WSJ Casts A Skeptical Eye on Mat Ishbia’s Quest to be “King of Mortgages and Basketball”

Key Takeaways:

– UWM CEO Mat Ishbia is the subject of a Wall Street Journal article that discusses his aggressive deal-making in both business and sports.
– The article compares Ishbia’s quest to win an NBA title with the Phoenix Suns to UWM’s push to become the nation’s biggest mortgage lender.
– UWM announced a “Game On” pricing initiative that lowered rates across all loan types, resulting in a net loss for two quarters.
– Despite the losses, Ishbia and his family collect $150 million in dividend payments every quarter.
– UWM faced criticism for Ishbia’s ultimatum to mortgage brokers, in which he stated that UWM would no longer do business with brokers who send loan applications to rivals.
– The article raises concerns about UWM’s ability to retain employees and market share if demand for mortgages does not pick up.
– UWM has rebounded in profits and has onboarded 1,000 new employees in preparation for future business opportunities.
– There is no guarantee that UWM will hold its market share if rates fall, as customers tend to go wherever the rates are lowest.

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UWM CEO Mat Ishbia’s quest to become “the king of mortgages and basketball” is the subject of a lengthy article in The Wall Street Journal that alleges the “fast-talking 43-year-old billionaire” is “charting a risky path in both business and sports.”

Wednesday’s profile of Ishbia details the “aggressive deal-making” the Phoenix Suns have engaged in since Isbhia and his brother, Justin, bought a controlling interest in the NBA team in February. The 2,200-word article by Journal reporters Ben Eisen and Robert O’Connell compares Ishbia’s determination to win an NBA title to United Wholesale Mortgage’s aggressive “push to grab market share.”

Not everyone who works in mortgage lending will care how the Phoenix Suns’ new owners are faring after firing head coach Monty Williams and loading the team’s roster with stars like Kevin Durant, Bradley Beal and Devin Booker, who together will earn more than $120 million this season.

But Eisen and O’Connell also take a critical look at the risks UWM took to surpass Rocket Mortgage as the nation’s biggest mortgage lender last year — and the profits the Ishbia family is raking in even when the company is losing money.

‘Game on’ pricing initiative

Last summer, UWM announced a “Game On” pricing initiative that brought its rates down by 50 to 100 basis points (0.5 to 1 percentage point) across all loan types. With margins shrinking to as low as 0.51 percent per loan, UWM was in the red for two of the past four quarters — (Q4 2022 and Q1 2023).

According to the Mortgage Bankers Association, three out of four independent mortgage banks lost money in the last three months of 2022 as their business dropped off faster than they were able to trim expenses, resulting in an average loss of $2,812 per loan. Much of UWM’s first quarter net loss was driven by a $337 million write-down in the fair value of the company’s mortgage servicing rights (in addition to making loans, UWM collects payments on nearly $300 billion in mortgages on behalf of investors).

Profits have since rebounded — UWM last week reported $301 million in third-quarter net income, and Ishbia boasted that the company had onboarded 1,000 new employees to be prepared when rates come down and business booms.

“When rates turn we will be ready because we are investing heavily right now to ensure our brokers will win bigger than ever in the next refi cycle,” Ishbia said on a Nov. 8 call with investment analysts. “The combination of our purchase business and the scale and quality of our servicing book is so strong that our business can thrive in virtually all markets. We embrace these cycles each time they happen and we come out stronger, and no other lender can say that.”

But Eisen and O’Connell note that if demand for mortgages doesn’t pick up, “it might prove costly to retain employees and chase market share. High rates tend to be hardest on the kind of smaller shops that UWM relies on to send it customers.”

And if rates do fall, “there is no guarantee that UWM will hold its market share,” the Journal reporters noted. “Mortgage lenders are all effectively selling the same product, and customers tend to go wherever the rates are lowest.”

A UWM spokesperson declined Inman’s request for comment on that and other questions raised by The Wall Street Journal.

Millions in dividends paid to Ishbias

Regardless of whether the company is profitable, Ishbia and his family — including brother Justin and father Jeff, who both sit on the UWM’s board of directors — collect $150 million in dividend payments every quarter, the Journal noted.

After UWM went public in a 2020 SPAC merger, a company controlled by the Ishbia family, SFS Holding Corp., retained 94 percent ownership of UWM Holdings LLC.

“Over the 12 months through Sept. 30, the company [UWM] earned $329 million and paid out $601 million [in dividends] to Ishbia’s holding company,” the Journal reported.

