Q3 2021 UWM Holdings Corp Earnings Call
There'll be a question and answer session.
If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star one. Thank you met Roslyn you may begin your conference.
Good morning, I am Matt Roslyn E VP of legal affairs, and Investor Relations. Thank you for joining us and welcome to the third quarter 2021 earnings call for U W. M Holdings Corporation.
Before we start I'd like to remind everyone that the 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. Please also note that along with the earnings release, we posted on our Investor website and filed the slide deck that will be referenced in our prepared remarks I'll now I'll.
Turn the call over to Maddish via Chairman and CEO of U W. M Holdings Corporation, and United Wholesale Morgan. Thanks, Matt appreciate it and thank you everyone for joining the call. Today are you know it's great to be here. After you know another outstanding quarter here at U. W. M. You know before we get into the details I want to thank everyone of you Wm for anything do together here you know our team are.
Broker clients.
Growing their business everyone's working hard together in and we appreciate our clients' loyalty along with our team members continued efforts.
We had another record breaking quarter, you know, we on our way to our seventh consecutive year of origination growth.
I don't think there's another lender America. They can say that you know since 2014 to every single year, we've grown here at U W. M along with our second consecutive record breaking quarter.
Along with our biggest purchase quarter of all time, you know last quarter I explained why purchase production is such an important measure of lenders health, especially in a rising rate environment not the percentage the actual volume, which we're gonna go into deeper into that in a minute, but let me go through the third quarter first first we delivered another record quarter 63 billion.
And production, beating our guidance of 57 to 62 and up six 4% from the $59 2 billion prior quarter, which was a record as well.
$26 5 billion of that was purchase another record and up 10% compared to the prior quarter.
Both of those quarters, where records very very proud of our purchase production, we're very proud to share. It because we are the number one purchase mortgage company in America by standards of origination.
Our gain margin gain on sale was 94 basis points up from 81 in the second quarter and the higher rent of our range of 75 to 100 from the guided that we guided to last quarter, that's a 16% growth on our margin compared to prior quarter.
As I've said before and others indicated in their earnings call. You W. M is not a victim of margin compression as the number one wholesale lender in the country. We control the margins in other lenders have to react to us based on what we do we have 100% wholesale and while our margins are in the mid nineties.
Other lenders will continuously be lower than ours ought to remain competitive because of our amazing service levels technology and speed to close loans, we make the process faster easier and cheaper for mortgage brokers and thus we are winning in this wholesale channel we've seen a cycle where margins went from all time highs as significant lows and now we're seeing some normalization sooner than.
Most people expected.
Realizing these margins are part of strategy, you've plainly can see the retail mortgage burdened our 350 to 500, which is thousands and thousands of dollars more out of a consumer's pocket on most loans. So it's more expensive to go to a retail lender.
But by keeping wholesale margins very low its long term business development play to help the wholesale channel brokers or offer consumers lower cost loans and keep the pressure on retail lenders. We expect the channel to continue to grow because of this as loan officer will continue to lead the retail channel enjoying the broker channel, which is good for consumers. It's good for.
<unk> and is really good for you Wm once again, its all part of our strategy to help brokers compete and at the same time grow the channel, which is a winning play for U W. M. Our margins are more than just the number you see it's a part of our strategy that's been working very well for years here at UWS now let's speak about.
Net income we delivered $329 9 million of net income.
Which is a great number compared to the previous quarter of 139 million now last quarter I talked about as a CEO I view.
Our core business I focus on things that I can control I can't control whether rates go up rates go down and how the MSR values go. However, we had 170.4 million decline in fair values of the MSR, So when I take that out and add that back into our $329 million.
It puts us right around $500 million of core earnings once again, that's the way I look at it that's different than GAAP, but that's how I run this business knowing that were very successful and profitable going forward the.
The quarter also looks great year over year up 16% and overall production.
You had 119% and purchase production.
More telling is when you look at our performance relative to our peers from Q1 of this year through Q3, you know the first and fourth quarters are typically down in the mortgage business, because a cyclical industry and usually purchase are slower in the first and fourth quarter as you can understand it with winter and all in school being insertion, but in good quarters are second and third quarter, you would expect everyone to.
Go up but everyone else went down in those quarters, except for U W. M. So taking a look at our numbers from first quarter to second quarter to third quarter is really an amazing thing to see us continue to grow and the rest of the market not.
As you can see in earnings slides three and four we went up almost 30% from Q1 to Q3 and most big banks were flat while the rest of the largest lenders were down between 10 and 25% once again rates just ticked up so its because rates ticked up just a bit.
If rates continue to rise we will see them you know in and with the tapering is set to begin you know all these things happen and we're going to see you know who really has the strongest mortgage coming in America, and that's where we want to position ourselves as not only the biggest but the best mortgage company in America, and we're proud of that.
Have you seen we're guiding our production down based on the sequentially for the fourth quarter, but it will still be larger than the first quarter, which is a really important thing to note is I don't think there's anyone in America. They will do more business in the fourth quarter.
We will let you wm than the first quarter of 2021, So we will be the only one that will show the strength of our business here at U W. M that being said we're extremely excited for 2022, because when you combine rising rates the power brokers embedded in their communities and UWS low cost and power of our speed service and technology, It's a recipe for mortgage brokers and new Wm.
