The company believes mortgage brokers are a better solution for home finance than bank-based loans.
The mortgage market was very active last year. The COVID-19 pandemic sparked an economic collapse that prompted the Fed to cut lending rates to zero and aggressively support the mortgage market. Mortgage bankers had their prime in ages, and many, like Rocket (NYSE: RKT), took advantage of the market to go public.
Another leader in mortgage lending, United Wholesale (NYSE: UWMC), just went public through a special purpose vehicle (SPAC). United Wholesale, with a completely different business model than the typical originator, has just announced its fourth quarter and full year 2020 results.
United Wholesale has a different business model
United Wholesale, which is behind the findamortgagebroker.com website (and the Super Bowl ad), has a different business model than traditional retail brokers like Rocket or correspondence businesses like PennyMac Financial (NYSE: PFSI). Rocket is a retail model primarily aimed at consumers. It handles the lending process from start to finish. PennyMac Financial is a correspondent lender that buys completed loans from smaller originators.
In contrast, United Wholesale uses a broker model. It works with independent mortgage brokers who bring interested borrowers to United Wholesale and then United Wholesale provides the financing.
Before the Great Recession of 2007-2009, brokers were half of the mortgage market. That’s only 20%, but United Wholesale expects brokers’ market share to recover.
The company recently reported some of its fourth quarter and full year numbers. The press release only offered short financial statements with high-level figures that did not include certain figures, including earnings per share. Full statements will be released when the company submits its 10-K and the review is complete.
What we have, however, shows strong growth. In the fourth quarter, United Wholesale generated revenue of $ 54.7 million – an increase of 71% over the fourth quarter of 2019. For the full year, United Wholesale generated revenue of $ 182.5 billion, 69% more than 2019. That Company posted net income of $ 1.4 billion for the fourth quarter, up nearly ten-fold from last year. The sales profit was 3.05% compared to 1.1% a year ago. Note that United Wholesale suspended Federal Housing Administration (FHA) loans and jumbo loans in the early days of the crisis. Hence, how useful would comparisons between these numbers be?
Technology investments result in lower costs
United Wholesale has invested heavily in technology. Findamortgagebroker.com, which aired a Super Bowl ad for 2021, was a massive investment. Its purpose is to raise awareness of mortgage brokers as a loan tool for homebuyers. Consumers can get recommendations to a mortgage broker that will help the consumer decide which product is best.
Other technology investments include UTrack, a tracking application that tells borrowers, brokers, and brokers the current status of a loan. Blink + is the company’s lending system that compiles the documents and does the basics for composing the loan. Finally, EASE Docs handles the final documents for closing.
The payoff for this technology is not only a faster shutdown, but a lower cost to create. In the fourth quarter, it took United Wholesale 18 days to prepare a loan, compared to 56 days for the typical retail lender. On the conference call, CEO Tim Forrester said that United Wholesale’s cost of borrowing (including brokerage fees) was $ 5,800 per loan, compared to the average retail cost of $ 8,872. This leads to lower borrowing costs. United Wholesale’s average lending rate for the fourth quarter was 2.74% compared to 2.89% for the industry as a whole.
A mortgage lender with a return
Finally, United Wholesale introduced a quarterly dividend of $ 0.10 per share, giving the company a dividend yield of 4%. This is higher than most of the competition aside from New Residential, an originator with a different business model. At The Street, United Wholesale earns $ 1.40 next year, which gives the company 7.1 times more value for money. United Wholesale’s cost advantage may allow it to acquire shares from other lenders and this may justify a premium multiplier.
Mortgage lenders generally don’t trade with massive multipliers unless the industry is in a rough patch and profits are low. This is how mortgage lenders resemble cyclical stocks most. United Wholesale has a long-term business model and an attractive return. It is likely more attractive to income-oriented investors. I’d love to see the 10-K before making any recommendations on the stock.
Are Mortgage Brokers a Dying Breed?
