UWM (UWMC) - 2025 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis for UWM Holdings Corporation Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements of UWM Holdings Corporation, including the balance sheets, statements of operations, changes in equity, and cash flows, along with comprehensive notes detailing accounting policies, financial instrument valuations, debt, equity, and other financial disclosures for the periods ended March 31, 2025, and December 31, 2024 Condensed Consolidated Balance Sheets This section presents the condensed consolidated balance sheets, detailing assets, liabilities, and equity for UWM Holdings Corporation as of March 31, 2025, and December 31, 2024 Condensed Consolidated Balance Sheets (in thousands) | Metric | March 31, 2025 | December 31, 2024 | Change ($) | Change (%) | | :-------------------------------- | :------------- | :---------------- | :--------- | :--------- | | Total assets | $14,048,433 | $15,671,116 | $(1,622,683) | -10.36% | | Total liabilities | $12,413,084 | $13,617,268 | $(1,204,184) | -8.84% | | Total equity | $1,635,349 | $2,053,848 | $(418,499) | -20.38% | - Mortgage loans at fair value decreased from $9,516,537 thousand at December 31, 2024, to $8,402,211 thousand at March 31, 2025, a reduction of $1,114,326 thousand[9] - Mortgage servicing rights (MSRs) decreased from $3,969,881 thousand at December 31, 2024, to $3,321,457 thousand at March 31, 2025, a decrease of $648,424 thousand[9] Condensed Consolidated Statements of Operations This section outlines the condensed consolidated statements of operations, presenting revenues, expenses, and net income (loss) for the three months ended March 31, 2025, and 2024 Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | Change ($) | Change (%) | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Total revenue | $613,370 | $585,519 | $27,851 | 4.76% | | MSR valuation adjustments, net | $(388,585) | $(15,563) | $(373,022) | 2396.85% | | Total expenses | $485,601 | $385,692 | $99,909 | 25.90% | | Earnings (loss) before income taxes | $(260,816) | $184,264 | $(445,080) | -241.55% | | Net income (loss) | $(247,028) | $180,531 | $(427,559) | -236.83% | | Net income (loss) attributable to UWM Holdings Corporation | $(13,679) | $8,730 | $(22,409) | -256.69% | | Basic EPS | $(0.08) | $0.09 | $(0.17) | -188.89% | | Diluted EPS | $(0.12) | $0.09 | $(0.21) | -233.33% | - The significant decrease in net income (loss) was primarily driven by a substantial increase in MSR valuation adjustments, which moved from a $(15,563) thousand adjustment in Q1 2024 to a $(388,585) thousand adjustment in Q1 2025[11] Condensed Consolidated Statements of Changes in Equity This section details the condensed consolidated statements of changes in equity, showing movements in capital, retained earnings, and non-controlling interest for the period ended March 31, 2025 Condensed Consolidated Statements of Changes in Equity (in thousands) | Metric | Balance, January 1, 2025 | Net Loss | Class A Common Stock Dividends | Member Distributions to SFS Corp. | Stock-based Compensation | Re-measurement of Non-Controlling Interest | Balance, March 31, 2025 | | :--------------------------------------- | :----------------------- | :------- | :----------------------------- | :-------------------------------- | :----------------------- | :----------------------------------------- | :---------------------- | | Class A Common Stock Amount | $16 | — | — | — | — | $4 | $20 | | Class D Common Stock Amount | $144 | — | — | — | — | $(4) | $140 | | Additional Paid-in Capital | $3,523 | — | — | — | $775 | — | $4,298 | | Retained Earnings | $157,837 | $(13,679) | $(18,775) | — | $132 | $34,892 | $160,407 | | Non-controlling Interest | $1,892,328 | $(233,349) | — | $(148,395) | $8,259 | $(48,359) | $1,470,484 | | Total Equity | $2,053,848 | $(247,028) | $(18,775) | $(148,395) | $9,166 | $(13,467) | $1,635,349 | - Total equity decreased by $418,499 thousand from January 1, 2025, to March 31, 2025, primarily due to a net loss of $247,028 thousand and member distributions to SFS Corp. of $148,395 thousand[13] - Exchange Transactions resulted in an increase of 42,549,478 Class A common stock shares and a corresponding decrease in Class D common stock shares, leading to a re-measurement of non-controlling interest[13][80] Condensed Consolidated Statements of Cash Flows This section presents the condensed consolidated statements of cash flows, categorizing cash movements from operating, investing, and financing activities for the three months ended March 31, 2025, and 2024 Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Three months ended March 31, 2025 | Three months ended March 31, 2024 | Change ($) | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | :--------- | | Net cash provided by (used in) operating activities | $593,898 | $(2,202,740) | $2,796,638 | | Net cash provided by investing activities | $928,391 | $1,287,502 | $(359,111) | | Net cash (used in) provided by financing activities | $(1,544,604) | $1,023,409 | $(2,568,013) | | Net (decrease) increase in cash and cash equivalents | $(22,315) | $108,171 | $(130,486) | | Cash and cash equivalents, end of period | $485,024 | $605,639 | $(120,615) | - Operating activities shifted from a net cash outflow of $2.2 billion in Q1 2024 to a net cash inflow of $593.9 million in Q1 2025, primarily due to a decrease in mortgage loans at fair value[17][190] - Net cash used in financing activities increased significantly to $1.5 billion in Q1 2025, compared to $1.0 billion provided in Q1 2024, mainly due to net repayments under warehouse lines of credit[17][192] Notes to Condensed Consolidated Financial Statements This section provides detailed notes to the condensed consolidated financial statements, covering significant accounting policies, fair value measurements, debt, equity, and other financial disclosures NOTE 1 – ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note describes UWM Holdings Corporation's 'Up-C' structure, its operating subsidiary's business, capital structure, and income tax