To win together that will happen in 2022, we're going to finish our all time best year in 2021, and we're excited to continue to gain a massive amount of market share in 2020, you, especially as it ties to purchase let's dive deeper into purchase because when rates are low there's plenty of revised to go around but when rates are rise refis slow down are you.
Even disappear in some situations and purchase production is essentially lenders viability.
On July 1st the 30 year fixed rate was still in the high twos now as the Friday I believe it was like three point O. Nine 3.10, it's rising now still very low and in the in our in the overall context, but watch what happens if rates go to 3.33, 0.53, 0.7 and with the fed.
Confirming their tapering you know that's what a lot of people are projecting.
This plays into our strength as the number one purchase lender in America, we have a strong record of sustained growth over the last four years and we're continuing to grow on the purchase side now, let's talk about the purchase volume not the purchase percentage because purchase percentages just means I did less refis is what a lot of people will tell you we're actually talking about the purchase volume the pure number we delivered over.
50 billion in the last two quarters of purchase.
You know and we're not shy about sharing those numbers because it's really showing the health of any mortgage company not just U W. M. Can you originate purchase business history shows that we perform great in a rising rate environment purchase oriented again in 2018 rates went up we were one of the few lenders.
Grew and made money, while the rest of the industry really struggled on the origination side not just hey, we make money because the servicing book goes up we make money on the origination side you know my point earlier about how we're the only mortgage can be that's grown every year. Since 2014, I think this will be the seventh consecutive year of growing mortgage originations, that's because in a rising rate or reducing <unk>.
[noise] environment, you'd IBM is going to win unmatched speed, great rates and low cost and outstanding servicing that combine that with the local community focused of mortgage brokers, it's really a powerful combination.
You guys know, we talk about speed a lot 15 consecutive quarters less than 20 days application to close most lenders are 40 45 50, we've even seen a hired a 50 to 60 days for a long time over the last couple of years, the speed and service a referral catalyst for brokers, we hear anecdotes everyday from where borrowers are reorders alike.
<unk> quickly how quickly the closed loans and help them getting homes and get paid faster. This helps consumers brokers loan officers as a broker shops real estate agents and the overall wholesale channel our client service continues to be world class with our year to date net promoter score of plus 87 want 0.1, which is off the charts for anyone that really falls in that pre.
Motor scores.
Now.
Let's talk a little bit about technology technologies is huge catalyst of our success and it will continue going forward.
Historically.
We've leveled the playing field for mortgage brokers by providing tech. That's previously only been available to loan officers at banks or Mega retail lenders things like Blinked, plus you closed brand 360, among others have given brokers access to world class point of sale CRM loan origination systems to help them not only compete but win win going head to head with retail loan officers.
In the third quarter, we took it to a new level and Unbilled you know.
Multiple game changing technologies and process technologies that will change the game for you Wm and brokers. The big one was called bolt. Another one was called appraisal direct which I'll talk about both bolt I'm, telling you right now is a massive massive change in the mortgage landscape and it will be talked about for years and years to come and I don't believe.
Anyone to be able to match it for 2345 years at the earliest probably more between five and 10 years. It's that good a technology proprietary built using OCR ADR proprietary technology to help give broker clients certain unit answer on alone within 15 20 minutes, our underwriters already lapped the car.
Physician and speed without sacrificing quality and now bolt takes it to a whole another level, where we can.
Review of the documents review the work faster and easier so think about the process at the double down on the speed advantage basically the early signs indicate that you know.
We will be able to maybe double underwriting productivity in the next year or two so think about it you know our underwriters already underwrite more loans than our competition you can see that our cost per closings, but at the same time you can also see that if if we double that we're going to exponentially expand it and that helps us win in a rising rate environment again huge think bolt.
Is going to be the future 2022 'twenty 'twenty, three and beyond and it's a huge huge leg up on the competition.
And I also want to talk for a second I can set about appraisal direct it's really a technology, but really a process change. This has been the biggest pain point in the mortgage space for the last year, but even beyond that and so what we're doing is trying to help with great technology.
And putting the UWS process in place to make process better for appraisers paying appraisers top dollar we're not taking a fee on these things like a lot of other companies. We don't take a fee we want to make it through the process is faster and easier. It plays right into our brokers are better mindset, helping our brokers a win across the board and so it's a big thing bolt appraisal Jack we also.
Royalty and called the source there is a lot of big technology, we came out with in the third quarter and that stuff took a year plus to build a lot of this development and so its really big stuff and we're very excited about what's happening you'll hear much more about bolt for years and years to come as it's really a game changing technology that no one will be able to match for years and years to come now I'm going to turn it over to our CFO Tim.
Forrester for more details about our financials.
Thank you Matt the third quarter was successful for the company in a challenging environment as Matt noted our volume was a record led by continued growth in purchase volume the competitive environment still has margins in the in a lower range as compared to the record margins. We saw in the third quarter of 2020. However, we experienced improved margin over the second quarter of this year as Ray.
Its fluctuated and margins improved.
The increased servicing portfolio delivered significantly greater revenue this quarter as our portfolio continues to grow.
We also experienced improved overall interest income, which expanded more than interest expense as we self funded more loans were redeployed available liquidity to fund mortgage lumps.
On the expense side, our staffing levels moderated a bit leading to lower lower overall compensation expense, especially when compared to prior year levels that included some volume driven incentives.
