Fourth quarter profit fell significantly amid shifting landscape
Not even a mortgage industry behemoth such as United Wholesale Mortgage Holdings Corp. is immune to shifting market forces. While the Pontiac, Mich.-based firm posted a higher volume of business in 2021, it earned $1.6 billion in profit compared to $3.4 billion in 2020 – a drop of more than 53%, the company reported this week.
Net income for the fourth quarter took an even deeper hit. The company reported profits of $239.8 million – down more than 80% from the comparable period in 2020 when $1.4 billion was posted.
Company officials attributed much of that decline to its temporary holding on to loans from the Federal Housing Finance Agency that it planned to sell in early 2022.
Rising mortgage rates have led to a retreat from refinancing, which had yielded a rich vein for brokers for the better part of the last two years. Such industry shifts are reflected in UWM’s latest financial report.
Notwithstanding tighter profit margins, the company has no plans to eliminate workers – a step other industry players have been forced to take or plan on doing so. “No, we won’t be cutting people,” president and CEO Mat Ishbia (pictured) said during the earnings call. “We’re not like everybody else. We don’t lay off like other companies, and we don’t have a need to,” he added, attributing the dynamic to a cost to originate and technology that is “…superior to our competition.”
Company officials conceded the employee base is down from the second and third quarters of 2021, but attributed that to “natural attrition” rather than layoffs. “We’re hovering between 8,000 to 9,000 team members,” a company spokesperson subsequently told Mortgage Professional America in an email.
MPA later asked what plan of action the company might have – a slight pivot into other business segments, for example – to avert layoffs. “UWM has not, and does not, plan to do any layoffs,” came the succinct response from the same spokesperson.
Indeed, company officials said they were still hiring although at a slower pace than last year. “Our staffing levels have naturally migrated a little bit lower,” UWM’s CFO Tim Forrester said. “Because we’ve managed our head count and our hiring rate, our overall head count is a little bit lower, or we expect it to be lower, in the first quarter.”
Better news came in the area of originations. For the year, the company reported total volume of loan originations up 24% in 2021 to $226.5 billion – a new record for the firm. Among those across mortgage, 61% came from refinancing and another 39% from home purchases, officials said. In 2020, more than 76% of the company’s loans were derived from refinancing, while 23% were from home purchases.
Other industry players have not been able to avoid layoffs – a reality for which many are bracing in the coming months amid a shifting landscape triggered by rising rates. The online real estate marketplace company Zillow Group Inc. continues to lay off workers after the failure of its Zillow Offers home-flipping product, with 55 additional job cuts expected by April. In correspondence to state officials, the company wrote of plans to cut 19 jobs in Tampa, Fla., by April 18, and 36 more in Centennial, Colo., by March 21.
Similarly, California-based Winnpointe Corp., doing business as Interactive Mortgage, plans to lay off 51 employees by April, according to a WARN notice filed in its home state.
Santander Bank LLC, a Spain-based global banking group, recently revealed plans to cut 53 employees in the Philadelphia region by the first week of April, according to a state regulatory filing. The company told MPA the cuts were due to its discontinuing of residential mortgage and home equity originations.
Better.com started the layoff trend in earnest late last year when it fired some 900 workers during a Zoom call a few weeks before Christmas. Bloomberg later reported that the cuts essentially moved a larger portion of its workforce offshore. The online mortgage lender had been aggressively hiring in the US and India for the better part of 2021, the news agency reported, in order to keep pace with the refinancing tidal wave that is now receding. A recent regulatory filing shows that the cuts fell much harder stateside than in India, Bloomberg reported.