United Wholesale Mortgage Plunges Despite 822% Profit Jump

(Bloomberg) -- UWM Holdings Corp., one of the nation's largest mortgage lenders, reported $1.4 billion in net income as the newly public company capped its most profitable year ever.

Still, the 822% profit surge wasn't enough to satisfy investors, with the company's shares dipping as much as 10% to $10.20 on Thursday in New York.

The Pontiac, Michigan-based company, better known as United Wholesale Mortgage, told investors in a statement Wednesday that it missed its 2020 projection for originations and that it would post lower margins on new mortgages in the quarter that ends in March.

The company's quarterly results were strong, said Henry Coffey, a Wedbush Securities analyst. But investors are nervous about the prospect of declining profitability in originating mortgages after a record 2020.

While some industry experts expect the mortgage business to slow this year, Ishbia reiterated that United Wholesale's lending will grow by at least 15%.

“We haven't even come close to accomplishing all the refinances that should be in the market right now,” Ishbia said in an interview.

United is the nation's largest wholesale mortgage lender, which means it provides the funds for mortgages originally handled by loan brokers. It reported $54.7 billion in loan originations last quarter, bringing its annual total to $182.5 billion. The company had told prospective investors in September to expect $200 billion in originations for the year.

United Wholesale announced a merger with Gores Holdings IV Inc., a special purpose acquisition company, in September, riding a wave of unprecedented mortgage profits to a roughly $16 billion valuation. United made its public trading debut on the New York Stock Exchange two weeks ago and closed Wednesday with a market value north of $18 billion.

The company expects to produce between $52 billion and $57 billion in new mortgages this quarter, according to the statement. The company also said profitability on each new mortgage will drop to as low as 2%, from 3.05% in the fourth quarter.

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