We did incur more marketing expense in the quarter as the impact of the pandemic continued to lessen and we were able to spend more time supporting and training with our brokers our servicing costs increased but trailed our revenue increases over comparable prior periods. This is an important feature both from an earnings view and also a cash flow perspective, as our servicing portfolio continues to grow.
We continue to benefit from the cash flows as well as the contribution to our performance the key as our revenue growth has outpaced our expense.
The MSR portfolio is approximately 285 billion at September 30, with a weighted average interest rate of 2.95% down from 2.97% at June 30.
Our forbearance rate is roughly 83 basis points. So we are continuing to observe better asset quality in the industry overall.
As it has historically our delinquencies remained quite low if rates continue to increase as expected with the announced tapering plan from the fed.
Our servicing book becomes further insulated from potential downward pressures on valuation loss.
The WAC or weighted average coupon is already well below the market and further upward movement in rates make it that much more attractive.
Now we saw a modest amount of MSR and in the third quarter and reestablish relationships with several potential investors on terms, we support and believe are favorable to our relationships while retention of MSR is our preference we balanced that position with tactical sales to ensure we have access to markets. If we anticipate the need to sell more MSR and.
To maintain appropriate balance origination engine to remind everyone. The pickup in sale is excluded from core earnings.
In the third quarter, we continued to deliver private label securitization and work toward a aggregating potential additional offerings for the fourth quarter diversifying our means of disposition well. Our collateral is primarily agency eligible we continue to evaluate improved execution as well as alternative sources for putting our loans in the end investors portfolios.
Our unsecured debt continues to perform well and we recently received ratings upgrades on issuances aligning with the outstanding bonds with our issuer rating.
We believe these outcomes as a result of continued operational performance as well as our credit discipline.
Cost per loan.
Again cost per loan was solid in the quarter, we experienced cost per loan well inside our target of 1500, which continued our performance from prior periods and maintaining disciplined on spend while our operations continue to execute efficiently as we continue to invest in technology and innovation, we seek to improve such cost performance as a reminder.
When we discuss part cost per lap ours is a fully loaded cost without exclusions, excluding allocations or on an incremental basis. It is all in.
As noted in the press release, the board again authorized a regular dividend to be paid to our public shareholders consistent with our track record over our entire history as a publicly traded company. We are comfortable with the amount and timing and believe it is appropriate to reward our stockholders.
Also as noted in the press release, we have acquired approximately 2.7 million shares through our approved stock buyback program for a roughly $21 million to date.
We will continue to evaluate opportunities for buying back more stock as authorized within the parameters of the board's approval as it represents an attractive return for us to do so.
Those efforts will continue to be balanced with our desire to maintain or even established more float for investors and maintain our profile and availability for future long term investors.
We continue to evaluate the propriety of additional debt issuances to align with our MSR growth tampered with the balance of debt levels relative to equity and the overall size of the MSR asset. We believe we are operating prudently, but embrace potential additional debt as it allows us to grow our MSR portfolio and benefit from the positive cash flow as mentioned.
Earlier.
Now I will I will turn things back over to our chairman and CEO Maddish via for some closing remarks. Thanks, Tim appreciate it as you guys. Just heard you know our third quarter was a record breaking across the board. We're very very excited about it you know the big part of I spoke about is purchase purchase volume is a leading indicator of lenders health in the most critical proof point of whether we can you know make mud.
In a rising rate environment or lower rate environment, you know, whether it's a four trillion dollar industry of one and a half trillion dollar industry. It's a big difference revise or easy purchases are a lot harder and takes more expertise more detail and new Wm shines and soda independent mortgage brokers, they make the process faster easier and cheaper you know the broke.
Your channel will grow its share.
Next year and beyond as purchased becomes a bigger percentage of the business and retail loan officers are going to convert over as I talked about earlier as we look ahead, we expect to deliver between 52 and $60 billion in the fourth quarter of volume that's going to be bigger than the first quarter first quarter, we did about $49 billion there'll be no other lender to mirror.
They actually can do more volume in the fourth quarter than they did in the first quarter. We're proud of that we're also guiding.
Our margin to be between 85, and 105 basis points, which is a higher guidance that I gave 75 to 100 for the third quarter, we've seen the margin compression loosen across the board and I see that it's there's still be lower than the the norms, but maybe not as low as we had expected or people had talked about for a while.
And we see it loosening up sooner, we're very excited about the fourth quarter, but even more excited about 2020 to UW M is laser focused on showing all of you guys. On this call that we are the elite and best mortgage kept me in America, just like our clients brokers and consumers already know this we are going to one day be the number one overall mortgage company of America.
From a volume perspective, but we will never sacrifice the loan quality and the process and the technology that we've put in place and to do it. So we will not lower our FICO is we will not do different things to become number one we're going to stay as being the best and soon will be the biggest and the best we appreciate the partnership with all of you and we're looking forward to taking questions and I'm going to turn it back over to Matt Roslyn, but thank you.
Operator at this time, we'll begin the Q&A session.
At this time I would like to remind everyone in order to ask a question press star and number one on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.
Your first question comes from the line of Brock.
With UBS your line is open.
Hey, good morning, guys.
Matt just circling back on your closer there before the Q&A see margin compression loosening sooner could you just.
Put some greater.
Greater greater dialogue and description around that characterization.
