period for the GNMA MSR facility ends on March 20, 2024, and the facility has a maturity date of March 20, 2025. As of December 31, 2023, $250.0 million was outstanding under the GNMA MSR facility.
Borrowings under the Ginnie Mae MSR facility bear interest based on SOFR plus an applicable margin. T he draw period for the Ginnie Mae MSR facility ends on March 20, 2026, and the facility has a maturity date of March 20, 2027. As of December 31, 2024, $250.0 million was outstanding under the Ginnie Mae MSR facility.
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.
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. 52 Table of Contents 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.
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.
These investment securities are financed on average a t approximately 74% 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 borrowin gs.
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.
Prior to February 1, 2027, we may, at our option, redeem up to 40% of the aggregate principal amount of the 2030 Senior Notes originally issued at a redemption price of 106.625% of the principal amount of the 2030 Senior Notes redeemed on the redemption date plus accrued and unpaid interest, with net proceeds of certain equity offerings.
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.
No amounts were outstanding under the Revolving Credit Facility as of December 31, 2024. Borrowings Against Investment Securities 51 Table of Contents In 2021, UWM began selling some of the mortgage loans that it originates through UWM's private label securitization transactions.
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.
For the year ended December 31, 2024, we recognized a gain of $295.2 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 changes in relevant market interest rates, compared to a loss of $330.0 million recognized for the same period in the prior year as a result of decreases in market interest rates.
Refer to Note 5 - Mortgage Servicing Rights to the consolidated financial statements. (2) Reflects management incentive bonuses under our long-term incentive plan that are accrued when earned, net of cash payments. (3) Reflects the change (increase/(decrease)) in the fair value of the Public and Private Warrants. (4) Reflects the change (increase/(decrease)) in the Tax Receivable Agreement liability.
Refer to Note 5 - Mortgage Servicing Rights to the consolidated financial statements. (2) Reflects management incentive bonuses under our long-term incentive plan that are accrued when earned, net of cash payments. (3) Reflects the change (increase/(decrease)) in the fair value of the Public and Private War rants, which expire in January 2026.
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.
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.
As of December 31, 2023, $500.0 million was outstanding under the MSR Facility. 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, 2023, we were in compliance with all applicable covenants.
As of December 31, 2024, $250.0 million was outstanding under the Conventional MSR Facility. The Conventional 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.
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.
All such mortgage loans must adhere to a set of eligibility criteria to be acceptable. As of December 31, 2024, $23.4 million amount was outstanding under the ASAP+ program and $279.5 million was outstanding through the EF program.
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.
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.
Other costs were $965.9 million for the year ended December 31, 2022, a decrease of $12.5 million, or 1.3%, as compared to $978.4 million for the year ended December 31, 2021.
Other costs were $935.6 million for the year ended December 31, 2023, a decrease of $30.4 million, or 3.1%, as compared to $965.9 million for the year ended December 31, 2022.
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.
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.
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.
Net cash provided by in vesting activities Net cash provided by investing activities was $2.7 billion for the year ended December 31, 2024 compared to $1.8 billion of net cash provided by investing activities for the same period in 2023.
We used a portion of the proceeds from the issuance of the 2029 Senior Notes to pay off and terminate a line of credit that was in place at the time of issuance, and the remainder for general corporate purposes.
Interest on the 2029 Senior Notes is due semi-annually on April 15 and October 15 of each year. We used a portion of the proceeds from the issuance of the 2029 Senior Notes to pay off and terminate a line of credit that was in place at the time of issuance, and the remainder for general corporate purposes.
Included within these reserves are amounts for estimated liabilities for requirements to repay a portion of any premium received from investors on the sale of certain loans if such loans are repaid in their entirety within a specified time period after the sale of the loans; • the change in fair value of IRLCs, FLSCs and recorded loans on the balance sheet, due to changes in estimated fair value, driven primarily by interest rates but also influenced by other assumptions; and • capitalization of MSRs, representing the estimated fair value of newly originated MSRs when loans are sold and the associated servicing rights are retained.
