UWM Holdings Corporation (NYSE:UWMC) Q2 2023 Earnings Call Transcript

UWM Holdings Corporation (NYSE:UWMC) Q2 2023 Earnings Call Transcript August 9, 2023

UWM Holdings Corporation beats earnings expectations. Reported EPS is $0.11, expectations were $0.05.

Operator: Good morning. My name is Lisa, and I’ll be your conference operator today. At this time, I would like to welcome everyone to the UWM Holdings Corporation Second Quarter 2023 Earnings Call. All lines have been placed on mute to prevent ay background noise. After the speakers’ remarks there will be a question-and-answer session. [Operator Instructions] Blake Kolo, you may begin your conference.

Blake Kolo: Good morning. This is Blake Kolo, Chief Business Officer and Head of Investor Relations. Thank you for joining us and welcome to the Second Quarter 2023 UWM Holdings Corporation Earnings Call. Before we start, I would like to remind everyone that this conference call includes forward-looking statements. For more information about factors that may cause actual results to differ materially from forward-looking statements, please refer to the earnings release that we issued this morning. I will now turn the call over to Mat Ishbia, Chairman and CEO of UWM Holdings Corporation and United Wholesale Mortgage.

Mat Ishbia: Thanks, Blake. Well, I’d like to start by thanking everyone for joining the call. I really appreciate it. We’re very excited here at UWM, proud of our team members, proud of our clients and really proud of the amazing quarter we’ve had at UWM. The market, the data, the numbers we’re seeing are all really strong, and we’re going to talk more about that soon. But before I get into that, I want to start with one of the overarching themes in our industry, and that’s the market. It’s been a very difficult mortgage market over the last 18 months. But UWM has demonstrated the strength because of the foundation we’ve built for years and years, we can succeed in all market environments. As I have said, dating back to my initial roadshow when we went public, and every quarterly call since, this quarter is evidenced once again that UWM can succeed in all of these markets.

While other companies are exiting the market, losing money, shrinking and laying people off. We are the exact opposite. We are profitable. We are hiring. We are investing in technology, and we are planning to continue to grow. We know the [refi] (ph) boom, whether it’s a long sustained one or a mini refi boom is going to come soon. The opportunities are usually in the first three, six months, maybe nine months to really make money from a volume and margin perspective and it really grow your business. We are prepared for that now. Scale is the name of the game, and that is why we’ve been winning and we’re going to continue to win going forward. Our business model succeeds in the up markets and the down markets. This is the ultimate down market, and we are still winning.

I can’t wait for the big market to come. It’s going to come. I don’t know when, as I said, but we are prepared at UWM and that’s why we are different than everyone else. Let’s get into the quarter’s numbers first. We delivered $31.8 billion in overall production, meeting our guidance. We set another new all-time quarterly record for purchase volume, $28 billion. We did $28 billion of purchase. That’s more business than anybody else did business altogether, just our purchase volume, and we are on pace for an all-time record purchase year here at UWM. Our gain margin was 88 basis points, well within guidance. We made $228.8 million of net income, which is very profitable and more than we made last year in the second quarter when the market was significantly better and stronger.

With that being said, some of the net income includes value of MSR moving up, a small amount of it. Just like I spoke last quarter, MSR value moving up and down, it doesn’t really play into my business or our mind at all. So maybe we made only about $200 million. When you take out MSR adjustment, just like last quarter, people hit us for it, it doesn’t really matter. We are running a profitable, successful business, no matter which way you look at it, and this is a hell of a quarter given the environment. Before turning it over to Andrew, our CFO, I want to touch on a few other highlights. The broker channel continues to gain momentum. In addition to the share growth we’ve seen in the channel in the past year we also continue to see loan officers joining the broker channel in big, big numbers.

These things go hand-in-hand in my mind. It’s actually a multiplier factor when a loan officer joins the broker channel, it’s not like we just get loans onetime. We get loans for potentially years and years to come. So it’s a big deal when they make the jump from retail to wholesale. In the second where we track thousands more loan officers during the broker channel with more than half of them leaving the retail channel to join the broker channel. I said it before, and I’ll say it again, not only is broker channel the best place for a consumer to get our loan, it’s also the best place for a loan officer work. In the second quarter, we really enhanced our products as well. We rolled out a 1% down program, which is really helping lower-income borrowers achieve the dream home ownership, which we feel is very important.