Yeah. Thanks, Brian Thanks for the question.
We're seeing you know I think last quarter I thought that maybe it would be a prolonged lows you know I should have been from all time highs all time lows and we're seeing that loosen sooner than than before and we expect it may be in a lot of diverse back and so you saw our margins were strong.
You know relative to the second quarter and at the same time I don't think they're going to get back to the normalized numbers that we've talked about.
In the fourth quarter to the first quarter, however, the prolonged margin compression.
It does not seem as likely from where I sit today as it did maybe 90 days ago.
Got it and as a follow up seems like Oscar for many investors, who get a bit of a pain trade going on right now.
Treasury rates headed down not up could you talk about as you look at that guidance, you've given for the fourth quarter, what would kind of put you towards the bottom and the top.
Those of those guys could you kind of book ended a little bit.
Yeah, you know, it's obviously going to depend on a couple of different factors, but the reality is where the market is right now we feel comfortable with our guidance and at the same time, we've obviously have a month and in about 10 days under our belt.
Understanding what we've done in October and where we're going to be and so I think that the numbers.
<unk> to $6 85 to one O five seem in the right ranges. However, there is still you know that.
The hardest part to predict is Thanksgiving Christmas the slowdown what rates do how loans closed MSR values a lot of different nuances that can make it. So I think it's good to have the full range and go as low as 85 as high as one five on the margin as low as 50 to as high as 60 and I'm on the volume I feel comfortable we are less cyclical than the.
The rest of the market, but the purchase market is.
The big thing to look at it first quarter and fourth quarter are usually the slower quarters in mortgage second and third quarter, the better ones, we're going to beat our first quarter from a volume perspective, and I don't think anyone else in the country will be able to say that after this quarter.
Great. Thanks for the question.
Thanks, Brian.
Your next question comes from the line of Steven Delaney with JMP Securities. Your line is open.
Thanks, Hey, good morning, Matt Congrats to you and the team on another strong quarter I.
I was wondering.
Sure I was wondering if you could comment sort of generally on the the health financial condition of the of the broker industry.
And kind of just what youre hearing from your partners the groups coming off a couple of very strong re five years as we all know so it's we're still sort of going into adjustment to the new reality.
Just share with us what you're hearing from your partners and also give us maybe an update on your broker partner count and where you expect that might go over the next year. Thanks.
Yeah. So thanks for the question appreciate it so we're seeing.
Part of this strategy and part of understanding our business model is rates going up rates going down.
Do we react and how do we put ourselves in position to win the broker channel is growing what we're seeing right now.
Is when rates go up and they started to go up a couple months ago, and you know, obviously, you've kind of been floundering as low 3% range for a little while but.
And they go up the retail loan officers convert over to brokers and they actually are doing that right now usually the first and fourth quarter are the best times that occurred in the second and third quarter. When things are hot people aren't really moving companies involved and so right now we see a really good.
<unk> on that dynamic and so more loan officers join the broker channel, leaving the retail channel, which will then expand our pie as I've mentioned earlier, whether it's unfortunately dollar euro one and a half trillion dollars year, how is that going to impact gws, it's not going to impact us like everybody else because a big part of that is the one five trillion dollar a year will be a lot bigger percentage brokers. Unfortunately in dollars.
<unk> because of the revised the servicer service Refis and the migration of retail although so we feel really good about that our broker count is very strong I don't have the exact number but we are getting about three to 400 people loan officers into our office I think it was 294 last year, maybe three O four coming in are obviously get trained the broker.
How did you feel the energy of more loan officers wanted to be part of the broker channel. So I see a lot of upside across the board in our broker channel.
It's very strong it's as strong as it's been since pre 2008, and we're excited to continue to grow and we are obviously the leader by a long shot in the wholesale space. So therefore, we'll grow with the channel.
So it sounds like Youre, saying, you see the the size of the wallet.
Growing for the broker channel given the current broader environment in mortgages and you would expect your share of that increasing broker.
Size of the pie to grow as well.
Exactly.
Okay. Thanks for the comments.
Thank you.
Yes.
Your next question comes from the line of Henry Coffey with Wedbush.
Your line is open.
Yes, good morning, and thank you for taking my call again, congrats on a great quarter.
I think we've all have all begun to really learn about this channel I did have one friend closed three wall and he got his loan done in two weeks. So congrats on a great business.
I appreciate it.
So getting really picky and technical on number one question number one you had 175 million dollar decline in the fair value of mortgages, how did that breakdown.
Tim between fair value marks and amortization.
I think it's.
It's a combination of.
I don't think its amortization VK.
Payoffs along with a write down there.
Value asset yes.
Yeah, and Jim can give you a couple of details.
Yes, and actually for for the.
2021, theres going to be a collection the realization of cash flows. So there is the majority of it realization of cash flows or payoffs.
Which I think it's $217 million.
And then there's the assumptions that the market assumption changes that happened and we have no control over its about 61 million that increase and so that's the majority of changes and then there's a realized we had some sales of MSR.
The effect of it as well so when you look at the 170, a majority of that is the collection, but it really the collection is about a third of that $2 17, and two thirds of that is the painful.
And.
Your thoughts on why speeds or soda high still are you actually seeing healthy levels of refinance.
From your internal servicing.
So Henry no we're not in the speeds are not high actually the speeds are the lowest they've been in two years at UW Almond.