accounting policies - UWM Holdings Corporation operates in an 'Up-C' structure, with United Wholesale Mortgage, LLC (UWM) as its operating subsidiary, engaged in the origination, sale, and servicing of residential mortgage loans[19][20][26] - The company's capital structure includes Class A, B, C, and D common stock, with Class A and B having economic interest and Class C and D primarily voting rights[21] - The company accounts for income taxes by applying an estimated annual effective tax rate to year-to-date earnings and has a Tax Receivable Agreement (TRA) with SFS Corp. for 85% of tax savings from Exchange Transactions[29][30] NOTE 2 – MORTGAGE LOANS AT FAIR VALUE This note explains the Company's election of the fair value option for mortgage loans and presents a breakdown of mortgage loans at fair value - The Company elects the fair value option for mortgage loans to best reflect the economic consequences of its origination and hedging activities[40] Mortgage Loans at Fair Value (in thousands) | Metric | March 31, 2025 | December 31, 2024 | | :----------------------------- | :------------- | :---------------- | | Mortgage loans, unpaid principal balance | $8,258,871 | $9,450,137 | | Premiums paid on mortgage loans | $93,852 | $88,202 | | Fair value adjustment | $49,488 | $(21,802) | | Mortgage loans at fair value | $8,402,211 | $9,516,537 | NOTE 3 – DERIVATIVES This note details the Company's use of Interest Rate Lock Commitments (IRLCs) and Forward Loan Sale Commitments (FLSCs) for hedging, along with their fair values - The Company uses Interest Rate Lock Commitments (IRLCs) and Forward Loan Sale Commitments (FLSCs) to economically hedge its pipeline of mortgage loans[42][43] - The blended average pullthrough rate for IRLCs was 79% as of March 31, 2025, down from 80% at December 31, 2024[42] Derivative Financial Instruments (in thousands) | Derivative Type | March 31, 2025 (Fair Value Assets) | March 31, 2025 (Fair Value Liabilities) | December 31, 2024 (Fair Value Assets) | December 31, 2024 (Fair Value Liabilities) | | :---------------- | :--------------------------------- | :------------------------------------ | :------------------------------------ | :------------------------------------- | | IRLCs | $36,648 | $3,969 | $6,729 | $33,685 | | FLSCs | $7,310 | $23,953 | $93,235 | $2,280 | | Total | $43,958 | $27,922 | $99,964 | $35,965 | NOTE 4 – ACCOUNTS RECEIVABLE, NET This note provides a breakdown of accounts receivable, net, and highlights changes in its components between reporting periods Accounts Receivable, Net (in thousands) | Category | March 31, 2025 | December 31, 2024 | | :-------------------------------- | :------------- | :---------------- | | Servicing fees | $155,930 | $159,282 | | Servicing advances | $138,102 | $148,953 | | Receivables from sales of servicing | $96,175 | $32,582 | | Margin deposits | $58,162 | $25,520 | | Origination receivables | $22,140 | $27,527 | | Derivative settlements receivable | $9,642 | $22,377 | | Other receivables | $340 | $5,590 | | Provision for current expected credit losses | $(8,191) | $(3,876) | | Total accounts receivable, net | $472,299 | $417,955 | - Total accounts receivable, net, increased by $54,344 thousand from December 31, 2024, to March 31, 2025, primarily driven by an increase in receivables from sales of servicing and margin deposits[44] NOTE 5 – MORTGAGE SERVICING RIGHTS This note describes the valuation methodology for Mortgage Servicing Rights (MSRs) and details changes in their fair value, including key unobservable inputs - MSRs are measured at fair value using a valuation model that considers prepayment speeds, discount rate, cost to service, and income streams[45] Changes in MSR Assets (in thousands) | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Fair value, beginning of period | $3,969,881 | $4,026,136 | | Capitalization of MSRs | $735,571 | $535,951 | | MSR and excess servicing sales | $(1,010,124) | $(1,383,098) | | Changes in fair value (valuation inputs/assumptions) | $(250,821) | $141,059 | | Changes in fair value (collection/realization) | $(123,050) | $(128,245) | | Fair value, end of period | $3,321,457 | $3,191,803 | - The fair value of MSRs decreased by $388.6 million in Q1 2025, primarily due to changes in valuation inputs and assumptions ($-250.8M) and collection/realization of cash flows ($-123.1M)[47] Key Unobservable Inputs for MSR Valuation | Input | March 31, 2025 (Weighted Average) | December 31, 2024 (Weighted Average) | | :------------------ | :-------------------------------- | :--------------------------------- | | Discount rates | 11.0% | 10.9% | | Annual prepayment speeds | 9.6% | 8.3% | | Cost of servicing | $88 | $85 | NOTE 6 – WAREHOUSE AND OTHER SECURED LINES OF CREDIT This note outlines the Company's warehouse lines of credit and MSR facilities, detailing outstanding amounts, compliance with covenants, and changes in borrowing capacity Warehouse Lines of Credit (in thousands) | Facility Type | March 31, 2025 (Total Advanced) | December 31, 2024 (Total Advanced) | | :-------------------------------- | :------------------------------ | :------------------------------- | | Master Repurchase Agreements | $7,531,099 | $8,394,841 | | Early Funding (EF) | $42,040 | $279,515 | | Total | $7,573,139 | $8,697,744 | - The Company was in compliance with all covenants for its warehouse lines of credit and MSR facilities as of March 31, 2025[52][54][55] - The Conventional MSR Facility and warehouse facility combined total uncommitted borrowing capacity increased to $2.0 billion, with maturity extended to June 26, 2026[54] - Outstanding borrowings under MSR facilities were $125.0 million for both Conventional and Ginnie Mae MSR Facilities as of March 31, 2025, down from $250.0 million each at December 31, 2024[54][55] NOTE 7 – OTHER BORROWINGS This note details the Company's outstanding Senior Notes, including maturity dates and interest rates, and provides information on its unsecured Revolving Credit Facility Outstanding Senior Notes (in thousands) | Facility Type | Maturity Date | Interest Rate | March 31, 2025 (Carrying Amount) | December 31, 2024 (Carrying Amount) | | :---------------- | :------------ | :------------ | :------------------------------- | :-------------------------------- | | 2025 Senior notes | 11/15/2025 | 5.500% | $798,631 | $798,084 | | 2027 Senior notes | 06/15/2027 | 5.750% | $498,087 | $497,870 | | 2029 Senior notes | 04/15/2029 | 5.500% | $696,464 | $696,245 | | 2030 Senior notes | 02/01/2030 | 6.625% | $793,285 | $793,127 | | Total senior notes | | 5.87% (W.A.) | $2,786,467 | $2,785,326 | - The Company issued $800.0 million in 2030 Senior Notes in December 2024, accruing interest at 6.625% per annum, with interest payments commencing August 1, 2025[61] - No amounts were outstanding under the $500.0 million unsecured Revolving Credit Facility with SFS Corp. as of March 31, 2025, or December 31, 2024[65] NOTE 8 – COMMITMENTS AND CONTINGENCIES This note discusses the Company's representations and warranties reserve activity, commitments to extend credit, and assessment of legal and regulatory matters Representations and Warranties Reserve Activity (in thousands) | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Balance, beginning of period | $87,647 | $62,865 | | Additions | $10,376 | $10,463 | | Loss realized, net of adjustments | $(4,622) | $(5,106) | | Balance, end of period | $93,401 | $68,222 | - The Company had commitments to extend credit to potential borrowers totaling approximately $19.9 billion as of March 31, 2025[69] - The Company does not believe any current legal or regulatory matters will have a material adverse effect on its financial position, results of operations, or cash flows[70] NOTE 9 - ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER This note provides a detailed breakdown of accounts payable, accrued expenses, and other liabilities, highlighting key changes between reporting periods Accounts Payable, Accrued Expenses and Other (in thousands) | Category | March 31, 2025 | December 31, 2024 | | :-------------------------------- | :------------- | :---------------- | | TRA liability | $123,994 | $78,519 | | Servicing fees payable | $118,869 | $95,621 | | Representations and warranties reserve | $93,401 | $87,647 | | Accrued compensation and benefits | $85,625 | $90,964 | | Accrued interest and bank fees | $76,186 | $41,851 | | Other accrued expenses | $45,173 | $36,773 | | Derivative settlements payable | $42,719 | $13,622 | | Other accounts payable | $31,161 | $37,352 | | Investor payables | $29,492 | $24,883 | | Deferred tax liability | $3,902 | $4,210 | | Public and Private Warrants | $2,057 | $2,743 | | Margin call payable | $122 | $66,551 | | Total | $652,701 | $580,736 | - Total accounts payable, accrued expenses and other increased by $71,965 thousand, primarily due to increases in TRA liability, servicing fees payable, accrued interest and bank fees, and derivative settlements payable[71] NOTE 10 – VARIABLE INTEREST ENTITIES This note explains the Company's consolidation of Holdings LLC as a variable interest entity and its maximum exposure to loss in non-consolidated securitization trusts - The Company consolidates Holdings LLC as its primary beneficiary under the variable interest entity (VIE) model, as it holds 100% of the management and voting power[72][73] - The Company's maximum exposure to loss in non-consolidated securitization trusts (VIEs) is limited to its retained beneficial interests, which were $102.982 million at March 31, 2025[78][9] NOTE 11 – NON-CONTROLLING INTEREST This note details the ownership percentages of Holdings LLC common units by UWM Holdings Corporation and SFS Corp., and the impact of Exchange Transactions on non-controlling interest Ownership of Holdings LLC Common Units | Entity | March 31, 2025 (Common Units) | March 31, 2025 (Ownership Percentage) | December 31, 2024 (Common Units) | December 31, 2024 (Ownership Percentage) | | :-------------------------- | :---------------------------- | :------------------------------------ | :------------------------------- | :----------------------------------- | | UWM Holdings Corporation | 200,781,659 | 12.56% | 157,940,987 | 9.88% | | SFS Corp. | 1,397,782,620 | 87.44% | 1,440,332,098 | 90.12% | | Total | 1,598,564,279 | 100.00% | 1,598,273,085 | 100.00% | - During Q1 2025, Exchange Transactions resulted in the Company issuing 42,549,478 shares of Class B common stock (immediately converted to Class A), increasing its ownership in Holdings LLC and re-measuring non-controlling interest[80] NOTE 12 – REGULATORY NET WORTH REQUIREMENTS This note outlines UWM's regulatory requirements for minimum net worth, liquidity, and capital ratios, confirming compliance as of March 31, 2025 Regulatory Requirements as of March 31, 2025 | Requirement | Minimum | UWM Status | | :-------------------------- | :-------- | :--------- | | Minimum net worth | $684.1 million | In compliance | | Minimum liquidity | $316.1 million | In compliance | | Minimum capital and risk-based capital ratios | 6% | In compliance | - UWM is required to maintain minimum net worth, liquidity, and capital ratios by secondary market agencies and state regulators, and was in compliance with all requirements as of March 31, 2025[81][82] NOTE 13 – FAIR VALUE MEASUREMENTS This note explains the three-level hierarchy for fair value measurements and classifies various financial instruments based on the observability of their inputs - Fair value measurements are classified into a three-level hierarchy (Level 1, 2, 3) based on the observability of inputs[83][84][85][86] - Mortgage loans at fair value, FLSCs, and investment securities are primarily Level 2, while IRLCs and MSRs are classified as Level 3 due to significant unobservable inputs like pullthrough rates and prepayment speeds[89][90][91][92][93] Financial Instruments Measured at Fair Value (in thousands) | Description | Level 1 (March 31, 2025) | Level 2 (March 31, 2025) | Level 3 (March 31, 2025) | Total (March 31, 2025) | | :-------------------------------- | :----------------------- | :----------------------- | :----------------------- | :----------------------- | | Assets: | | | | | | Mortgage loans at fair value | — | $8,402,211 | — | $8,402,211 | | IRLCs | — | — | $36,648 | $36,648 | | FLSCs | — | $7,310 | — | $7,310 | | Investment securities at fair value, pledged | — | $102,982 | — | $102,982 | | Mortgage servicing rights | — | — | $3,321,457 | $3,321,457 | | Total assets | — | $8,512,503 | $3,358,105 | $11,870,608 | | Liabilities: | | | | | | IRLCs | — | — | $3,969 | $3,969 | | FLSCs | — | $23,953 | — | $23,953 | | Public and Private Warrants | $1,866 | $191 | — | $2,057 | | Total liabilities | $1,866 | $24,144 | $3,969 | $29,979 | NOTE 14 – RELATED PARTY TRANSACTIONS This note summarizes net payments from related party transactions, including rent, legal fees, and other general and administrative expenses Related Party Net Payments (in thousands) | Category | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Rent and other occupancy related fees, net | $4,889 | $4,897 | | Legal fees | $150 | $150 | | Other general and administrative expenses | $79 | $122 | | Total related party net payments | $5,118 | $5,169 | - The Company engages in various related party transactions, including leasing its corporate campus from entities controlled by its CEO and Board member, legal services from a firm where a director is a partner, and aircraft leases[102] NOTE 15 – INCOME TAXES This note details the Company's effective tax rate and the impact of Exchange Transactions on deferred tax assets and the Tax Receivable Agreement liability - The Company's effective tax rate was 5.29% for Q1 2025, compared to 2.03% for Q1 2024, primarily due to the portion of earnings attributable to non-controlling interest[103] - Exchange Transactions in Q1 2025 resulted in a $32.7 million increase in deferred tax assets and a $45.9 million increase in the TRA liability, with the offset recorded as an adjustment to equity[105] NOTE 16 – STOCK-BASED COMPENSATION This note provides details on RSU activity, stock-based compensation expense, and unrecognized compensation expense related to unvested awards RSU Activity (Shares) | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Unvested - beginning of period | 19,997,692 | 7,867,321 | | Granted | 2,145,576 | 1,198,345 | | Vested | (344,957) | (1,426,590) | | Forfeited | (448,619) | (138,135) | | Unvested - end of period | 21,349,692 | 7,500,941 | - Stock-based compensation expense was $8.3 million for Q1 2025, up from $5.9 million in Q1 2024[106] - As of March 31, 2025, $116.7 million of unrecognized compensation expense related to unvested awards is expected to be recognized over a weighted average period of 3.9 years[106] NOTE 17 – EARNINGS PER SHARE This note explains the two-class method for calculating earnings per share for Class A and Class B common stock and presents key EPS metrics - The Company applies the two-class method for calculating earnings per share for Class A and Class B common stock, allocating undistributed earnings equally on a per-share basis[107] Earnings (Loss) Per Share of Class A Common Stock | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Net income (loss) attributable to UWMC | $(13,679) | $8,730 | | Basic EPS | $(0.08) | $0.09 | | Diluted EPS | $(0.12) | $0.09 | | Weighted average shares outstanding (Basic) | 164,100,022 | 94,365,991 | | Weighted average shares outstanding (Diluted) | 1,598,383,240 | 1,598,647,205 | NOTE 18 – SUBSEQUENT EVENTS This note discloses subsequent events, including the declaration of a cash dividend on Class A common stock and a proportional distribution to SFS Corp - Subsequent to March 31, 2025, the Board declared a cash dividend of $0.10 per share on Class A common stock, payable July 10, 2025, and approved a proportional distribution to SFS Corp. payable around the same date[112] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition, results of operations, and cash flows for the three months ended March 31, 2025, compared to the same period in 2024. It covers the business overview, components of revenue and expenses, a summary of financial performance, non-GAAP measures, detailed results of operations, liquidity and capital resources, critical accounting estimates, and forward-looking statements - UWM is the largest overall residential mortgage lender in the U.S., operating exclusively through the wholesale channel, focusing on conforming and government loans[114] - The company reported a net loss of $247.0 million for Q1 2025, a significant decrease from net income of $180.5 million in Q1 2024, primarily due to MSR valuation adjustments[123][149] - Adjusted EBITDA for Q1 2025 was $57.8 million, down from $101.5 million in Q1 2024[123][129] Business Overview This section provides an overview of UWM's position as the largest U.S. residential mortgage lender, its operational model, and its strategy for Mortgage Servicing Rights - UWM is the largest overall residential mortgage lender in the U.S. by closed loan volume, operating exclusively through the wholesale channel[114] - For Q1 2025, 92% of originated loans were sold to Fannie Mae, Freddie Mac, or Ginnie Mae pools, with the remainder including non-agency jumbo loans and non-qualified mortgage products[115] - The company generally retains Mortgage Servicing Rights (MSRs) for the majority of its production but opportunistically sells them based on market conditions[116] Components of Revenue This section identifies the three primary components of the Company's revenue: loan production income, loan servicing income, and interest income - Revenue is generated from three primary components: loan production income, loan servicing income, and interest income[119] - Loan production income includes primary gain (loss), loan origination fees, provision for representation and warranty obligations, and capitalization of MSRs[120][125] Components of Operating Expenses This section lists the various categories of operating expenses, including personnel costs, direct loan production costs, marketing, and general administrative expenses - Operating expenses include salaries, commissions and benefits, direct loan