KBRA Affirms Ratings for United Wholesale Mortgage, LLC

1 Dec 2023   |   New York


KBRA affirms the Issuer and senior unsecured debt ratings of BBB- for Pontiac, Michigan-based United Wholesale Mortgage, LLC (“UWM” or “the company”). The Outlook for the ratings is Stable.

Key Credit Considerations

UWM’s ratings are supported by the company’s solid multi-year operating performance history (including during much of the 2022 and 2023 cyclical industry downturn for the mortgage origination business), continued moderate core leverage, and maintenance of an enhanced liquidity profile.

Historically a wholesale origination-focused business model that systematically sold most of its MSRs after some accumulation and seasoning, UWM adjusted its corporate strategy beginning in 2020 by retaining a majority of their MSRs that year and into 2021. With recent period servicing portfolio balances of ~$300 billion ($281 billion at 3Q23), the company’s now meaningful MSR investment certainly represents more than a short-term change; notwithstanding active bulk sales during 2022 ($113 billion of total UPB) and YTD23 (~$99 billion). Adding the ‘business model’ balance of a scale servicing book to a leading production platform should continue to help dampen the cyclical effects on operating performance in the current challenging origination environment. With that said, we believe that the ‘economic’, financial and business model benefits associated with a refined, financial instrument MSR hedging program would represent a credit positive for the company over time.

UWM’s longstanding operational intensity around its origination business – benefiting from industry leading technology, unwavering / singular focus on the broker channel, distinct share leadership in purchase mortgages, and overall operating execution – should serve the company comparatively well as the current, lower production volume environment persists. The wholesale channel has remained highly competitive, magnified by UWM’s intense recent pricing strategies; one which could continue to facilitate reduced competition over time.

UWM’s continued ultimate future success is reliant both on the maintenance of the company’s operational excellence and differentiation, as well as continued market share development that has occurred in recent years for the wholesale channel in aggregate. Additionally, cash burn related to UWM’s origination activities, as well as any related change in corporate leverage trends, in part associated with the company’s competitive pricing strategy during the current cyclical downturn, will need to be monitored.

Rating Sensitivities

An upgrade is not contemplated at this juncture. Continued solid operating results / growth in equity base in the less robust origination market, as well as the maintenance of an enhanced liquidity profile and similar core leverage would be positive. Development of an MSR hedging program would also be considered favorably. An unexpected deterioration in profitability, more significant operating cash burn than expected, together with a related increase in corporate leverage could have negative ratings ramifications.

To access rating and relevant documents, click here.



A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.

Doc ID: 1002790

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