Lower than the market right now so you're actually seeing the big part of that is because our WAC a weighted average coupon is $2 95 in the markets right now in the 3% range. So therefore, a lot of our loans are not in the refinance in the money. If you think of it that way and so we won't we'll speed loans always refinance of course however.
We're excited to see a slowdown in that in the fourth quarter and beyond.
Third quarter, Youre going to see a little bit of that prepayment that I imagine that patent falls, that's really a lag through the quarter. So when we're looking at prepayment speeds now and we look at some of the reports to come out in the industry really has come out this week speak to really decline, especially for us.
And a very attractive level. So what we're reporting for the third quarter is reflective of what actually gets paid in July August and September and that affecting the books, then which is an event that really.
It comes from some interest rate movement really from June and earlier in the year even July.
Some of our portfolio that we may not have had the fortunate circumstance be able to pull back through a broker.
Those things lag.
<unk> mentioned, the 60 days it takes for others.
<unk> executed a refi or alone.
It would've gone through us it probably would have been done in 10 to 14 days, but that's a little bit of a lag youll see in the third quarter. That's reflective of the July July August and September as well.
And then now speeds appear to be getting better you're right that's going to be extremely helpful.
I think Matt, you're probably sick and tired of asking answering this question, but I'm going to ask it anyways. So 2019 was a growth year 2020 was a growth year. Some people depending on who you talk to 2021 is gonna be quoting an up year, that's what inside mortgage finance is saying a lot of people think.
Their numbers are pretty aggressive.
Others are saying.
That it's going to be kind of a flattish year and then everybody has.
A pretty negative view on 2022.
Down 20 down 30, I mean, who knows what the final numbers are going to be.
How what is what are the what are the elements that drive and that kind of market.
What are the elements that drive how you WMC approaches things.
How do you build.
How you build share how do you build volume.
How do you how do you have to staff, our re staff for that kind of market.
What does technology do to help you kind of manage through that cycle I mean, it's.
There's going to be some headwinds out there.
How does in absolute dollar terms, how does you WMC manage through those headwinds.
Yeah no. Thanks for the question Henry Happy to answer it and go through it with you and anyone that wants to talk about it. So a couple of things the 19 and 20 years in 'twenty. One one thing I'll mention on whether it's inside mortgage finance are a lot of People's numbers is there's a lot of double counting in there with correspondents theyre actually not originating the loan there is no origination being done is being done by a company who sells it to them. So I think.
Sometimes it's double counting going on which makes the numbers look really big when they're really not that big even in this year. The year. We're in right now it's actually how many actually worked close you can't close alone twice. So if one lender close it and sells it to wells Fargo or Penny Mac or another correspondent both companies are counting it and you guys. All look at that as origination, but you can only originated one so.
There's a lot of double counting which makes it the industry. It looks like it's bigger than it really is right now and.
And that's so.
That's one part to kind of address your 2019, 'twenty and even this year 'twenty one.
Across the board now 2021 will be an all time record year at UW AUM, we've already exceeded what we did last year and we still got.
Two months left to go and so it's gonna be at all time record here at UWS by a long shot now to think about next year and how do you handle the headwinds.
There's a couple of things.
Let's talk first technology, we've differentiated.
And with technology about 12 under technology people, who are building stuff from start to finish I talked about bolt bolt is a big play it because it makes it gives the brokers certainty. It gives the brokers the ability to give answers to realtors and consumers quicker at the same time.
Ops control cost to originate because our team will be able to do even more loans per day per person and so people don't understand the whole gravity of that technology, but you'll see that next year at this time and for sure in 'twenty, three and so going into a tougher year do you think of it that way.
I think that bolt is a huge part of it so technology one thing the other big one is I kind of talked about on the last question was about loan officers converting as the market shrinks and those easy refinances are not in your pipeline you start to look around and say why our other loan officers offering consumers better deals because consumers get a better deals through a broker and so those loan officers are.
Trying to transfer over to broker shops, whether they start their own or they call Washington, We help place them at a local mortgage broker in their area and then therefore, they get better rates, they get better technology and they are able to give better service to their clients. It's a win win win but they don't really leave when they got 31 loans in our pipeline because rates are 2%, because it's hard to transfer and leave when you're not in it.
Independent and that's what brokers are in retail loan officers or not so we're seeing that transfer and then the third piece is purchase I talked about it a lot in my prepared remarks, which was.
It's not a purchase percentage game, it's a purchase volume game and we did over $50 billion.
In the last few quarters I've, just purchase volume and so the real thing is theres going to be less business in 2022 than there was in 2021, we all know that but that does not mean UWS is going to necessarily do less business now what I look at it is where we do less visits we would do more how's the market can shake out theres a lot of variables, but here's what I do know and you can market is now.
And you can hold me accountable next year, our market share will go up drastically we will do more business in broker channel overall, the brokerage and will do more business, but you Wm will do more business as a market share percentage than other companies next year, and that's because everyone else who's living on the servicing book churn and burn the revise those guys. They are they coming to an end.
Eventually when your WAC or weighted average coupon is lower than the rates in the market. There's only so much refinancing left out there in those situations now I could be wrong and rates go to 2% and everyone is a heck of a year again, but if rates go to three and a half youre going to really see where people are and that's where we're going to shine and so we're excited converting retail all those the technology differentiator, which helps on the call.