We’re excited about how that has been going. On the other side of the spectrum, we enhanced our jumbo product significantly to drive more volume there to and help more consumers by clarifying programs and brokers and helping them succeed. We think there’s a big opportunity in the jumbo coming soon as well. We already win in the conventional and government loans and the products help us win brokers, but helping the lower end and higher end loan sizes we’re focused on as well to really round out what UWM does. We also had UWM LIVE! event in the second quarter, which was a record event for us with about 6,000 brokers and real estate agents attending. A lot of excitement and energy around the broker channel. We announced two big enhancements, one, the UWM Portal, which helps the technology and efficiency for brokers and other one is PA+, which is really preparing brokerage for scale.

As I said before, a lot of our competitors are laying people off, a lot of people aren’t prepared for the next mini boom or big refi boom when it comes. Brokers are no different. UWM is prepared and PA+ is a way to help them scale by helping them process and facilitate their loans, so they can go out and get new business. So if a broker has to double or triple their business, they’ll be ready because of UWMs PA+. We’re really excited about that and UWMPortal, and we rolled those out just a couple of months ago. Those things are things we’re investing in now that we might hit our expenses now that we will see the rewards next year or whenever the refi boom comes, we’re excited about both those things. These new products and processes are proof of the never relax commitment that UWM has to the broker channel and growing at UWM.

Now I’m going to turn it over to Andrew for a few more details on our financials.

Andrew Hubacker: Thanks, Matt. The momentum from Q1 carried over to Q2 as our production volume increased over the prior year quarter and was 43% higher than Q1 of 2023. Year-to-date, net income turned to a positive $90.2 million and our operational performance before considering changes in the fair value of MSRs improved in both Q2 and year-to-date compared to 2022. Year-to-date gain margin of 90 basis points is solid and right in the middle of what we continue to guide to in this competitive market. This is also a significant increase from the last half of 2022 when we had our Game On pricing as we have transitioned from this more broad-based pricing strategy to a more targeted initiative. Furthermore, despite being in growth mode from a team member standpoint, expenses continued to moderate in Q2, excluding servicing, interest and other nonoperational expenses, total expenses declined approximately 9% year-to-date.

Overall, we delivered very solid financial performance in Q2 considering current overall mortgage market conditions. We have previously discussed our plans to opportunistically sell MSRs in 2023 as market conditions warrant to support the operating and capital liquidity needs of the business, while maintaining a sizable and high-quality MSR portfolio that provides a recurring quarterly cash flow stream. We continued to execute on these plans in Q2 by completing sales of MSRs, while maintaining a total servicing portfolio of approximately $295 billion at the end of the quarter. Additional bulk sales on loans with a total UPB of approximately $26.2 billion were completed subsequent to quarter end, resulting in total proceeds from MSR and excess sales year-to-date of nearly $1.4 billion.

We have maintained a strong balance sheet with total equity of approximately $2.9 billion and total accessible liquidity of approximately $2.8 billion as of the end of the quarter. Matt mentioned our current strong competitive positioning from all of our efforts to provide superior technology, speed and service to our broker partners and our significant investments in growing both the wholesale channel and our market share. We believe that our current financial strength also positions us very well to capitalize on future market opportunities. Okay. I will now turn things back over to our Chairman and CEO, Mat Ishbia for some closing remarks.

Mat Ishbia: Thanks, Andrew. I want to close with a few quick points. I’m pleased with how we have performed in this market. Like I said earlier, we did more purchase business than anyone else did in overall business this past quarter. We are on track for our biggest purchaser ever, even in this rate and inventory environment. We don’t use those things as excuses, we use them to our advantage and continue to grow and dominate this mortgage business. And brokers are winning. This provides us a great foundation of business when rates do drop and the refis do grow. With that backdrop in mind, our privilege strategy is not changing. We’ve established a clear formula for long-term success in the mortgage market and it means we’ll continue to invest in our team members, invest in tech and products to better serve our brokers, invest in the broker channel and we’ll continue to invest in our future by hiring new team members [prepared] (ph) for the opportunity ahead.

I’m also very proud to report that for the 11 quarter in a row, we announced a $0.10 quarterly dividend. And as I have said, 2023 has been a year the overall industry production is down, mortgage spreads are wide, consumers have faced rapidly rising rates. Yet against this backdrop, we are growing share, breaking purchase production records and continue to invest in products and technology. Overall, the future is extremely bright at UWM. And you can tell I’m excited. For the third quarter, we expect production to be between $26 billion and $33 billion and our margins in the range of 75 to 100 basis points. I’m going to turn things back over to the operator for Q&A.

Q&A Session

Operator: Thank you. [Operator Instructions] Your first question comes from the line of Kyle Joseph with Jefferies. Your line is open.