A spokeswoman for the UWM told the Journal that UWM’s board of directors is comfortable with the distributions. But the Journal noted that the board is “stocked with his allies,” including former Detroit Pistons star Isiah Thomas.

Ultimatum to mortgage brokers

In addition to slashing rates and introducing new loan products and technology, in 2021 UWM launched a controversial initiative aimed at growing its business. As a wholesale mortgage lender, UWM works exclusively with mortgage brokers, and Ishbia often credits brokers’ ties to local real estate agents and homebuyers for the company’s success.

Ishbia took to Facebook in March 2021 to announce that UWM would no longer do business with mortgage brokers who send loan applications to rivals Rocket Mortgage or Fairway Independent Mortgage. At the time, he claimed that those companies were attempting to poach mortgage brokers’ clients through their direct and retail channels.

UWM faced criticism for Ishbia’s “All In” ultimatum to mortgage brokers and also became entangled in litigation as both a defendant and a plaintiff.

In its latest quarterly report to investors, UWM said it remains a defendant in a 2021 lawsuit filed by The Okavage Group LLC over the policy and continues to pursue a 2022 complaint it filed against mortgage broker America’s Moneyline Inc. for allegedly violating a pledge to work only with UWM. America’s Moneyline has denied the allegations and filed a counter-complaint.

Citing data from mortgage analytics firm Modex, The Wall Street Journal reported that “partly as a result of” Ishbia’s 2021 ultimatum, “thousands of mortgage brokers send nearly all of their business to UWM.”

“We’re trying to win every day,” Ishbia told The Journal, of both UWM and the Phoenix Suns.

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Property Chomp's Take:

The traditional way of doing business is rapidly becoming obsolete, and the need to adapt to new market challenges and opportunities has never been more crucial. Inman Connect New York, taking place from January 23-25, is the perfect platform for industry professionals to come together and conquer these challenges and prepare for the future.

One individual who embodies the spirit of defying the market and betting big on the future is Mat Ishbia, the CEO of United Wholesale Mortgage (UWM). Ishbia's quest to become "the king of mortgages and basketball" has recently been the subject of a lengthy article in The Wall Street Journal, which characterizes him as a "fast-talking 43-year-old billionaire" who is taking risks in both business and sports.

The article highlights Ishbia's aggressive deal-making since he and his brother, Justin, acquired a controlling interest in the NBA team, the Phoenix Suns, in February. Drawing parallels between Ishbia's determination to win an NBA title and UWM's aggressive push to grab market share, the article delves into the risks that UWM has taken to surpass Rocket Mortgage as the nation's largest mortgage lender.

Last summer, UWM announced its "Game On" pricing initiative, which reduced rates by 50 to 100 basis points across all loan types. This move, however, led to a decrease in margins and two quarters of losses for UWM. The Mortgage Bankers Association reported that three out of four independent mortgage banks lost money in the last quarter of 2022, with an average loss of $2,812 per loan. Despite these challenges, UWM's profits have rebounded, with the company reporting $301 million in net income for the third quarter of this year.

The Journal article raises concerns about UWM's ability to retain employees and market share if demand for mortgages doesn't pick up. It also notes that customers tend to go wherever the rates are lowest, so there is no guarantee that UWM will hold its market share if rates fall. Despite these uncertainties, Ishbia remains confident in UWM's ability to thrive in all market conditions, citing the combination of their purchase business and the scale and quality of their servicing book.

One point of contention raised by the article is the millions in dividend payments that the Ishbia family receives, regardless of whether UWM is profitable or not. The family collects $150 million in dividends every quarter, despite the company reporting losses in some quarters. While a UWM spokesperson declined to comment on this issue, the company's board of directors, which includes Ishbia's family members and allies, reportedly stands by these distributions.

In addition to UWM's aggressive approach to market share, the company faced controversy with its "All In" ultimatum to mortgage brokers. UWM announced in 2021 that it would no longer do business with brokers who send loan applications to its rivals, Rocket Mortgage and Fairway Independent Mortgage. This move led to litigation and criticism, but data from mortgage analytics firm Modex suggests that thousands of mortgage brokers now send most of their business to UWM.

In conclusion, the article in The Wall Street Journal sheds light on the risks and challenges that UWM and its CEO, Mat Ishbia, are facing in their quest for market dominance. While the company has experienced losses and uncertainties, it remains focused on innovation and growth. Inman Connect New York provides an excellent opportunity for industry professionals to learn from Ishbia's experiences and gain insights into how to navigate the evolving business landscape.

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