Included within these reserves are amounts for estimated liabilities for requirements to repay a portion of any premium received from investors on the sale of certain loans if such loans are repaid in their entirety within a specified time period after the sale of the loans; and • capitalization of MSRs, representing the estimated fair value of newly originated MSRs when loans are sold and the associated servicing rights are retained.
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.
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.
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.
Four of our warehouse lines advance based on the fair value of the loans, rather than the principal balance. For those lines, we exchange collateral for modest changes in value.
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 $2.2 billion for the year ended December 31, 2023 compared to cash used in financing activities of $9.6 billion for the same period in 2022.
See Note 10 - Commitments and Contingencies to the consolidated financial statements for further information. Interest rate lock commitments, loan sale and forward commitments In the normal course of business, we are party to financial instruments with off-balance sheet risk. These financial instruments include commitments to extend credit to borrowers at either fixed or floating interest rates.
See Note 10 - Commitments and Contingencies to the consolidated financial statements for further information. Interest rate lock commitments, loan sale and forward commitments, and other interest rate derivatives In the normal course of business, we are party to financial instruments with off-balance sheet risk.
For the year ended December 31, 2023, 93% of the loans we 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 the year ended December 31, 2024, 89% of the loans we originated were sold to Fannie Mae or Freddie Mac, or were transferred to Ginnie Mae pools in the secondary market, while the remainder primarily include non-agency 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, construction loans, and non-qualified mortgage products, including home equity lines of credit (which in many instances are second liens) .
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 .
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 .
MSRs were $4.03 billion as of December 31, 2023, compared to $4.45 billion as of December 31, 2022.
MSRs were $3.97 billion as of December 31, 2024, compared to $4.03 billion as of December 31, 2023.
These decreases were partially offset by an increase in direct loan production costs of $13.9 million primarily due to costs associated with grants under a down payment assistance program that launched in 2023 and increased title recording fees, as well as an increase in marketing, travel and entertainment expenses of $10.3 million from our continued investment in our broker relationships through broker visits and training programs.
These decreases were partially offset by an increase in direct loan production costs of $13.9 million primarily due to costs associated with grants under a down payment assistance program that launched in 2023 and increased title recording fees, as well as an increase in marketing, travel and entertainment expenses of $10.3 million from our continued investment in our broker relationships through broker visits and training programs. 46 Table of Contents Income Taxes We recorded a $6.6 million provision for income taxes during the year ended December 31, 2024, compared to a $6.5 million benefit for income taxes for the year ended December 31, 2023 and $2.8 million provision for income taxes for the year ended December 31, 2022.
Cash flow data for the years ended December 31, 2023, 2022 and 2021 For the year ended December 31, ($ 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 $8.27 billion for the same period in 2022.
Cash flow data for the years ended December 31, 2024, 2023 and 2022 For the year ended December 31, ($ in thousands) 2024 2023 2022 Net cash (used in) provided by operating activities $ (6,241,495) $ 165,244 $ 8,268,182 Net cash provided by investing activities 2,676,092 1,829,962 1,290,346 Net cash provided by (used in) financing activities 3,575,274 (2,202,636) (9,584,718) Net increase (decrease) in cash and cash equivalents $ 9,871 $ (207,430) $ (26,190) Cash and cash equivalents at the end of the period 507,339 497,468 704,898 Net cash (used in) provided by operating activities Net cash used in operating activities was $6.2 billion for the year ended December 31, 2024 compared to net cash provided by operating activities of $165.2 million for the same period in 2023.
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.
Derivative assets and liabilities were $100.0 million and $36.0 million, respectively, as of December 31, 2024, as compared to $33.0 million and $40.8 million, respectively, as of December 31, 2023.
The amount owed and outstanding on our warehouse facilities fluctuates based on our origination volume, the amount of time it takes us to sell the loans we originate, our cash on hand, and our ability to obtain additional financing.
As of December 31, 2024, there were no outstanding exchanges of collateral. 48 Table of Contents The amount owed and outstanding on our warehouse facilities fluctuates based on our loan origination volume, the amount of time it takes us to sell the loans we originate, our cash on hand, and our ability to obtain additional financing.