Kyle Joseph: Hey, good morning, Mat, Andrew and Blake. Thanks for taking my question. Just want to talk about origination capacity. Obviously, your volumes were up substantially quarter-on-quarter. And I know you guys did not undertaken any layoffs. But can you just give us a sense is that — are those — are people working overtime to do that? Do you hire some more folks or how you’re able to really drive volume up 40% quarter-on-quarter?

Mat Ishbia: Thanks, Kyle. Appreciate the question. Yes, so the answer is our technology. I talked about it multiple times. Again, I know you follow us pretty closely. I got people don’t realize like everything we’ve said for quarter-over-quarter it’s a strategy, it’s a plan. And so the technology investments we made in both and different investments have made it so we can handle the volume when we have an opportunity to go get the volume, and the opportunity was there and the opportunity is going to continue to be there right now, especially because we dominate the purchase market and so of brokers. With that being said, we’re hiring and we’re also letting people go. Right now the hiring that we did — where we did a couple of hundred people among 250 or 300 people in a month, last month or two, that doesn’t really impact any operational capacity because it takes six months for someone to get ready.

And that’s why I talk about the word scale. These other companies that are preparing laying off and still playing these games are — like when the market turns, we don’t know when it’s going to be. Their first six months is when you make your money. The first six months when you take your market share things first and we are prepared. And so we — the hiring and things we’ve done have zero impact on what we did in the second quarter, and we’ll [indiscernible] in the third quarter or what we do in the third quarter. But we are prepared for the first quarter or second quarter of next year when that — when rates might drop and that we might go from doing $30 billion to $40 billion or $50 billion, and we will be able to handle it at bigger margins, and more capacity than anywhere in the country, and that’s really when things happen.

So we’re prepared. Scale is the word of the day for us, and that’s why we’re winning now, and that’s why we’ll continue to win.

Kyle Joseph: Got it. Yes, that makes sense. And then just one follow-up for me. You touched on the jumbo opportunity in your remarks. Is that a function of what’s going on with the banks? And how big of an opportunity is that for you guys?

Mat Ishbia: Yes. Thanks, Kyle, obviously, like I said, you follow the industry closely, so you know you’re talking about. That’s an important point to understand like the capital rules and what impact they can make on banks and credit unions and how that does not impact us, nonbanks and brokers. It also can impact correspondence with some of these smaller players or small warehouse lines, the bigger players that we work with is not really relevant. But, it’s interesting to see what that will happen. That is part of the jumbo thought, along with other things I’m working on, we’re working on here at UWM on the jumbo front, just truly capture those opportunities and help the brokers continue to grow because that’s really the name of the game. As the brokers grow, we grow and even when — and that’s what we’re focused on. I think jumbo is an opportunity.

Kyle Joseph: Got it. Thanks for taking my questions. Congrats on a good quarter.

Mat Ishbia: Thank you.

Operator: Your next question comes from the line of James Faucette with Morgan Stanley. Your line is open.

James Faucette: Great. Thanks. I want to follow up on those last comments around kind of competitive environment, et cetera. Last quarter, I think you mentioned you were deploying some of your excess cash to self-warehouse some of your production in order to help manage interest costs. What’s your strategy has been like during this quarter, given the elevated rate environment and the fact that some warehouse lenders seem to be pulling back?

Mat Ishbia: Yes. So we use our excess cash the same way. It does limit our interest expense when we’re doing that. And that’s what — we have a lot of cash, right? Cash is king. We keep a lot of cash on the balance sheet. And so, we continue to do that. So there’s really no change in the strategy. In the warehouse lines, I think that’s — that’s really not a story, right now to be honest with you. Maybe it’s a story for some small correspondence, but they work with the other lender, it’s not affecting brokers and it’s not affecting a lender like UWM. Warehouse line issues are really not a concern at all with UWM and obviously we have the cash on top of that. But that’s not really a concern. It’s more a concern for some of the smaller regional banks that give out small lines to these little correspondence.

I can argue that that’s actually a positive for us because when those smaller warehouse lines kind of get on the business like we saw Comerica do recently and some other ones. What happens is, those little lenders that use them say, I can’t do this anymore. Let me just go back to being a broker, and that becomes a big client for UWM, and so we’ve seen some of that happen. But once again, I don’t think it’s a huge mover right now.

James Faucette: Got it, Mat. I appreciate that color. And then just on pricing, you mentioned a couple of the pricing incentives in recent quarters, including conventional 1% down offering, as well as Game On and some other initiatives. How much of a drag are those assets having on your margin? And I guess the bigger question is, do you have a life span in line for any of these promotions?