To originate and making the process faster and easier and then the purchase market. Those all things are going to be a huge part of 2022 and beyond.
And just one last question in the broker channel are there so so whole new sub channels opening up.
Or is it more just you know you win one person at a time.
People a day whatever the pace is positive one at a time sort of thing or are there new new sort of sub channels opening up that that you can explore.
Well you know what hopefully by the next call I'll be able to share with you first of its usually youre talking of one person. However, I'm talking we're talking to a person who is leaving and I won't mention the company or the names of people, obviously, leaving and he runs a large branch of 18 loan officers the whole branches coming over to the broker channel you're starting his own brokerage out, but all 18, all those come with them right and so those.
<unk> are not I'm talking to one or I'm, not but our team is talking to one, but it's 18 come with them.
Same thing or is this a onesie loan officers that just leaving it wants to get placed this as a catalyst because once they join our broker shop they call their friends that he used to be at the retail shopping only I won't name names and then they all start migrating over and so youre going to see a lot of it and I'm going to get more colorful data for you guys see it.
To get you to talk to certain loan officers and see this but this is not just a trend. This is what's going to be going forward because as I've said before it's better for our loan officer to work at independent mortgage broker shop, and it's better for consumers to go to independent mortgage brokers that channel is going to grow and we're going to grow with it.
Thank you.
Thank you.
Your next question comes from the line of.
George Your line is open.
Hey, everyone. Good morning.
Wanted to go back to the to the purchase market information I mean your share it looks like it went up pretty meaningfully.
Just can you talk about strategies for doing that are you attracting brokers, who do more purchase you are helping your brokers do more but yeah, just any color on the impressive growth you did this quarter.
Thank you for that.
And the comment I appreciate it Bose. So it's a combination of a lot of things. One is how do we help our current loyalists are current brokers that do lots of loans with us everything on one how do we help them getting with the real estate shops, how do we help them get in with a more purchase business and so their strategy I actually just did a webinar a couple of days ago.
In the last week about this and I pulled in one of the best loan officers or extra two great loan officer in the country and talked about purchase strategies. How you build your business with so we're coaching our current royalties right. Then we're helping convert retail loan officers as I've talked about enough already on this so I won't continue that but those guys are coming over and that's just more of the pie to the group.
More opportunity, but then the last piece, which I think is very critical.
Is real estate agents know it they know they know how long it takes to close when they go to a large retailer a large bank and what they're doing is they're finding local brokers and brokers are closing a 15 18 20 days getting that realization paid on time.
Certainly is a big deal for real estate, if your real estate and who would you refer your clients to somebody who knew had options a broker and somebody and you could get it done for you. So that people were in the house because nobody wants a mortgage they want the house and so brokers are able to deliver that so real estate agents. The sentiment is shifting and they find a great broker and they're like Wow I can really closer to that <unk> 28.
My borrower can offer a 20 day offer at a 45 day offer that changes the game, especially in a great purchase market and so all of those things have added up and we're doing a lot of things and those are just things publicly I can share, but there's a lot of them are new show a lot of details in order to make these things happen and that's why we had another record purchase quarter.
Okay, Great. That's helpful. Thanks, and then actually just switching over to the MSR sale.
Going forward is that just going to be periodic to keep your market access or is there any level of MSR that you target versus originations or some other way that you kind of look at that.
Sorry, you broke up on that last I can see that overtime.
Yeah like whether the sales are just going to be periodic just to keep your sort of excess in terms of selling MSR or do you target sort of MSR versus originations is there some sort of a broader approach to how much MSR you choose to hold.
Yes so.
We look at things and we've always been opportunistic right and so.
The servicing sales we've done.
When we made the sales they're being sold for slightly higher than we have on our book value.
So we look at that as an opportunistic way, however, always protecting the broker channel and therefore, whether we put non solicits on or different things to make sure that those loans arent solicited and we always protect our clients and so it's opportunistic we like the servicing asset because we're creating the best servicing book and the country. As you guys saw the lowest delinquency rates, we've got great cash flow and at the same time.
We feel really good about the asset with a WAC the weighted average coupon being $2 95, so and the credit score all process. So we feel really good about it but if someone wants to come and offer us.
Bundle of cash for something that we have an asset and we can take advantage of that opportunity and continue to invest that technology into our technology into our broker channel, we will do that as well so basically just call it opportunistic.
And and continuing going forward that we're getting a lot of knocks on the door on it because we have such a great quality book and people know that.
So Matt Roslyn.
So you saw that.
Total book increased.
As it has every quarter since Covid started.
Yep, Yep, Yep, and actually one follow up just on the the sale. So the non solicit. So you can essentially prevent them from recapturing your loans with those agreements.
That's correct.
That's exactly how it works for three year 36 months.
Is the standard we do and so if you hold it for a year and 36 more months. It creates a lot of protection for our clients and at the same time.
A good cash flow for the new Investor New servicer.
Okay, great. Thanks, a lot with the key being protecting our clients.
Yep Yep Yep, absolutely. Thanks.
Your next question comes from the line of Doug Harter with Credit Suisse. Your line is open.
Thanks, Matt you've talked a lot about kind of technology like Bulks can you just give us a sense as to where you think the cost to originate can go over the next one two years.
Yeah, Thanks, Doug so.