production costs, marketing, travel and entertainment, depreciation and amortization, servicing costs, general and administrative, interest expense, and other expense (income)[122] Three Months Ended March 31, 2025 and 2024 Summary This section provides a summary of key financial and operational highlights, including loan originations, net income (loss), and Adjusted EBITDA for the periods presented Key Financial and Operational Highlights (in thousands) | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | Change ($) | Change (%) | | :---------------- | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Loan originations | $32,351,776 | $27,630,535 | $4,721,241 | 17.1% | | Net income (loss) | $(247,028) | $180,531 | $(427,559) | -236.8% | | Adjusted EBITDA | $57,803 | $101,490 | $(43,687) | -43.0% | Non-GAAP Financial Measures This section defines Adjusted EBITDA as a non-GAAP measure and provides a reconciliation from net income (loss), detailing adjustments for non-cash and non-operating items - Adjusted EBITDA is a non-GAAP measure used to evaluate operating performance, excluding interest expense on non-funding debt, income taxes, depreciation, amortization, stock-based compensation, MSR valuation changes, and other non-cash items[127] Reconciliation of Net Income (Loss) to Adjusted EBITDA (in thousands) | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Net income (loss) | $(247,028) | $180,531 | | Interest expense on non-funding debt | $50,081 | $40,243 | | Provision (benefit) for income taxes | $(13,788) | $3,733 | | Depreciation and amortization | $11,340 | $11,340 | | Stock-based compensation expense | $8,310 | $5,876 | | Change in fair value of MSRs due to valuation inputs or assumptions | $250,821 | $(141,059) | | Deferred compensation, net | $914 | $1,063 | | Change in fair value of Public and Private Warrants | $(685) | $(686) | | Change in Tax Receivable Agreement liability | $(442) | $180 | | Change in fair value of investment securities | $(1,721) | $269 | | Adjusted EBITDA | $57,803 | $101,490 | Results of Operations for the Three Months Ended March 31, 2025 and 2024 This section provides a detailed analysis of the Company's financial performance, examining changes in revenue, expenses, and net income (loss) for the three months ended March 31, 2025, and 2024 Loan production income This section analyzes changes in loan production income, including origination volume by type, primary loss, origination fees, and MSR capitalization Loan Origination Volume by Type (in thousands) | Loan Type | Three months ended March 31, 2025 | Three months ended March 31, 2024 | Change ($) | Change (%) | | :---------------- | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Total purchase | $21,747,037 | $22,121,429 | $(374,392) | -1.69% | | Total refinance | $10,604,739 | $5,509,106 | $5,095,633 | 92.50% | | Total loan origination volume | $32,351,776 | $27,630,535 | $4,721,241 | 17.10% | Components of Loan Production Income (in thousands) | Component | Three months ended March 31, 2025 | Three months ended March 31, 2024 | Change ($) | Change (%) | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Primary loss | $(532,720) | $(314,098) | $(218,622) | 69.6% | | Loan origination fees | $112,275 | $87,563 | $24,712 | 28.2% | | Provision for representation and warranty obligations | $(10,375) | $(10,462) | $87 | -0.8% | | Capitalization of MSRs | $735,571 | $535,951 | $199,620 | 37.2% | | Loan production income | $304,751 | $298,954 | $5,797 | 1.9% | | Gain margin | 0.94% | 1.08% | -0.14% | -12.96% | - The increase in loan production volume was primarily driven by higher refinance volume due to pricing incentives and an increase in average loan amount[138] Loan servicing income and servicing costs This section examines trends in loan servicing income and associated costs, along with key metrics of the servicing portfolio, including UPB and weighted average service fee Loan Servicing Income and Costs (in thousands) | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | Change ($) | Change (%) | | :-------------------------- | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Loan servicing income | $190,517 | $184,702 | $5,815 | 3.1% | | Servicing costs | $30,434 | $30,324 | $110 | 0.4% | - Loan servicing income increased by 3.1% due to an increase in the portfolio weighted average servicing fee, despite a decline in the average servicing portfolio[139] Servicing Portfolio Metrics | Metric | March 31, 2025 | December 31, 2024 | | :-------------------------------- | :------------- | :---------------- | | UPB of loans serviced (in thousands) | $214,615,072 | $242,405,767 | | Number of loans serviced | 589,259 | 729,781 | | Weighted average service fee | 0.3544% | 0.3333% | Interest income and Interest expense This section analyzes changes in interest income and expense, distinguishing between funding facilities and non-funding debt, and their impact on net interest income Interest Income and Expense (in thousands) | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | Change ($) | Change (%) | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Interest income | $118,102 | $101,863 | $16,239 | 15.9% | | Interest expense on funding facilities | $70,329 | $58,425 | $11,904 | 20.4% | | Net interest income | $47,773 | $43,438 | $4,335 | 10.0% | | Interest expense on non-funding debt | $50,081 | $40,243 | $9,838 | 24.4% | | Total interest expense | $120,410 | $98,668 | $21,742 | 22.0% | - Net interest income increased by 10% due to higher interest income from increased average balances of mortgage loans at fair value, partially offset by higher interest expense on funding facilities[142] - Interest expense on non-funding debt increased primarily due to interest on the $800.0 million of 2030 Senior Notes issued in December 2024[143] Change in Fair Value of Mortgage Servicing Rights This section details the significant decrease in the fair value of MSRs, attributing it to changes in valuation inputs, assumptions, and cash flow realization - The fair value of MSRs decreased by $388.6 million in Q1 2025, a