Housing: 'Working with mortgage brokers' is 'where we've shined,' UWM CEO says

UWM Chairman and CEO Mat Ishbia opens up about how his brokerage firm has managed to grow by working alongside mortgage brokers as housing prices continue to rise this quarter.

Video transcript

[ELECTRONIC CHIRPING]

JARED BLIKRE: Welcome back. The number one mortgage lender in the US is leveraging a red-hot housing market to deliver record results in its latest earnings report for the third quarter. UWM Holdings chairman and CEO Matt Ishbia along with Yahoo Finance's Brian Sozzi joins us now.

And Matt, knockout, blowout quarter. You out-competed your peers notably, as you've noted in some of your notations to us. We also have the 30-year mortgage rate at the lowest level since July. I have to think that's helping the housing market some. But can you just break down your insider view into this very complex market?

MATT ISHBIA: Yeah, no, absolutely. Third quarter was a great quarter. We had an all-time record quarter from a volume perspective at over $63 billion of mortgage. And what that means is-- and also, an all-time record on purchase. And that's where, really, the red hot market that you're talking about.

Rates have actually gone up a little bit, gone down a little bit. But they're in the low 3's still. And going to findamortgagebroker.com, find a local mortgage broker who can shop and get you a great deal. And that's really where we've shined is working with mortgage brokers on the purchase side and of course on the refi side as well.

But the housing market's been really hot right now. And it's going to cool off, fourth quarter, first quarter. It's cyclical. However, with rates staying low or rates being in the low 3's it's still a great time to buy. And people are taking advantage of that.

BRIAN SOZZI: [INAUDIBLE] next year.

MATT ISHBIA: Sorry, you broke up on that, Brian.

BRIAN SOZZI: The sequential improvement you saw on your gain on sale margin, very key metric for you guys, is that sustainable into next year?

MATT ISHBIA: Yeah, absolutely. We obviously control the margin. So what we're trying to do is give the brokers an ability to give consumers a better rate. And so brokers can give a consumer a better deal getting a mortgage. And we're to continue that. But gain on sale margins were at the all-time lows in the second quarter. And we talked about how they're going to go up. And I've guided them to be in the same range, maybe slightly up from where I guided last quarter.

And so we see it going up a little bit, maybe loosening. However, the way we think about it is it's good. Gain on sale margins being low is great for consumers and, at the same time, great for brokers, which is really a business development strategy for UWM in the long term.

And so it's winning. It's helping UWM win, helping brokers win. And we're really proud of it. And we obviously, with our cost-originate, we're able to be very profitable at these margins.

BRIAN SOZZI: I talked to one of your competitors recently, Matt. I'm sure you know them quite well. They are in fact in Detroit. They said they are looking at acquisitions. And they sounded very aggressive. Are you prepared to get aggressive on the M&A front next year?

MATT ISHBIA: We look at everything. But honestly, we've been organic. We've been in business 35-plus years. And we've done everything organically. We've grown from, when I got here 18 years ago, about 12 people at UWM, to almost 9,000 people. We've grown to be the number one wholesale lender in the country.

We feel like acquiring a company, you have to have a lot of culture, a lot of mixture, a lot of things you've got to do. We have cash able to do that. However, we can acquire by just continuing to dominate and taking market share. And that's really how we've grown for a long time.

And I see 2022 being a major market share play for UWM without having to acquire. If we wanted to acquire, it'd be even bigger. But we're looking at all things. But that's not the focus right now. Right now, the focus is organic growth and continuing going forward.

KARINA CONTRERAS: And sir, I wanted to ask you, UWM was up almost 30% from Q1 to Q3. But where are you seeing the most upside growth geographically?

MATT ISHBIA: It's really across the country. It's really in the purchase market. So I think when we've been up so much, where most competitors, first quarter to third quarter, you can see, everyone's gone down. And UWM went up almost 30%. That's because of the purchase business.

And so people want to buy a house. It's one thing to go get a refinance or go through a process. But you want to have certainty of closing. Closing loans in 17, 18, 19 days is what UWM can do with a mortgage broker. Go to, like I said, findamortgagebroker.com. They're all throughout the country. So it's not just California or Minnesota or New Mexico. It's everywhere in the country, local mortgage brokers. And that's who we partner with.

And so it's been big across the country, I'd really say the big reason for the growth is purchase is where we're winning. And that's where we'll continue to win.

JARED BLIKRE: Matt, I got to ask you about the Fed because you are in an interest rate-sensitive industry. And we have the Fed, they're going to taper their purchase of mortgage backed securities. That affects the market directly. But eventually, they're going to be raising rates. We're going to see mortgage rates rise as well, putatively.

So I'm just wondering how you view the interest rate environment and how you're adapting your company to it.

MATT ISHBIA: Yeah. So since the first quarter, rates have ticked up a little bit, right? They're still very low, low 3's, as we've talked about already earlier. But we see the rates going to 3 and 1/2, 3.75%. And when that happens, what's going to happen?

Of course, I hope I'm wrong, and it goes down. But the reality is, that's what everyone's talking about, 3 and 1/2, 3.75%. It's still very low in the big scheme of things. But you better be able to do purchase because we service for over a million consumers who pay us every month. And our average interest rate's in the 2%'s. So you're not going to be refinancing from a 2% rate to a 3% rate.

And so therefore, we're looking at an opportunity on purchase business. And that's really the health of any mortgage company is how much purchase volume can you do? And if you're going to be strong for the long term, you've got to be able to help people buy houses, not just save money on a refinance.

BRIAN SOZZI: Last time I saw you, Matt, I think it was down on the New York Stock Exchange floor. And you were pretty amped up about UWM accepting Bitcoin as payment. Since then, you said, no, no, we're not going to accept Bitcoin as payment here. Do you think he gave up too soon on that? To me, it seems very innovative and an opportunity for you guys.

MATT ISHBIA: Yeah, so we're a leader in technology. So with 1,200 technology people, innovating, coming up with new ideas, the Bitcoin and just using crypto in general, we want to explore. We push the envelope on everything. But we want to make sure there's enough demand and it's worth our time.

We are able to do it today. We just said, hey, listen, we're not going to make it a mass thing right now. Let's figure it out. If it becomes more mainstream or we want it to become mainstream, we can turn it on. But we've got to go through working with regulators. At the same time, making sure there's a demand from consumers.

But we have proven we can do it. We were the first ones ever to do it. We are able to pull it off the shelf any time. We just don't see it as a huge catalyst for our growth in 2022.

KARINA CONTRERAS: All right, Matt Ishbia, thank you so much for that insight. We thank you very much, UWM chairman and CEO.