Obviously the customer today is very very low it just depends on how you look at it as Tim pointed out in our <unk>.
Remarks ours is a fully loaded life youll talk about numbers and it's at times like comparing apples to oranges to bananas is not really the same.
So we feel really good about our we have a fully loaded cost we put all the numbers in there and so being south of 500 is.
Fantastic and can we drop that even further it's possible absolutely and how do we do that but as you think about it we're not looking at it in bps. We're looking at in dollars because it cost dollars. It doesn't cost gets to do things and so we're looking at that how do we continue to drive that number down and bolt is a great catalyst for that along with a handful of other things that probably are.
Too much into details of the weeds to get into on this call or in general but.
We really focus on that number because.
When the tide comes in and tie goes out how we want to think of it things change and you have to know who you are and how much it cost to actually manufacturer alone and we are very process focused and technology focus here and that's what has given us a huge leg up.
Great and then just as you think about the impact of.
Of home price appreciation and the higher loan limits that are.
To be announced.
And then not too distant future how does that impact you.
Your business.
Well impacted positively right and so the higher loan sizes.
Obviously.
The opportunity to continue to grow our volume and grow our business is there and so once.
Once again, that's why we talk about cost originate in dollars because a lot of people will sell you all will or bps or cost regime bps went down that just because your average loan size went up thats not really seeing your cost went down and so we're tracking dollars per closing and making sure and so we're monitoring that and now we obviously.
You kind of preempted, we know that I think it's November 30th is when FHFA will announce to the firm numbers of what the new loan sizes are we actually came out with the numbers at 625. So we're already seeing a little bit of a pickup from that we think the number would come in higher than that maybe closer to 646 45, even.
The new loan sizes, which is a massive improvement from the 548 that it was this year on the conforming loan limits and so that opportunity is good actually youll, probably see a little spike in our Q4 assets because we hold those loans and sell those all January 1st second third.
Because those are opportunity, but it's a great way to do a lot of business and help the broker channel continued advance. So the loan size thing will be a positive move for <unk> and for our brokers and for consumers across America.
Thank you Matt.
Thank you.
Your next question comes from the line of Ryan Nash with Goldman Sachs. Your line is open.
Hey, good morning, everyone.
Good morning.
Matt.
Let me ask a question on capital allocation. So I'm just trying to think through the tradeoff between buying back stock paying a dividend and then also selling msr's.
Given margins are still running below what you would consider normalized levels.
Actually doing it so in certain respect to preserve liquidity.
Related to that Tim you mentioned, a willingness to maybe take on some.
MSR that can maybe just talk about where you're willing to stay.
Leverage for the company in order to provide some balance sheet flexibility and I have a follow up thanks.
Yes, I think the.
The balance of the three.
I mentioned earlier is buying back shares is there potential for float but specific to the debt.
We've realized that the data are the asset that most people look to and again, it's an unencumbered asset the MSR the asset that most people look to or loosely associate with the unsecured debt issuances MSR MSR has continued to grow fairly substantially in the last three months, even with the modest sale that Matt.
Matt mentioned and we talked about was really a test to the market reestablishing some relationships.
As we continue to grow that asset it has value and.
We think that's supportive on a on a direct asset linkage.
So the debt, but also from a leverage standpoint, so we're going to continue to stay within our leverage.
Comfort zone.
Not getting outside of <unk> 75 of non funding debt.
Yes.
Could we get up to one ensure we can get up to that side, but we're going to continue to be very prudent with how we issue debt and how we look at it relative to our equity, but also relative to the size of the asset. So there is some <unk>.
Interest in that and we may explore that opportunity.
Similar to the other opportunities to balance outflows as well as the IPO the attractiveness of the stock right now and its current price.
In that regard we went from.
$660 million excuse me of book value or equity value at January one 2020, so closing the quarter at $3 billion. So notwithstanding the dividend notwithstanding the buybacks.
The equity has been going up pretty materially in our non funding debt to equity is at a very healthy range.
Okay.
Got it.
Matt maybe a big picture and specific question for you.
No.
It seems like the.
Your desired outcome for the all in initiative.
Working as Youre seeing really really strong.
Production here and you alluded to the fact that pricing is loosening a bit. So can you maybe just talk about what's driving you guys actually increasing price and then second maybe next couple of quarters. Now you said that you thought that this would last longer than 18 months. Now you are saying you don't think it's going to be as prolonged.
Is it you are looking to see along the way in terms of broker migration to the channel that will.
Allow you to change your pricing strategy a bit and then just lastly can you just remind us.
Once once you achieve your desired outcomes, where would you expect margins to inevitably level off for the company. Thanks for taking all my questions.
Thanks, Ryan So I appreciate it a couple a couple of things. So I think the big thing that I kind of tried to mentioned it earlier in my remarks was understanding.
Margins will be doing and how we look at them and how you know obviously, we control we're not a victim of the margins. We make we said the margins others people will react to those numbers.
Sale mortgage brokers, having better rates then reach out is not only are you Wm strategy.
Business development strategy, it's growing our pie, it's growing the channels, putting immense pressure on these retail channels, which is helping drive loan officers to our channel. The way we think about it is.
People ask me all the time, Ryan Hey, Youre going to grow the broker channel, Matt What's the strategy, how you're going to do that you know why don't you do more TV ads all of these things and so here's how I think about it so you understand our strategy around it it's very simple.