significant change from a $15.6 million decrease in Q1 2024[144] - The Q1 2025 decrease was mainly due to a $250.8 million decline from changes in valuation inputs/assumptions (market interest rates) and a $123.1 million decline from cash flow realization/decay[144] Other costs This section analyzes the increase in other operating costs, including salaries, direct loan production, marketing, and general and administrative expenses Other Costs (in thousands) | Category | Three months ended March 31, 2025 | Three months ended March 31, 2024 | Change ($) | Change (%) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :--------- | :--------- | | Salaries, commissions and benefits | $192,800 | $154,241 | $38,559 | 25.0% | | Direct loan production costs | $43,127 | $31,436 | $11,691 | 37.2% | | Marketing, travel, and entertainment | $22,190 | $19,111 | $3,079 | 16.1% | | General and administrative | $68,148 | $40,809 | $27,339 | 67.0% | | Other income | $(2,848) | $(237) | $(2,611) | 1101.7% | | Total Other costs | $334,757 | $256,700 | $78,057 | 30.4% | - The 30.4% increase in other costs was primarily driven by higher salaries, commissions and benefits due to increased team member count, and increased general and administrative expenses[147] Income Taxes This section explains the shift from an income tax provision to a benefit, driven by decreased pre-tax income and increased ownership in Holdings LLC - The Company recorded a $13.8 million income tax benefit in Q1 2025, compared to a $3.7 million provision in Q1 2024, due to decreased pre-tax income attributable to the Company and increased ownership in Holdings LLC[148] Net income (loss) This section summarizes the net loss for Q1 2025, attributing it to increased negative MSR valuation adjustments and higher total expenses, and details the loss attributable to UWM Holdings Corporation - Net loss was $247.0 million for Q1 2025, a $427.6 million decrease from net income of $180.5 million in Q1 2024, primarily due to increased negative MSR valuation adjustments and higher total expenses[149] - Net loss attributable to UWM Holdings Corporation was $13.7 million in Q1 2025, compared to net income of $8.7 million in Q1 2024, reflecting its approximate 13% and 6% ownership interest in Holdings LLC, respectively[150] Liquidity and Capital Resources This section discusses the Company's primary sources and uses of liquidity, including funding facilities, MSR sales, and cash flow from operations, and assesses its ability to meet future obligations Overview This section outlines the Company's primary liquidity sources and uses of funds, affirming the sufficiency of current resources for operations and loan originations - Primary liquidity sources include borrowings (warehouse facilities), cash flow from operations (loan sales, origination fees, servicing income, interest income), and MSR sales[151] - Primary uses of funds include loan originations, MSR retention, interest and operating expenses, and dividends/distributions[160] - The Company believes its current cash and liquidity sources are sufficient to maintain operations and fund loan originations for the next twelve months, including the upcoming maturity of the 2025 Senior Notes[155] Loan Funding Facilities This section describes warehouse facilities as the primary short-term funding source for mortgage loan originations and confirms compliance with all associated covenants - Warehouse facilities are the primary short-term funding source for mortgage loan originations, typically financing 97-98% of the principal balance[156] - The Company was in compliance with all operating and financial covenants under its warehouse facilities as of March 31, 2025[166] Warehouse Facilities and Amounts Advanced (in thousands) | Facility Type | Current Line Amount as of March 31, 2025 | Total Advanced Against Line as of March 31, 2025 | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | | Master Repurchase Agreements | $12.85 Billion | $7,531,099 | | Early Funding (ASAP+ & EF) | $1.35 Billion | $42,040 | | Total | $14.2 Billion | $7,573,139 | Other Financing Facilities This section details the Company's outstanding Senior Unsecured Notes and MSR financing facilities, including their capacities, outstanding amounts, and weighted average interest rates - The Company has four series of Senior Unsecured Notes outstanding: 2025 ($800M, 5.500%), 2027 ($500M, 5.750%), 2029 ($700M, 5.500%), and 2030 ($800M, 6.625%)[167][168][170][172] - The Company maintains Conventional MSR Facility ($1.5 billion uncommitted capacity) and Ginnie Mae MSR Facility ($500.0 million uncommitted capacity) to finance MSRs, with $125.0 million outstanding on each as of March 31, 2025[175][177][179] - The weighted average interest rate for MSR facilities was 7.32% for Q1 2025, down from 9.07% for Q1 2024[181] Excess Servicing Cash Flow Transactions This section explains the Company's strategy of selling excess servicing fee cash flows to generate liquidity and reports the proceeds from these transactions - The Company sells excess servicing fee cash flows on certain agency loans to generate liquidity, retaining the base servicing fee obligation[182] - Proceeds from these sales were approximately $184.6 million in Q1 2025, up from $150.9 million in Q1 2024[182] Revolving Credit Facility This section describes UWM's unsecured revolving credit facility with SFS Corp. and confirms no outstanding amounts as of March 31, 2025 - UWM has a $500.0 million unsecured revolving credit facility with SFS Corp. as the lender, which automatically renews annually[183][184] - No amounts were outstanding under this facility as of March 31, 2025[185] Borrowings Against Investment Securities This section details outstanding borrowings under sale and repurchase agreements collateralized by retained beneficial interests in securitization trusts, including financing terms - The Company had $88.8 million outstanding as of March 31, 2025, under sale and repurchase agreements collateralized by retained beneficial interests in securitization trusts[186] - These borrowings are