Mat Ishbia: Yes. So they’re not a drag on our margins. Like our margins are exactly where I wanted to be in every aspect. So that’s not a concern at all. To your question though, how long are these things, those are things that we don’t really discuss and talk about. But the reality is, I think that these things that we do are all helping consumers, which we care about, brokers, which we care about and helping the real estate community, which partners with our brokers. And then at the end of the day, it helps UWM and all of our investors and all our shareholders. And so, we’re going to continue to stay in the details, stay in the weeds like, I’m involved with this every single day, if not hourly in the day. And so we know exactly where we are, where we want to be, and we’re going to continue to be in the weeds of our business.

And so, there is no timing or ending of what we want to do on some of these things, and we’re just building the relationship and deepening our relationship with the brokers for when rates do drop or just helping brokers win right now, which they’re winning, we’re winning and it’s really an all-around success for UWM, and I think you saw that in our quarterly numbers, and I expect you to see that again in the third quarter, too.

James Faucette: Yes. Thanks a lot, Mat.

Operator: Our next question comes from Bose George with KBW. Your line is open.

Bose George: Hey, good morning. I wanted to stick to the volumes. I mean, you guys ended Game On, but it looks like your share — it looks like it went up a little bit and your volume came in above the high end of your guidance. Can you just talk about how that kind of played out? What you expect to share? And where you think you are in terms of your share of the broker market this quarter versus last?

Mat Ishbia: Thanks for the question. Yes. I mean you just described what’s happened. And that’s exactly what I said what happened if you look at our 2022 second quarter and third quarter, we talked about Game On. [indiscernible] this is what we do all day, right? So I expected it. This is what we expected as we planned for. It’s all part of the strategy. The thing that people don’t get and after 11 quarters of doing this, I figured that [indiscernible] when we talk about something, we explain something, this is what we do all day. This is not hyperbole, this is not [BS] (ph), it’s not rhetoric like a lot of my competitors we actually are doing it consistently. And hopefully, you’ve seen it. And so am I surprised that Game On worked and [indiscernible] joined the broker channel and our share went up, and then it’s going to go down a little bit from the high end because we picked up our margin, no, I’m not surprised at all.

That’s what we do, and that’s what the plan is. I’d be surprised if it didn’t. And now from the market share, like if you go back and listen to the recording, I think I said it a year ago, like I expect that our market share will go up. We did not do it for a market share play. But once someone starts working with UWM, they realize how great we are and how easy is it to work and that they can grow their business. And so once someone tries us and some brokers didn’t try us before because they were so focused on price. Game On brought them into our tent and then they say, wow, you guys are amazing. Like I don’t know why I care about 8 basis points or 12 basis points or 20 basis points more and they become our loyal partners. And so that’s what happened.

That’s what we’re proud of and that’s what we’ll continue. Where market share is this quarter, like, I said, I consider the Game On a success if we go up from the 30% we were at that time, I think we’ve peaked at 50. And if we stay in the low 40s, it’s a pretty big success. And I think we’re there. And I think you see our higher numbers on purchase and our brokers that are working with this are up, our LOs that are working with us are up. And so overall, we feel great about where we’re at, and our strategy is working. At the same time, we’re coming up with new strategy and new moves and new techniques to continue to win, continue to build this business for our partners, for our investors, for our brokers and for our team members here at UWM.

Bose George: Okay. Great. Thanks a lot.

Operator: Your next question comes from the line of Doug Harter with Credit Suisse. Your line is open.

Douglas Harter: Thanks. Mat, you talked about kind of being prepared for the eventual turn in the market whenever that may be. How do you think about what that size of that market opportunity might be?

Mat Ishbia: Yes. So great question, Doug. I mean it’s going to be big, right? So like every day that goes by another day, where my competitors lay people off, so they’re becoming unprepared. Every day that goes by another day where a lot of loans are closing at 7% and 7.25%, so it’s a bigger supply opportunity for us. Every day that goes by is another day that we’re deeply relation with our brokers. Every day goes by is another day on preparing for the scale. And so, like although everyone wants a rate drop, I kind of like where it’s at right now. It keeps going, and they keep building this monstrosity if that’s the right word, of an opportunity. And will that opportunity last for three months, six months or three years? I don’t know, but I’m going to be ready, and we’re going to be ready at UWM when nobody else is.