I can do a lot of television ads and I can do a lot of Google searches and all the different things to drive business every time I convert a consumer Ryan Nash could become.
Do alone with a broker thats one loan most consumers do alone every four years that means thats one loan every four years I got by spending money on a television commercial okay.
Well the same thing as you focus on consumer and Thats, what you get your focus on real estate, because I kind of alluded to earlier and you get a nice pickup because on average the real estate and let's just call. It 82 loans per month, well over four years of real estate that we convert to say I'm going to refer to a broker ABC mortgage broker that's two loans, a month or 96 loans and a four year period.
<unk> 96 times more valuable converted a real estate agent to understand that a broker and they actually understand that that.
Brokers are better because they understand our closing on fast and there is also only a 1 million to 2 million real estate is versus 300 plus million consumers.
Then there's a third bucket 450000 loan officers on average alone Astra might do six loans a month six loans a monster it turns out to be what is that.
96 loans, a year or 288 loans am I doing that right 288 loans every or 290, <unk> 72, a year, yes. So.
So it's a big number so 290 loans a year versus one on a year and there is only 400000. So our focus is convert loan officers to brokers. It gives us 290 loans over roughly 290 loans over a four year period.
Rather than one loan over a four year period with the consumer and then realizations of the middle and so our focus is business development growing the channel. If we can bring every loan officer brings over almost 300 loans over the next four years into our pie than we're focusing there and thats why keeping margins low has been a.
Huge catalysts for brokers and for UW AUM, and we will continue to be and so sometimes people look at our margins you think oh, well why didn't you raise the margins since you control because I'm growing the channel and as a channel grows you Wm grows in all my shareholders people that are already in this call are going to benefit along with consumers along with brokers along with my team members here.
Thanks for the color.
Thank you.
Again, if you would like to ask a question Press Star then the number one on your telephone keypad. Your next question comes from the line of Sandy BD with Morgan Stanley. Your line is open.
Hi, This is actually Blake matter of speaking on behalf of James Faucette.
Thanks for taking my questions.
So in terms of the competitive advantage of your platform you mentioned that speed to close is a big factor.
Are there any theories as to why there is such a big gap relative to relative to the competition and how long you can sustain that before our competitors catch up.
Yeah. Thanks for the question appreciate it.
It's not even a theory, it's just the facts or the technology right. So 200 people building proprietary technology I'm not out there using 88 vendors cobbling. It all together to try to do loans, we've invested in our technology for years and years.
I think it's b billions be with billions of the be ahead of our competition on the technology and so people can market until you got great technology by technology, great well, here's the here's the difference is.
How do you know your technology.
I just feel a spiel unless you actually can prove it and so the proof is in the pudding, which is origination cost origination cost.
Our cost and then speed to close look at those two numbers Youll find who's got the best technology and who doesn't.
Also we have no channel conflict remember I'm building technology for one line of business. The best wholesale mortgage lender in America period, I'm, not trying to build a great wholesale and direct to consumer and they've got to figure out the correspondent channel and they've got to figure out the retail branching model. We're building it with singular focus and dominance in mind and that's what we're doing and that's why we're able to be <unk>.
And then everybody else, that's why our technologies better and once again, it's not me, saying and you can actually look at the proof, which is how much does it cost to originate alone that's a technology number and how much how fast does it take you to close alone technology number get those two data points, you'll find out who built their own technology, who's winning and who's just kind of keeping up while the times are good in the market.
Thanks for that.
Can you talk a little bit about how you balance head count growth again spend on technology is there an ideal spot here and is that impacted by the logos have buying mortgage originations volumes.
Yes, so we track all of the things tied to team members technology, but the reality is we got to look at.
Making sure that operations team is always able to handle the volume that our sales team can bring in and Thats why we have the elite high in service and we help our brokers brokers every time, we make a broker it looks like a superstar to Jenny Smith in Minnesota and in Minnesota, Jenny Smith refers clients to that broker along with our real estate as we will refer more client so we.
Want to make sure our brokers looked like superstars, all the time given that Wow client experience.
And we continue to do that so with team members in technology in head count the way we look at it is making sure that we are always able to handle the volume at the same time handle growth too. We don't think the volumes are going to shrink in the broker channel as much as you're going to have a shrink in the direct to consumer channel, which is all refi or an auto retail branching where a lot of those are going to migrate over and so.
We feel like we're in a really good position with our team member count right now and at the same time, the ability to win and do more with our team members, which ties to bolt as I mentioned earlier.
Great. Thank you.
Thanks for all the questions everybody. We appreciate it I'm going to turn it over to the operator.
That will wrap up the Q&A portion I would like to turn the call back over to Matt <unk> for closing remarks.
Great well. Thank you guys. So obviously with this.
We appreciate the questions, we're happy to Matt Robison, our EVP of Investor Relations always happy to connect with anybody we feel really good about what happened in the third quarter and we're very excited about the fourth quarter and even more excited about 2020 to you. We've said that we're a purchase dominant lender and we're going to continue to do that as the broker channel grows and we continue to dominate on purchase we're excited about the future.
And excited about putting the position that <unk> is in which I think is as strong as we've been in a long long time and we're excited for you guys just yet for hopefully quarters and quarters to come. Thank you for the time and we look forward to talking to you next quarter.
This concludes today's conference call you may now disconnect.
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