As of the dates presented below, our loan servicing portfolio of loans serviced for others consisted of the following: ($ 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 $284.1 million for the year ended December 31, 2022.
As of the dates presented below, our portfolio of loans serviced for others consisted of the following: ($ in thousands) December 31, 2024 December 31, 2023 UPB of loans serviced $ 242,405,767 $ 299,456,189 Number of loans serviced 729,781 905,129 MSR portfolio delinquency count (60+ days) as % of total 1.37 % 1.15 % Weighted average note rate 4.76 % 4.43 % Weighted average service fee 0.3333 % 0.3029 % 44 Table of Contents Change in Fair Value of Mortgage Servicing Rights The change in fair value of MSRs for the year ended December 31, 2024 was a decrease of $295.0 million, as compared with a decrease of $854.1 million for the year ended December 31, 2023.
In addition, we may, at our option, redeem the 2027 Senior Notes prior to June 15, 2024 at a price equal to 100% of the principal amount redeemed plus a “make-whole” premium, plus accrued and unpaid interest.
In addition, we may, at our option, redeem some or all of the 2030 Senior Notes prior to February 1, 2027 at a price equal to 100% of the principal amount redeemed plus a "make-whole" premium, plus accrued and unpaid interest.

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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 changeManagement 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.
Biggest changeFor 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 . Counterparty risk We are subject to risk that arises from our financing facilities and interest rate risk hedging activities.
These activities generally involve an exchange of obligations with unaffiliated banks or companies, referred to in such transactions as “counterparties.” If a counterparty were to default, we could potentially be exposed to financial loss if such counterparty were unable to meet its obligations to us.
These activities generally involve an exchange of obligations with unaffiliated banks or companies, referred to in such transactions as “counterparties." If a counterparty were to default, we could potentially be exposed to financial loss if such counterparty were unable to meet its obligations to us.
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.
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, 2024, 2023 or 2022.
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 accordance with the best practices outlined 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.
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.
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, 2024 given hypothetical instantaneous parallel shifts in the yield curve. Actual results could differ materially.
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
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. 57 Table of Contents
The TBA market is a secondary market where FLSCs or TBAs are sold by lenders seeking to hedge the risk that market interest rates may change and lock in a price for the mortgages they are in the process of originating. We assess our market risk based on changes in interest rates utilizing a sensitivity analysis.
The TBA market is a secondary market where FLSCs or TBAs are sold by lenders seeking to hedge the risk that market interest rates may change and lock in a price for the mortgages they are in the process of originating. 56 Table of Contents We assess our market risk based on changes in interest rates utilizing a 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.
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.
These sensitivities are hypothetical and presented for illustrative purposes only. Changes in fair value based on variations in assumptions generally cannot be extrapolated to our performance because the relationship of the change in fair value may not be linear nor does it factor ongoing operations.
Changes in fair value based on variations in assumptions generally cannot be extrapolated to our performance because the relationship of the change in fair value may not be linear nor does it factor ongoing operations.
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.
For the year ended December 31, 2024, our originated loans had a weighted average loan to value ratio of 81.91%, and a weighted average FICO score of 737. For the ye ar 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 .
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.
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.
December 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.
December 31, 2024 ($ in thousands) Down 25 bps Up 25 bps Increase (decrease) in assets Mortgage loans at fair value $ 71,854 $ (79,109) MSRs (187,165) 158,487 IRLCs 56,179 (64,675) Total change in assets $ (59,132) $ 14,703 Increase (decrease) in liabilities FLSCs $ (128,433) $ 139,442 Total change in liabilities $ (128,433) $ 139,442 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.
Added
We periodically evaluate our overall interest rate risk management strategy with respect to MSRs, which includes consideration of our natural business model hedge, regular sales of MSRs and excess servicing cash flows, and at times entering into financial instruments to mitigate the interest rate risk associated with all or a portion of our MSR portfolio.
Added
We used December 31, 2024 market rates on our instruments outstanding at that time to perform the sensitivity analysis. These sensitivities are hypothetical and presented for illustrative purposes only.

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