And so, when will it come? I don’t know. How big it will be? It’s going to be pretty big. Think about this, Doug, like we’ve had $2 trillion last year, $2 trillion this year, all at 7%. Rates go — rates don’t have to go to three. Rates go to 5.875% and you’ve got $4 trillion of loans that are refi eligible instantly. And then flip around and say, don’t forget, we’re still the $28 billion of purchase, let’s just maintain that purchase volume. So I think our refi volume will be significant. And then, of course, my competitors that are all maybe struggling right now and laying people off will say how great their business model is, and you guys will probably write how smart they are, how they do good things because they’re dependent on rates. We’re dependent on the mortgage business or the economy being relevant.

We’re dependent on being alive and running our business. That’s how dependent we are in running our business and being successful. They’re dependent on rates. And so when rates drop, we’ll dominate, we’ll do great. Everyone else will do great, too, and everyone think that they’re doing good things and they’ll talk about their strategy. But this has been the best thing that you actually got to see what the market happens, what happens to the lenders when the market changes and what we’ve done and what we’re going to continue to do. But we are ready, and we are the most prepared [indiscernible] for refi boom, but other places will figure it out too. unless it’s like a three month boom and then they say they can’t hire quick enough and then they’re going to lay people off again, and they’re in this little death firethat they all live in.

Douglas Harter: Great. And I think historically, kind of people have thought about 50 basis points as the incentive and how do you think about the incentive today? And is that lower with in the broker channel than it might be in other channels?

Mat Ishbia: No, I don’t think it’s lower in the broker channel. I think it’s all about savings to the consumer. What makes sense? Like is 50 basis points in rate drop enough to hit a refi boom. I don’t know if it is. I think I lean towards more 75 to 100, but also remember, like I said everyone it’s 7%, but you are 6.5% and so be worth 7.25%. So like the number I’m targeting the hit the high five you’re going to have a big opportunity. Are there refis being done today? Yes. I mean I think it’s 12% of our business or whatever the number is 10% to 15%. And some other companies — I mean, if you’re a business is still — you’re still doing a lot of refis right now is a big percentage of your business you’re obviously not winning in the purchase market.

And so, what will happen, what it needs to be? I believe doing right by the consumer is important. And so these games that these players play that I’ll just lower a quarter point and then they can miss a payment, like that’s not really what we believe in and that’s not what we want brokers to believe in. So the number, I think, is 3.25 point in rate, is kind of the number I think. And I think rural refi as opportunity come at [6 and 6.25] (ph). Yes, when it hits the high 5s, it will be good. The other piece that people don’t recognize when rates hit the high 5s, people that are at 2.5, 3, 3.5 range, they are the ones that aren’t selling their houses because it’s so expensive to sell and buy another house. When it becomes a little more palatable they’ll sell their house, it opens up inventory like the purchase business will be great.

The refi business be great, and that’s why I’m so bullish. And we’ve been bullish. I’ve been saying the same stuff for years now. It’s just now we kind of see the light of entails coming, whether it’s in three months. 12 months, 18 months, I think it’s sometime next year, I don’t know exactly when.

Douglas Harter: Great, Mat. Thank you.

Operator: Your next question comes from the line of Kevin Barker with Piper Sandler.

Kevin Barker: Great. Thanks for having me on. I just wanted to ask about the growth in the government origination volume. You saw quite a bit of originate production volume growth, I believe it’s about 60% quarter-over-quarter, very strong. Could you talk about what you’re seeing in that market, in particular, and whether it’s from a competitive dynamic or some of the pricing initiatives you’re doing there? Thank you.

Mat Ishbia: Yes. Thanks a lot. So it’s not really the pricing initiatives. A lot of times, the government loans, a lot of the growth is in FHA world. The FHA world gets — competes a little bit with the home affordable programs from FHFA, which is Fannie Mae and Freddie Mac. And so as Fannie Mae and Freddie Mac do less to help affordable homes, those borrowers go FHA. And if those borrowers go to FHA, FHA is the best option for them. Also FHA did cut their MI, if you remember, which is their monthly MI, which actually made it so it was more advantageous sometimes to use an FHA loan than a conventional loan. And so brokers are smart, borrowers are smart. They’re going to go to the cheapest payment. So the cheapest payments FHA, we’re a great FHA lender.