financed at approximately 73% of the outstanding principal balance, with remaining terms of one to three months[187] Finance Leases This section reports the total finance lease liabilities, highlighting the portion related to leases with related parties as of March 31, 2025 - As of March 31, 2025, finance lease liabilities totaled $24.4 million, with $24.2 million related to leases with related parties[188] Cash flow data for the three months ended March 31, 2025 and 2024 This section summarizes cash flow activities, highlighting the significant shift in operating and financing cash flows between Q1 2024 and Q1 2025 Cash Flow Summary (in thousands) | Cash Flow Activity | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by (used in) operating activities | $593,898 | $(2,202,740) | | Net cash provided by investing activities | $928,391 | $1,287,502 | | Net cash (used in) provided by financing activities | $(1,544,604) | $1,023,409 | | Net (decrease) increase in cash and cash equivalents | $(22,315) | $108,171 | - Operating cash flow significantly improved year-over-year, shifting from a $2.2 billion use in Q1 2024 to a $593.9 million provision in Q1 2025, driven by a decrease in mortgage loans at fair value[190] - Financing activities shifted from providing $1.0 billion in Q1 2024 to using $1.5 billion in Q1 2025, primarily due to net repayments under warehouse lines of credit[192] Contractual Obligations This section identifies material cash requirements, including debt payments, lease obligations, and tax distributions, and details recent dividend and distribution declarations - Material cash requirements include interest and principal payments on Senior Notes, borrowings against investment securities, MSR facilities, lease agreements, and required tax distributions to SFS Corp[193] - In Q1 2025, the Board declared a $0.10 per share dividend on Class A common stock ($18.8 million) and approved a proportional $141.1 million distribution to SFS Corp., both paid on April 10, 2025[194] Repurchase and indemnification obligations This section explains the Company's exposure to repurchase and indemnification obligations for sold loans and the methodology for establishing a related reserve - The Company is subject to repurchase and indemnification obligations for loans sold to investors if underwriting or documentation standards are not met[197] - A reserve is established based on an assessment of contingent and non-contingent obligations, including expected losses and frequency[197] Interest rate lock commitments, loan sale and forward commitments, and other interest rate derivatives This section describes the Company's off-balance sheet financial instruments, including IRLCs, commitments to sell loans, and forward commitments to sell MBS, and their notional amounts - The Company is party to financial instruments with off-balance sheet risk, including IRLCs, commitments to sell loans, and forward commitments to sell MBS[198][199] Notional Amounts of Commitments (in thousands) | Commitment Type | March 31, 2025 | December 31, 2024 | | :--------------------------------------- | :------------- | :---------------- | | Interest rate lock commitments—fixed rate | $11,443,657 | $7,661,650 | | Interest rate lock commitments—variable rate | $110,010 | $7,742 | | Commitments to sell loans | $2,883,297 | $2,240,558 | | Forward commitments to sell mortgage-backed securities | $13,826,131 | $12,601,895 | Critical Accounting Estimates and Use of Significant Estimates This section identifies critical accounting estimates, including those for mortgage loans, MSRs, derivatives, and representations and warranties, noting no significant policy changes - Critical accounting estimates include accounting for mortgage loans held at fair value and revenue recognition, mortgage servicing rights, derivative financial instruments, and representations and warranties reserve[202] - There were no significant changes to the Company's critical accounting policies, methodologies, or processes since the 2024 Annual Report on Form 10-K[202] Cautionary Note Regarding Forward-Looking Statements This section advises that the report contains forward-looking statements subject to risks and uncertainties related to market conditions, financing, and regulatory changes - The report contains forward-looking statements related to future financial performance, business strategies, loan originations, interest rate risks, hedging, and macroeconomic conditions[204][205] - These statements involve estimates and assumptions subject to risks and uncertainties, including dependence on market conditions, financing facilities, ability to sell loans/MSRs, and regulatory changes[204][205] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section details the Company's exposure to various market risks, including interest rate risk, credit risk, and counterparty risk, and outlines the strategies employed to manage these risks, such as hedging activities and stringent underwriting standards - The Company is subject to interest rate, credit, and counterparty risks that can affect its operations and profitability[207] - Loan origination business provides a natural hedge to servicing, as volumes increase in declining rates while MSR values decrease, and vice versa[208] Interest rate risk This section analyzes how interest rate fluctuations impact origination volume, MSR valuations, and hedging activities, including the use of TBA securities - Interest rate risk impacts origination volume, MSR valuations, IRLCs, mortgage loans at fair value, and net interest margin from funding facilities[208] - The Company primarily uses forward agency or Ginnie Mae To Be Announced (TBA) securities to hedge IRLCs and mortgage loans at fair value[209] Estimated Change in Fair Value from Hypothetical Interest Rate Shifts (in thousands) as of March 31, 2025 | Asset/Liability | Down 25 bps | Up 25 bps | | :-------------------------- | :---------- | :-------- | | Mortgage loans at fair value | $42,483 | $(51,149) | | MSRs | $(193,323) | $198,076 | | IRLCs | $62,545 | $(78,286) | | Total change