It is true that many brokers had to go out of business during the recession. … Many mortgage brokers were quick to pronounce it a dying race. But reality refutes them today. Brokers play an increasingly important role in the real estate market as they bridge an important gap between the consumer and the right credit institution.
Is It Difficult To Become A Mortgage Broker?
There are no set requirements to becoming a mortgage broker, but you do need an education. Many brokers are former loan officers who decided to start their own business or real estate agents who decided to try the financial side of things. A background in sales is often helpful.
How Do Mortgage Brokers Generate Leads?
Here are 5 easy ways you can generate leads for mortgage brokers:
- Social media. Social media has the greatest reach at the lowest cost. …
- Blog. Create a blog that is either integrated with or linked to your website and focus on creating relevant content. …
- Networking. …
- Targeting & amp; Retargeting Ads. …
- Good feedback.
Who Makes More Money Real Estate Agent Or Mortgage Broker?
A mortgage broker generally does more because they are backed by large financial institutions. But above could easily be said for a real estate agent backed by a developer with deep pockets. How Much Do Real Estate Agents Charge When Buying a Home?
Is It Worth Having A Mortgage Broker?
When looking for a mortgage you may be wondering whether to speak to a mortgage broker or go straight to the lender. These days, brokers put together more than just a list of available mortgages for a hefty fee. So it might be worth it to see what they can offer.
What do I need to know before speaking to a mortgage broker?
10 questions to ask your mortgage broker or lender
- What Type Of Loan Is Best For You? …
- What is the interest rate and the annual percentage? …
- How much deposit is required? …
- What are the discount points and original fees? …
- What are all the costs? …
- Can you get a loan interest freeze? …
- Is there a prepayment penalty? …
- How much time do you need to finance?
When should you use a mortgage broker?
Consider a mortgage broker if:
- You want someone else to do the job of finding a good lender.
- You have a lower credit score or other loan application challenges and a good broker will know which lenders are willing to work with you.
How do I know if a mortgage broker is legitimate?
The Nationwide Mortgage Licensing System & amp; Registry (NMLS) maintains a database of licensed brokers. Additionally, you can usually check to see if a broker is licensed or if disciplinary action has been taken against the broker by checking with your state regulator.
How does United Wholesale Mortgage work?
United Wholesale Mortgage (UWM) draws loans for mortgage brokers, banks and credit unions. It does not lend directly to borrowers. Instead, borrowers are mostly concerned with the company’s credit department.
How do I pay my wholesale United mortgage?
Simply call 888-464-2432 to make a payment using the automated pay-per-phone system. Please have your account number and the last four digits of your social security number ready and follow the instructions.
Is United Wholesale Mortgage a Good Company to Work for?
86% of United Wholesale Mortgage employees say this is a great place to work compared to 59% of the typical US company.
Is United Wholesale Mortgage Selling Their Loans?
In fact, we are servicing over 100,000 loans at the same time. And while we occasionally sell our service, we make sure we protect your business in a number of ways. For one, we negotiate unsolicited agreements to protect your business for an additional 12 to 36 months.
What are the advantages of a mortgage broker?
Benefits of Using a Mortgage Broker
- Provides access to hundreds of loan products. A mortgage broker offers a wide range of mortgage loans from different lenders. …
- Find the most advantageous offer. …
- Has flexibility & amp; Expertise to meet your needs. …
- Saves you time. …
- Saves you money with no hidden costs. …
- Provides personalized service.
Is It Better To Get A Mortgage From A Bank Or Broker?
Who Should Use a Mortgage Broker? In general, if your loan is a straightforward transaction and your credit, income and assets are strong, you can potentially save time and money with a bank. If your application is challenging, a broker who knows which lenders are the most flexible can help.
Why shouldn’t you use a mortgage broker?
Working with a mortgage broker can save you time and fees. Cons to consider are that a broker’s interests may not match your own, you may not get the best deal, and they may not guarantee estimates. Take the time to contact the lenders directly and find out what mortgages may be available to you.