We can dominate that market if the market’s conventional will do it. And so right now, you’re seeing a little pickup in FHA because the MIP cuts and maybe the affordability programs have not been as successful as FHFA is focused on and Fannie and Freddie kind of do their own things and some of this stuff. And so we’re going to continue to focus on it. But whatever is best for the consumer is what we’re going to focus on. And we do a lot of FHA. We do a lot of VA. Veterans is still another big opportunity. We think veterans don’t necessarily get the best opportunities, and we’ve got to get them to find a mortgage broker.com, educate veterans because they can save a lot of money, too, and we’re continue to work on that with Veterans as well. And both Veterans and FHA are both in the government world that you speak of.

Kevin Barker: Do you expect the Veterans loans to be a greater source of refinance originations over the next year, just given the right sort of streamline [indiscernible] that are in place?

Mat Ishbia: Yes, exactly. Yes. Veterans have great purchase programs and so does FHA, but they also have great refinance programs, the [indiscernible] and the streamline refinances. And so, those programs will help invest back to the point is like there are certain recruitment rules about how much to rate back to the question about how much rates have to drop and we want to make sure that’s a veteran or the FHA borrower or any borrower is saving enough money to make sense for it to be a great opportunity for them. And so — but I do think veteran loans are a lot of refinancing in that program, and that will come too. But I’m focused more on the veteran purchases, helping the veterans buy those homes. And so there’s things we can continue to do to help them along with FHA.

And that’s why you’re seeing the government pick up because we’re doing those things, and you see our government volume has grown significantly quarter-over-quarter. And I think you’ll see it continue to grow going forward.

Kevin Barker: Great. Just a quick clarifying question. Andrew, I believe you commented was a $26 billion servicing portfolio was sold after the quarter end. Could you clarify that? And then was there one sold during the quarter? I’m just trying to understand — see what happened in the quarter? Thanks.

Andrew Hubacker: Yes. After quarter end, just over $26 billion of UPB was sold. And during the quarter, I think it was about $28 billion of UPB was sold.

Kevin Barker: Okay. Great. Thank you, Andrew. Thank you, Mat.

Mat Ishbia: Thank you.

Operator: Your next question comes from the line of Eric Hagen with BTIG. Your line is open.

Eric Hagen: Hi. Thanks. Good morning. Good to talk to you guys. Maybe a couple of follow-ups here. I mean what are you thinking could lead to growth of the broker channel itself? Like as a share of the overall market, what would contribute to some relative growth for brokers? And then second question here. I mean, if you’re doing, say, like 20% or 30% more volume than you’re doing right now, how do you feel like that would drive your policy towards returning capital and keeping MSRs just following up on that last question. I mean you’ve been a seller of MSRs so of other lenders. Like how do you feel like the volume of MSR sales for the market more broadly just kind of drives your appetite to self-servicing and the value that you think you can get for it?

Mat Ishbia: Yes. So I’ll answer the second question first, and you have to repeat the first one. But the second question is like, like we’re opportunistic. If there’s opportunities out there, we’ll sell servicing. We also love the servicing asset. We have about $300 billion of it, and we’ll continue to service clients and take great to your consumers and help brokers when that opportunity comes down the road for the refinancing of those consumers. And so — but we look at all opportunities. Like my job and our job here is to make the right business decisions for our team members, our brokers, our shareholders like everyone, we’re thinking about everyone across the board. And so right now, when there’s opportunity to self-servicing we’ll do it.

If we think it’s a good price, if not, we’ll sell none of it, right? Whether we sell the whole thing, we sell access like we have all these different options. Our liquidity is so strong right now, but I always like having extra liquidity and more liquidity. Cash is always king, we’ve done it. We’ve $2.8 billion, $2.9 billion of access to liquidity, and we’re in a great position across the board. So I feel good about our MSR strategy. Andrew has done a great job, Blake Kolo has done a great job, and we’re in the weeds of that every day. And that’s a day by day, week-by-week decision and we capitalize at the right time to make the right decisions for our company. And repeat your first question because I went on the tangent, I want to make sure I get.

Eric Hagen: No, that was helpful. Thank you. I was asking about relative growth in the broker channel itself, like the share of the market, what do you feel like the conditions would have to look like to see that the channel itself grow?

Mat Ishbia: Well, so listen, loan officers continue to move over, right? We got to continue to dominate from a service perspective for the brokers so they can continue to build relation with realtors and continue to do these things every day. But — and I think that from the last year it was 20%, I think first quarter was 22% market share for brokers. So it went up 10%. I don’t know if that’s relative not enough for me. But the fun part is like in a sick mind that I have is like, I like when it’s still low, and we’re still dominating. Like imagine when it goes up, there’s no one in this industry that will tell you the broker market share is going to go down. There is no one in this industry [indiscernible] the biggest retail guys in the world, brokers are growing.