in assets | $(88,295) | $68,641 | | FLSCs | $(110,884) | $127,322 | | Total change in liabilities | $(110,884) | $127,322 | Credit risk This section addresses credit risk arising from borrower default and repurchase obligations, detailing mitigation strategies and key loan portfolio quality metrics - Credit risk arises from borrower default and repurchase/indemnification obligations, mitigated by stringent underwriting standards and fraud detection[214] - For Q1 2025, originated loans had a weighted average loan-to-value ratio of 81.64% and a weighted average FICO score of 736, indicating a high-quality loan portfolio[214] Counterparty risk This section discusses counterparty risk from financing and hedging activities, outlining management strategies such as selecting strong counterparties and using master netting agreements - Counterparty risk stems from financing facilities and hedging activities, managed by selecting financially strong counterparties, diversifying risk, and using master netting agreements[215][217] - The Company incurred no losses due to nonperformance by any counterparties during Q1 2025 or Q1 2024[216] Item 4. Controls and Procedures This section details the company's disclosure controls and procedures and internal control over financial reporting, confirming their effectiveness as of March 31, 2025, with no material changes reported during the quarter - The Principal Executive Officer and Principal Financial Officer concluded that the Company's disclosure controls and procedures were effective as of March 31, 2025[220] - There were no changes in internal control over financial reporting during Q1 2025 that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[221] Disclosure Controls and Procedures This section describes the design of disclosure controls and procedures to ensure timely and accurate reporting of information required by the Exchange Act - Disclosure controls and procedures are designed to ensure timely recording, processing, summarizing, and reporting of information required under the Exchange Act[218] Changes in Internal Control over Financial Reporting This section confirms that no material changes in internal control over financial reporting occurred during the quarter ended March 31, 2025 - No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2025[221] PART II - OTHER INFORMATION This section provides additional information, including updates on legal proceedings, changes to risk factors, and other disclosures not covered in the financial statements Item 1. Legal Proceedings This section provides updates on legal and regulatory matters, including new complaints filed against the company related to alleged improper influence on mortgage brokers in Ohio and a 401(k) plan forfeiture dispute. It also discusses changes to risk factors, particularly regarding reliance on third-party sub-servicers and the ability to sell loans and MSRs - The Company is routinely involved in consumer complaints, regulatory actions, and legal proceedings in the ordinary course of business[223] - The Ohio Attorney General filed a complaint against UWM alleging improper influence on mortgage brokers to steer borrowers to UWM at excessive pricing and fees[225] - A 401(k) Complaint was filed alleging UWM's 401(k) plan forfeitures should have been used for plan expenses instead of future employer contributions[226] Legal Proceedings Details This section details new legal complaints, including the Ohio AG Complaint regarding mortgage broker influence and a 401(k) plan forfeiture dispute, and the Company's defense stance - The Ohio AG Complaint, filed April 17, 2025, largely mirrors the Escue Complaint, asserting allegations under Ohio law regarding UWM's influence on mortgage brokers[225] - The 401(k) Complaint, filed April 28, 2025, alleges UWM's 401(k) plan forfeitures were improperly used, seeking class certification and monetary damages[226] - UWM denies the allegations in both complaints and intends to vigorously defend them[225][226] Risk Factors This section highlights changes in risk factors, particularly concerning the Company's reliance on third-party sub-servicers and the implications of terminating Mr. Cooper as a sub-servicer - The Company relies on third-party sub-servicers for MSRs and plans to terminate Mr. Cooper as a sub-servicer due to its acquisition by a competitor, developing internal servicing operations[227][228] - The termination of Mr. Cooper and development of internal servicing are expected to incur material expenses and capital costs[228] - Disruption in the MSR purchase market due to the Mr. Cooper acquisition could adversely impact the cost and liquidity of the MSR market, affecting the Company's liquidity or results of operations[233] Item 5. Other Information This section discloses the adoption of a Rule 10b5-1 trading arrangement by SFS Holding Corp., which allows for the potential sale of up to 80 million shares of the Company's Class A common stock - SFS Holding Corp. adopted a Rule 10b5-1 trading arrangement on March 17, 2025, for the potential sale of up to 80,000,000 shares of Class A common stock[235] - Sales under this plan may occur from June 17, 2025, until June 15, 2026, or earlier if all shares are sold[235] - Mr. Mat Ishbia, the Company's Chairman and CEO, and other directors have an indirect pecuniary interest in the Paired Interests held by SFS Corp[235] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including certifications from the CEO and CFO, the Executive Officer Clawback Policy, and various XBRL taxonomy documents - Key exhibits include Certifications of CEO and CFO (31.1, 31.2, 32.1, 32.2), UWM Holdings Corporation Executive Officer Clawback Policy (97), and various XBRL documents (101.0 INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104.0)[238] Signatures This section formally concludes the report, confirming its due authorization and signing by the registrant's Chief Financial Officer - The report was signed on May 6, 2025, by Rami Hasani, Executive Vice President, Chief Financial Officer of UWM Holdings Corporation[242]