Go back to — like everyone knows brokers are winning and the fact that the numbers don’t come through as big as I like, that’s just like all upside green passers and rainbows and sunshine for UWM. So when it goes to 22% to 25% to 27% or 30%, like when it happens, we’re not going to do less business than we’re doing today, right? And so it’s all upside right now. And so I feel good about where it’s at. We’re prepared for scale, we’re prepared for those opportunities and brokers are growing and brokers are succeeding and brokers are loyal to UWM and we’re all winning together and I feel great about our business.

Operator: Your next question comes from the line of Michael Kaye with Wells Fargo. Your line is open.

Michael Kaye: Hi. Good morning. One of your major competitors who’s both a direct-to-consumer lender and a wholesale lender seems to be further emphasizing hiring local loan officers to better compete in a purchase mortgage market. The brand is obviously very strong and resonates with consumers. So what strategies and tools are you trying to put in brokers’ hands to better able to compete with a threat such as this, especially if they go after the distributed retail model in a much rounder way?

Mat Ishbia: Thanks, Michael. I appreciate the question. I’m familiar with that company. I don’t think highly [indiscernible] things they do. And the reality is understanding what that company is about, brokers know too. If you remember that company also is someone that all the brokers have left. And although if you look at their, what they’ve said, they’ve kind of falling off the deep end too, they lost their CEO, fire the CEO, fire their President, fire their Chief Legal Officer, CFO, everyone’s gone because their business strategy doesn’t work. Now with that being said, when refis come back, that company, we’ll probably do a lot of refis. But the local loan officer strategy is a silly concept. It’s just their way of saying, we can’t win in a broker market.

And that says the tipping their hat to UWM. So we’re going to try anything else we can do. And so the reality is, there’s not a broker in America, and Michael, you know this, that doesn’t think that UWM is the best partner for them and always does the right thing for brokers, and we’ll continue to do that. And really back to the last question that was asked to me about like how will brokers grow market share. The last time rates dropped brokers weren’t prepared, just like all these other lenders aren’t prepared. And when that happens, they couldn’t process the loan. They couldn’t originate the loan, so the [indiscernible] are originating and processing. So we built that PA+, which I talked about earlier, which basically is helping brokers scale.

Brokers don’t have access. What happens when rates drop next year, like they’re going to double their business. Well, they don’t have — they can’t double their process. Everyone is going to go on hire operations people. UWM has already built the scale for brokers to succeed and PA+ is a big part of that. And so part of the strategy is preparing for that. But that company doesn’t really matter to us and that the reality of when you’re asking about Michael, you know what they are in the broker channel, they’re not really relevant. And really, they’re not really relevant in the overall industry besides when rates drop, which they’ll be great again, when rates drop and then I’m sure they’ll tell you guys how great they are at that point, too.

Michael Kaye: Okay. Thank you.

Operator: [Operator Instructions] Your next question comes from the line of Steve Delaney with JMP Securities.

Steven Delaney: Hi, Matt, great to be on with you and congrats on another strong quarter.

Mat Ishbia: Yes, surprising. Steve.

Steven Delaney: Yes man. Listen, picking up on your comments with Doug about coupons. Do you guys — you obviously know what your average coupon was on second quarter production. Is that something that you’re at the average coupon? Is that something that you and Andrew could share with the analyst community? Or is that too much information that would — you don’t want in the hands of competitors?

Mat Ishbia: So thanks, Steve. I appreciate the question. Yes. I appreciate that, and I always appreciate the questions. So that is pretty much public information. I don’t have the number right in front of me, but if you look at some data, you can figure out what our average interest rate is and where the market is. But I mean generally, like just being general, not just UWM but the market space is like 6.75% to 7% in the second quarter, right, if you think of that range. And I think that may be a little bit lower in some situations, a little bit higher. But right now, and it might — there’s like a month in there that lower rates, depends on when you lock them and when they close. And so the way I look at it is rates are all in the 6s and low 7s.

And if they’re in the 6s and low 7s, that’s why I keep saying high 5s is the focus. And when it hits high 5s, remember, the other thing people talking about [indiscernible] fuels talk about that, talk about inflation. But don’t forget, the spreads between the 10-year and the 30-year fixed rate all-time highs, too. And so it could be any day it really could be any day right now that rates could drop. And it doesn’t need some crazy thing to happen. It just means those spreads come back to normalized numbers instead of 300 down to 150 or 200 and boom, it’s a refi opportunity for everybody. And so — we’re really excited about that. We’re prepared for it. We’re not sitting here — we don’t need it to happen, — but we’re ready for when it does happen, where a lot of our competitors need it to happen so they can come back on these calls and sound rational to you, Steve.

But the reality is we don’t need it. We’re excited for it, but we’re going to keep winning in the meantime.

Steven Delaney: Yes. [indiscernible] futures is saying that we’re going to go down over 100 basis points by the end of 2024. And I would suspect the long end of the market would follow the Fed and you’re going to follow the 10-year. So it seems like 2024 could give us — it’s not silly to be talking about lower rates at this point. And I get your point about you got to get it, be there, scaled up and ready to go for that first six months. [Multiple Speakers].

Mat Ishbia: One comment, Steve. I think it’s definitely a reason to think that we’re going to outperform the market.

Steven Delaney: Yes. And to that point, do you have it handy — I don’t care whether it’s today or June 30, like employee head count and broker count, just so we get a sense of how much growth there’s been year-to-date there.

Mat Ishbia: I don’t have those numbers handy. But the reality, you could always talk, I know you talk to Blake Kolo. I think you can get you some of the information. But the way we look at it is. Obviously, you’re a big company, some people leave, we’re hiring. I think we hired 350 people in July, which is actually new information because that’s actually in the third quarter, so you can understand our focus. But none of those people, as I answered the question earlier, not the hires where there’s 200-plus people in June, 300-plus people in July. None of those people are contributing to our success right now. They’ll contribute to our success next year, like we’re preparing. It’s like you’re building this opportunity. What everyone else is slashing, slashing, slashing.

And what I’ve tried to explain to people is that sometimes these refi booms aren’t five years running. They might be three months, six months. And if you’re not prepared, you can’t take advantage of. You can’t grow market share in PA+, the scale that we have, the technology we have, the partnerships we have, we’re ready for it, and we’re going to be ready when it happens. And in the meantime, we’re still going to have record purchase quarters, just like we did at $28 billion. We don’t need any refis. We don’t need anything to be successful. We’re going to win in all markets. And that’s why I stated back in my roadshow. I know you followed us back then, Steve, and everyone’s seen every quarter consistently successful.

Steven Delaney: Thanks for the comment. Blake, I’ll follow up with you on those numbers. Appreciate the time.

Operator: Your final question comes from the line of Vilas Abraham with UBS.

Vilas Abraham: Hi, everyone. Thanks for the question. Just real quick, just one for me. Can you talk a little bit about new production, MSR multiples, how that’s contributing to the margin? And just how we should think about that dynamic moving forward? Thank you.

Mat Ishbia: Yes. Thanks for the question. So the new production multiples on MSRs doesn’t really contribute to really any of the volume or the — I mean, it’s just a number that’s plugged in based on the assumptions that we have along with everyone else has. And if you look at a lot of those things, I think our assumptions are maybe a little more conservative than other places, which makes me feel like I got a little upside in it. But the reality is, I don’t think that really is moving any needles tied to margin, tied to volume. New production is the game right now. And purchases back to the point on are not the most price-sensitive borrowers, purchases they want to buy a house. And so our focus is on helping those borrowers find the house faster, easier and cheaper.

And so the reality is nobody really wants a mortgage, like I’m in the mortgage business, no one wants the mortgage, they want the house. How do they make it fast, easy and cheap, and that’s what we focused on. And so understanding rates, understanding like the MSR values tied to the rates, like it’s not really contributing in a positive or negative way. Just — this is a number that’s plugged in, rates are the rates. People are buying house at 6.85 or 7 or 6.75 or whatever it is. And then the real game though comes down when rates drop. And when they do drop, that opportunity will be there for UWM. And if they don’t drop for another two years, which I don’t think, but let’s just play it out. Certainly, we’re going to make $200-plus million a quarter over the next couple of years, still make $1 billion we’re going to be doing just fine.

And so when refis do come, though, that’s when you make billions within a year and the opportunity is there. And so we’re prepared for it. I don’t know if MSR assumptions really make big movements, plus or minus basis points here and there. I don’t think it really moves the needle much.

Vilas Abraham: Okay. Thank you.

Mat Ishbia: So thank you, everyone, for joining the call. I know you’re all really busy and have a lot of things going on. We appreciate the support. Obviously, Blake Kolo, and Andrew and our team here is available if you have any more questions, but we appreciate it. We’re excited about the second quarter. And we’re really excited about the third quarter as well, we’re going to keep doing it with brokers. Thanks for the support, and have a great day.

Operator: And this concludes today’s conference call. You may now disconnect.